As filed with the Securities and Exchange Commission
on December 22, 1998
Securities Act File No. 33-98102
Investment Company Act File No. 811-1743
SECURITIES AND EXCHANGE COMMISSION
Washington D. C. 20549
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 x
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Post-Effective Amendment No. 4 x
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and/or
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 x
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Amendment No. 17 x
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(Check appropriate box or boxes)
SPECTRA FUND
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
1 WORLD TRADE CENTER, SUITE 9333
NEW YORK, NEW YORK 10048
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: 212-806-8800
MR. GREGORY S. DUCH
FRED ALGER MANAGEMENT, INC.
1 WORLD TRADE CENTER, SUITE 9333
NEW YORK, NY 10048
- -------------------------------------------------------------------------------
(Name and Address of Agent for Service)
<PAGE>
It is proposed that this filing will become effective (check appropriate box):
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immediately upon filing pursuant to paragraph (b), or
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on [date] pursuant to paragraph (b), or
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60 days after filing pursuant to paragraph (a), or
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x
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on February 26, 1999 pursuant to paragraph (a)(2) of Rule 485
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SPECTRA FUND
FORM N-1A
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
PART A
ITEM NO. PROSPECTUS HEADING
- -------- ------------------
<S> <C> <C>
1. Cover Page............................................ Front Cover Page
2. Synopsis ............................................. Risk/Return Summary:
Investments, Risks & Performance
3. Condensed Financial Information ...................... Financial Highlights
4. General Description of Registrant .................... Risk/Return Summary:
Investments, Risks & Performance;
Management & Organization
5. Management of the Fund ............................... Management & Organization
5a. Management's Discussion of Fund Performance........... Risk/Return Summary:
Investments, Risks & Performance
6. Capital Stock and Other Securities ................... Management & Organization;
Shareholder Information
7. Purchase of Securities Being Offered ................. Shareholder Information;
Purchasing and Redeeming Fund Shares;
Investment Instructions
8. Redemption or Repurchase ............................. Purchasing and Redeeming Fund Shares;
Redemption Instructions
9. Pending Legal Proceedings ............................ Not Applicable
PART B HEADING IN STATEMENT OF
ITEM NO. ADDITIONAL INFORMATION
- -------- ----------------------
10. Cover Page ........................................... Front Cover Page
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
11. Table of Contents .................................... Contents
12. General Information and History ...................... Organization
13. Investment Objective and Policies .................... Investment Strategies and Policies;
Appendix
14. Management of the Fund ............................... Management
15. Control Persons and Principal Holders of
Securities ......................................... Certain Shareholders
16. Investment Advisory and Other Services ............... Management; Custodian and Transfer
Agent; Purchases and Redemptions;
See in the Prospectus
Management & Organization
17. Brokerage Allocation and Other Practices ............. Investment Strategies and Policies
18. Capital Stock and Other Securities ................... Organization; See in the Prospectus
Management & Organization;
Shareholder Information; Purchasing
& Redeeming Fund Shares
19. Purchase, Redemption and Pricing of Secu-
rities Being Offered ................................. Net Asset Value; Purchases and Redemptions
20. Tax Status ........................................... Taxes; See in the Prospectus "Shareholder Information"
21. Underwriters ......................................... Investment Strategies and Policies
22. Calculation of Performance Data ...................... Determination of Performance; See
in the Prospectus "Performance"
23. Financial Statements ................................. Financial Statements
</TABLE>
PART C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Registration Statement.
<PAGE>
SPECTRA FUND
INVESTING IN COMPANIES OF ALL SIZES TO ACHIEVE CAPITAL APPRECIATION
PROSPECTUS
February 26, 1999
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.
<PAGE>
TABLE OF CONTENTS
- -----------------------------------------------------------------------
2 ......................... Risk/Return Summary: Invest-
ments, Risks & Performance
3 ......................... Fees & Expenses
4 ......................... Management & Organization
4 ......................... Shareholder Information
5 ......................... Purchasing and Redeeming Fund Shares
6 ......................... Investment Instructions
7 ......................... Redemption Instructions
8 ......................... Financial Highlights
Back Cover ................ How to obtain more information
<PAGE>
[GRAPHIC OMITTED]
RISK/RETURN SUMMARY: INVESTMENTS, RISKS & PERFORMANCE
INVESTMENT GOAL AND APPROACH
The Fund seeks to maximize capital appreciation. It primarily invests in equity
securities, such as common or preferred stocks, which are listed on U.S.
exchanges or in the over-the-counter market.
Other securities the Fund sometimes invests in are discussed in its Statement of
Additional Information (see back cover).
The Fund also can leverage, that is, borrow money, to buy additional securities
for its portfolio. By borrowing money, the Fund has the potential to increase
its returns if the increase in the value of the securities purchased exceeds the
interest paid on the money borrowed.
Note that the Fund may invest up to 100% of its assets in cash, commercial
paper, high-grade bonds, or cash equivalents for temporary defensive reasons if
the Manager, Fred Alger Management Inc., believes that adverse market or other
conditions warrant. This is to protect the Fund's assets from a temporary
unacceptable risk of loss, rather than directly to promote the Fund's investment
objective.
The Fund's Manager seeks out and invests in companies that show growth
potential. These companies may be in the developmental stage or they may be
older companies that appear to be entering a new stage of growth. The growth
potential may be due to, among other things, changes in company management;
developments of new technology or products; or products or services having a
high volume growth rate.
PRINCIPAL RISKS
The main risks in investing in the Fund are:
n fluctuation in Fund price per share due to changes in the market prices of
its investments
n stocks tend to be more volatile than bonds
n developmental stage companies may involve greater risk when compared to
larger, more established companies, as they may have limited market lines,
markets, or financial resources and may lack management depth
n a risk of leveraging is that the cost to borrow the money will exceed the
returns from the securities purchased or that the securities purchased may
actually go down in value. Thus, the Fund's net asset value can decrease more
quickly than if the portfolio had not borrowed.
The Fund may engage in short-term trading, meaning that the Manager may buy a
security and sell it a short time later to take advantage of current gains if
its price is falling or it is believed that the security's price may soon go
down. This activity may create higher transaction costs due to commissions and
other expenses. In addition, a high level of short-term trading may increase the
Fund's realized gains, thereby increasing the amount that must be distributed to
shareholders at the end of the year. Therefore, you may be subject to higher
income taxes than shareholders of other funds.
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.
As with any equity fund, your investment will go up or down in value, and the
loss of your investment when you redeem your shares is a risk of investing.
Based on the Fund's investment objective, an investment in the Fund may be
better suited for long-term investment strategies.
GROWTH STOCKS: STOCKS
OF COMPANIES THAT ARE
EXPERIENCING RAPIDLY
EXPANDING REVENUES AND
PROFITS WITH EXPECTATIONS
FOR FUTURE GROWTH.
2
<PAGE>
PERFORMANCE
The following chart shows the Fund's performance from year to year and gives you
some indication of the risks of investing in the Fund. Performance assumes
reinvestment of dividends and distributions. Remember that the Fund's
performance in the past is not necessarily an indication of how it will perform
in the future.
Annual total return as of December 31 each year
[GRAPHIC OMITTED]
89 90 91 92 93 94 95 96 97 98
Best Quarter: Q1 1991 +35.23%
Worst Quarter: Q1 1990 - 19.18%
The following table compares the Fund's performance with that of the S&P 500
Index.
Average Annual Total Return as of December 31, 1998
1 Year 5 Years 10 Years 20 Years
- --------------------------------------------------------------------
Fund --% --% --% --%
S&P 500 Index --% --% --% --%
S&P 500 INDEX IS AN
UNMANAGED INDEX
COMPOSED OF 500 LARGE
COMPANY STOCKS.
INVESTORS CANNOT MAKE
INVESTMENTS DIRECTLY INTO
AN INDEX.
[GRAPHIC OMITTED]
FEES AND EXPENSES
Investors incur certain fees and expenses in connection with an investment in
the Fund. The table below shows the fees and expenses that you may incur if you
buy and hold shares of the Fund.
Shareholder Fees
(fees paid directly from your investment) None
Annual Fund Operating Expenses as of 10/31/98
(expenses that are deducted from Fund assets)
Management Fees 1.50%
Distribution Fees None
Other Expenses 0.46%
Total Annual Fund Operating Expenses1.96%
EXAMPLE
The example below is intended to help you compare the cost of investing in the
Fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the Fund for the time periods
indicated. The Example also assumes that your investment has a 5% return each
year and that the Fund's operating expenses remain the same as in the table
above. The figures shown would be the same whether you sold your shares at the
end of each period or kept them. Although your actual costs may be higher or
lower, based on these assumptions your costs would be:
1 Year 3 Year 5 Year 10 Year
- ---------------------------------------------------------
$199 $615 $1,057 $2,285
3
<PAGE>
The Fund pays its Distributor, Fred Alger & Company, Incorporated, a shareholder
servicing fee of .25% of the value of the Fund's average daily net assets for
service and maintenance of shareholder accounts. The Distributor may pay some of
this fee to other organizations that also provide service and maintenance of
shareholder accounts.
[GRAPHIC OMITTED]
MANAGEMENT AND ORGANIZATION
MANAGER
Fred Alger Management, Inc.
1 World Trade Center
Suite 9333
New York, NY 10048
The Manager has been an investment adviser since 1964, and manages investments
totaling (at 12/31/98) $___ billion in mutual fund assets as well as $___
billion in other assets. The Fund has had the same manager since 1974, and pays
the Manager a fee at an annual rate of 1.50% of its average daily net assets.
PORTFOLIO MANAGERS
David Alger and David Hyun are the individuals responsible for the day-to-day
management of the Fund's portfolio. Mr. Alger has been employed by the Manager
as Executive Vice President and Director of Research since 1971, and as
President since 1995. Mr. Hyun has been employed by the Manager as an Analyst
since 1991 and as a Portfolio Manager since 1998.
YEAR 2000
The Fund's Manager and Distributor have advised the Fund that they are
implementing a Year 2000 plan to address any issues arising from their systems'
erroneous readings of dates in the year 2000. Specifically, they are in the
process of confirming that the Fund's service providers resolve any Year 2000
issues as the millennium approaches. While there can be no assurance that there
will be no impairment of services at that time, currently it is not anticipated
that the Fund's shareholders' investments will be impacted negatively as a
result of the Fund's Year 2000 transition. However, people and resources have
been devoted to this important review.
[GRAPHIC OMITTED]
SHAREHOLDER INFORMATION
DISTRIBUTOR
Fred Alger & Company, Incorporated
30 Montgomery Street
Jersey City, New Jersey 07302
TRANSFER AGENT
Alger Shareholder Services, Inc.
30 Montgomery Street
Jersey City, New Jersey 07302
The price of one share is its "net asset value", or NAV. The NAV is calculated
as of the close of business (normally 4:00 p.m. Eastern time) every day the New
York Stock Exchange is open. The Exchange is closed on the following holidays:
New Year's Day (unless New Year's Day is a Saturday or Sunday), Martin Luther
King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day, and Christmas Day. It may close on other days from
to time.
4
<PAGE>
The Fund values an investment on the basis of market quotations. Where market
quotations are not readily available, the manager makes a good faith
determination of an investment's fair value, under procedures adopted by the
Board of Trustees.
Dividends and distributions are declared and paid annually by the Fund. The Fund
expects that its annual payments to shareholders will consist primarily of
short-term and long-term capital gains rather than net investment income. Unless
you choose to receive cash payments by checking the appropriate box on your New
Account Application, any dividends and distributions will be reinvested
automatically at the NAV on their payment dates. If you have chosen cash
payments and a payment is returned to the Fund as undeliverable, upon receipt
that payment will be reinvested in Fund shares. All subsequent payments will be
reinvested until you reinstate your cash election and provide a valid mailing
address.
Regardless of whether you choose to take distributions in cash or reinvest them
in the Fund, they may be subject to federal and state taxes. The tax status of a
capital gain distribution (that is, whether it is short-term or long-term in
nature), and therefore the rate at which you are taxed, is determined by how
long the Fund has held the securities and not by how long you have invested in
the Fund. 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 VALUES OF THE FUND'S
INVESTMENTS PLUS CASH AND
OTHER ASSETS, SUBTRACTING ITS
LIABILITIES AND THEN DIVIDING
THE RESULT BY THE NUMBER OF
OUTSTANDING SHARES.
Minimum Investments
Initial Subsequent
Investment Investment
- -----------------------------------------------------
Regular account $1,000 $100
Traditional IRA $250 $100
Roth IRA $250 $100
Education IRA $100 $100
SIMPLE IRA $250 $100
Keogh $250 $100
401(k) $250 $100
403(b) $250 $100
Automatic Investment $25 $25
PURCHASING AND REDEEMING FUND SHARES
The offering price of a share is the NAV and no sales charge is imposed on Fund
shares. You can purchase or redeem some or all of your shares on any day the New
York Stock Exchange is open. They will be processed at the NAV next calculated
after your purchase or redemption request is received by the Transfer Agent.
Ordinarily, your redemption check will be issued within 7 days after the
Transfer Agent accepts your redemption request. However, when you purchase
shares with a check or via TelePurchase or Automatic Investment Plan, no
withdrawals can be made against those funds for 15 days. The Transfer Agent or
Fund may reject any purchase order. The Fund does not impose a sales charge for
redemptions.
Different ways to purchase and redeem are listed on the chart on the next page.
For telephone redemptions, the Fund and Transfer Agent have procedures in place
to be sure 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.
The Fund does not provide share certificates.
5
<PAGE>
INVESTMENT INSTRUCTIONS
To open an account:
By Mail:
(make checks payable to Spectra Fund)
Mail your completed application and check
to:
Alger Shareholder Services, Inc.
30 Montgomery Street
Jersey City, NJ 07302
By Fed Wire:
- --------------------------------------------------------------------------------
Have your bank wire funds to: Example
State Street Bank & Trust Company State Street Bank & Trust Company
Boston, MA 02101 Boston, MA 02101
ABA # 011000028 ABA #0110000028
BNF: Spectra Fund BNF-Spectra Fund
AC-00797548 AC-00797548
Originator To Beneficiary OBI=Spectra Fund
Information* 30-New Account or 30-123456789
30-New Account John & Jane Doe
Shareholder Name(s) 123-45-6789
Tgax ID Number
Forward the completed New Account Application to Alger Shareholder Services
stating that the account was established by wire transfer and the date and
amount of the transfer.
Contact:
- --------------------------------------------------------------------------------
CALL OR VISIT your investment adviser, or bank or other financial institution.
Automatically:
- --------------------------------------------------------------------------------
Complete the Automatic Investment option on your account application. Minimum
automatic investment is $25.
Via The Internet:
- --------------------------------------------------------------------------------
Visit the Spectra Fund website to download a new account application -
www.spectrafund.com.
Mail completed application with your investment to Alger Shareholder Services,
Inc.
To make additional investments in an existing account:
By Mail:
- --------------------------------------------------------------------------------
Complete and return the Invest by Mail slip attached to your Spectra Statement
and return slip with your investment to:
Alger Shareholder Services, Inc.
30 Montgomery Street
Jersey City, NJ 07302
By Telephone or Fed Wire:
- --------------------------------------------------------------------------------
TELEPURCHASE* allows you to purchase shares by telephone (minimum $500, maximum
$50,000) by filling out the appropriate section of the New Account Application
or returning the Additional Services Form. The funds will be transferred from
your designated bank account to your Fund account normally within one business
day.
WIRE - Have your bank wire funds to:
State Street Bank & Trust Company.
*NOT AVAILABLE FOR RETIREMENT PLANS
Contact:
- --------------------------------------------------------------------------------
CALL OR VISIT your investment adviser, or bank or other financial institution.
Automatically:
- --------------------------------------------------------------------------------
SPECTRA FUND AUTOMATIC INVESTMENT PLAN allows you to make automatic purchases on
the 15th and/or the last business day of each month. Fill out appropriate
information on new account application or contact Spectra Fund to receive an
Additional Services Form. Minimum automatic investment is $25.
GOVERNMENT DIRECT DEPOSIT* allows you to arrange direct deposit of U.S. federal
government payments into your Spectra Fund account and Payroll Savings Plan*
allows you to arrange direct deposit of payroll directly to your Spectra Fund
Account. Call for a Payroll Savings Plan Form.
*NOT AVAILABLE FOR RETIREMENT PLANS
Via The Internet:
- --------------------------------------------------------------------------------
Visit the Spectra Fund website to download all forms to add services to your
account - www.spectrafund.com.
Mail your completed forms to Alger Shareholder Services, Inc.
6
<PAGE>
Redemption Instructions
By Mail:
=-------------------------------------------------------------------------------
SEND a letter of instruction to Alger Shareholder Services, Inc. which includes
- your name
- account number
- number of shares or dollar amount of redemption - where to send the
proceeds
- a signature guarantee is required if
-- your redemption is for more than $5,000; or
-- you want the check sent to a different address than the one we have
on file; or
-- you have changed your address on file within the past 60 days.
By Telephone:
- --------------------------------------------------------------------------------
CALL 800-711-6141 to sell shares (unless you refuse this service on your New
Account Application). The Fund will send you a check for amounts up to $5,000.
You can receive a check or a wire for amounts over $5,000. Note: you cannot
request a check if you have changed your address on file within the past 60
days.
TeleRedemption* allows you to redeem shares by telephone by filling out the
appropriate section of the New Account Application or returning the Additional
Services Form. The funds will be transferred to your bank account in an amount
between $500 and $50,000, normally within 2 business days.
*NOT AVAILABLE FOR RETIREMENT PLANS
Contact:
- --------------------------------------------------------------------------------
CALL OR VISIT your investment adviser, or bank or other financial institution.
Automatically:
- --------------------------------------------------------------------------------
Systematic Withdrawal Plan allows you to receive regular monthly, quarterly or
annual payments. Your account value must be at least $10,000, and the payments
must be for $50 or more. The maximum monthly withdrawal is 1% of the current
account value in the Fund at the time you begin participation in the Plan.
Via The Internet:
- --------------------------------------------------------------------------------
Visit the Spectra Fund website to download all forms to add redemption
privileges to your existing account - www.spectrafund.com.
Mail your completed forms to Alger Shareholder Services, Inc.
TO SPEAK WITH A SPECTRA FUND REPRESENTATIVE CALL 1-800-711-6141
e-mail: [email protected]
web address: www.spectrafund.com
Representatives are available to assist you with any questions you have.
SIGNATURE GUARANTEE
IS A GUARANTEE BY A
FINANCIAL INSTITUTION
THAT YOUR SIGNATURE IS
AUTHENTIC. THE FINANCIAL
INVITATION ACCEPTS
LIABILITY FOR ANY FORGERY
OR FRAUD IF THE SIGNATURE
THEY GUARANTEE PROVES TO
BE COUNTERFEIT. IT IS AN
IDEAL MEANS TO PROTECT
INVESTORS AND THEIR ASSETS.
A NOTORIZATION BY A
NOTARY PUBLIC IS NOT AN
ACCEPTABLE SUBSTITUTE.
Unless your account is a Spectra-sponsored tax-deferred retirement plan, if it
falls below $500 because of redemptions, the Fund may send you written notice
providing 60 days to restore it to the minimum balance. After 60 days, the Fund
may close your account and redeem all of your shares.
Under unusual circumstances, the Fund may redeem some of your shares "in kind",
which means that some of the proceeds will be paid with securities the Fund owns
instead of cash.
Shares may be worth more or less when you redeem them than they are at the time
you buy them. This means that you may realize a taxable gain or loss when you
redeem shares.
EXCHANGES
You can exchange shares of the Fund for shares of Alger Money Market Portfolio
of The Alger Fund, another portfolio advised by the Manager. If you would like a
prospectus describing the Money Market Portfolio, please call the Fund at
(800)-711-6141. Remember that for tax purposes, an exchange is considered a sale
and a purchase.
Thus, you may realize a taxable gain or loss when you exchange shares.
7
<PAGE>
FINANCIAL HIGHLIGHTS
The Financial Highlights table is intended to help you understand the Fund's
financial performance for the past 10 years. During this 10-year period, the
Fund was a closed-end fund until February 12, 1996, when it became an open-end
investment company. Certain information reflects financial results for a single
Fund share. The total returns in the table represent the rate that an investor
would have earned or lost on an investment in the Fund (assuming reinvestment of
all dividends and distributions).
The Financial Highlights for the fiscal periods ended June 30, 1991 through
October 31, 1998 have been audited by Arthur Anderson LLP, the Fund's
independent public accountants. The Financial Highlights, with the exception of
the total return information, for the periods prior to 1991 have been audited by
other independent accountants, who have expressed an unqualified opinion
thereon. This information should be read in conjunction with the financial
statements of the Fund contained in its Annual Report. These financial
statements are incorporated by reference into the Statement of Additional
Information. An annual report of the Fund is available by contacting the Fund at
(800) 711-6141.
8
<PAGE>
SPECTRA FUND FINANCIAL HIGHLIGHTS
For a share outstanding throughout the period
<TABLE>
<CAPTION>
Four
Months
Ended
Year Ended October 31, Oct. 31 Year Ended June 30,
- -------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994(i) 1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $13.61 $20.93 $18.82 $17.12 $19.02 $17.93 $19.50 $18.72 $15.12 $13.73
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net investment income (loss) (.17)(ii)(0.23)(ii) (0.53) (0.10) (0.28) (0.29) (0.22) (0.15) (0.13) (0.19)
Net realized and unrealized gain
(loss) on investments 3.77 1.22 7.24 1.80 2.66 3.70 1.65 2.25 3.83 1.66
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Total from investment operations 3.60 0.99 6.71 1.70 2.38 3.41 1.43 2.10 3.70 1.47
Dividends from net investment
income -- -- -- -- -- -- -- -- -- --
Distributions from net
realized gains -- (8.31) (4.60) -- (4.28) (2.32) (3.00) (1.32) (0.10) (0.08)
---- ----- ----- ---- ----- ----- ----- ----- ----- -----
Total Distributions -- (8.31) (4.60) -- (4.28) (2.32) (3.00) (1.32) (0.10) (0.08)
---- ----- ----- ---- ----- ----- ----- ----- ----- -----
Net asset value, end of year $17.21 $13.61 $20.93 $18.82 $17.12 $19.02 $17.93 $19.50 $18.72 $15.12
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Total return(iii) 26.45% 12.68% 57.72% 9.93% 17.53% 23.66% 11.65% 15.63% 24.76%(v)10.96%(v)
===== ===== ===== ==== ===== ===== ===== ===== ===== =====
Ratios and Supplemental Data:
Net assets, end of year
(000's omitted) $84,988 $11,485 $5,374 $4,832 $4,394 $4,884 $4,603 $5,006 $4,805 $3,881
==== ======= ======= ====== ====== ====== ====== ====== ====== ====== ======
Ratio of expenses to average
net assets 2.12% 2.55%(iv) 3.76% 2.75% 2.59% 2.57% 2.14% 2.74% 3.01% 4.09%
==== ==== ==== ==== ==== ==== ==== ==== ==== ====
Ratio of net investment income
(loss) to average net assets (1.06)% (1.69)% (3.05)% (1.72)% (1.47)% (1.55)%(1.07)% (0.85) %(0.76)% (1.35)%
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Portfolio Turnover Rate 133.98% 197.04% 207.25% 56.24% 116.61% 100.17% 63.54% 78.00% 81.70% 139.94%
====== ====== ====== ===== ====== ====== ===== ===== ===== ======
</TABLE>
(i) Ratios have been annualized; total return has not been annualized.
(ii) Amount was computed based on average shares outstanding during the year.
(iii) Dividends and distributions paid when the Fund operated as a closed-end
fund (i.e. prior to Fbruary 12, 1996, have been reflected as being
reinvested at market value.
(iv) Amount has been reduced by 0.69% due to expense reimbursements.
(v) Unaudited.
9
<PAGE>
FOR FUND INFORMATION:
By telephone: 1-800-711-6141
By mail: Spectra Fund
1 World Trade Center
Suite 9333
New York, NY 10048
By Internet: Text versions of Fund documents can be
downloaded from the following sources:
a The Fund: http://www.spectrafund.com
a SEC: http://www.sec.gov
STATEMENT OF ADDITIONAL INFORMATION
For more detailed information about the Fund and its policies, investments, and
risks, 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 its most recent fiscal
year. You can receive free copies of these reports by calling the Fund's
toll-free number or by writing to the address above.
Another way you can obtain copies of Fund documents is by visiting the SEC's
Public Reference Room or by forwarding your request and a duplicating fee to the
SEC's Public Reference Section, Washington, DC 20549-6009. Information on the
operation of the Public Reference Room is available by calling 1-800-SEC-0330.
DISTRIBUTOR: FRED ALGER & COMPANY, INCORPORATED
SPECTRA FUND
SEC FILE #811-1743
<PAGE>
STATEMENT OF
ADDITIONAL INFORMATION FEBRUARY 26, 1999
|
SPECTRA | One World Trade Center--Suite 9333
| New York, New York 10048
FUND | (800) 711-6141
|
================================================================================
This Statement of Additional Information is not a Prospectus. This document
contains additional information about Spectra Fund (the "Fund") and supplements
information in the Prospectus dated February 26, 1999. It should be read
together with the Prospectus which may be obtained free of charge by writing or
calling the Fund at the address or toll-free number shown above.
The Fund's financial statements for the year ended October 31, 1998 are
contained in its annual report to shareholders and are incorporated by reference
into this Statement of Additional Information.
CONTENTS
Investment Strategies and Policies ........................................ 2
Net Asset Value ........................................................... 9
Purchases and Redemptions ................................................. 9
Management ................................................................ 11
Taxes ..................................................................... 14
Custodian and Transfer Agent .............................................. 14
Certain Shareholders ...................................................... 15
Organization .............................................................. 15
Determination of Performance .............................................. 16
Financial Statements ...................................................... 17
Appendix .................................................................. A-1
<PAGE>
INVESTMENT STRATEGIES AND
POLICIES
CERTAIN SECURITIES AND INVESTMENT TECHNIQUES
The Prospectus discusses the investment objective of the Fund and the principal
strategies to be employed to achieve this objective. This section contains
supplemental information concerning the types of securities and other
instruments in which the Fund may invest, the investment policies and portfolio
strategies that the Fund may utilize and certain risks attendant to those
investments, policies and strategies. The Fund may invest a portion of its
assets in money market instruments, including, but not limited to, certificates
of deposit, time deposits and bankers' acceptances issued by domestic bank and
thrift institutions, US Government securities, commercial paper and repurchase
agreements.
CASH POSITION
In order to afford the Fund the flexibility to take advantage of new
opportunities for investments in accordance with its investment objective or to
meet redemptions, it may, under normal circumstances, hold up to 15% of its
total assets in money market instruments and repurchase agreements. When
management's analysis of economic and technical market factors suggests that
common stock prices will decline sufficiently that a temporary defensive
position is deemed advisable, the Fund may invest in high-grade senior
securities or U.S. Government securities or retain cash or cash equivalents, all
without limitation.
SMALL CAPITALIZATION INVESTMENTS
Certain companies in which the Fund will invest may still be in the
developmental stage, may be older companies that appear to be entering a new
stage of growth progress owing to factors such as management changes or
development of new technology, products or markets or may be companies providing
products or services with a high unit volume growth rate. Investing in smaller,
newer issuers generally involves greater risk than investing in larger, more
established issuers. Such companies may have limited product lines, markets or
financial resources and may lack management depth. Their securities may have
limited marketability and may be subject to more abrupt or erratic market
movements than securities of larger, more established companies or the market
averages in general.
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.
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.
REPURCHASE AGREEMENTS
Under the terms of a repurchase agreement, the Fund 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 Fund to
resell, the instrument at an agreed price (including accrued interest) and time,
thereby determining the yield during the Fund's holding period. Repurchase
agreements may be seen to be loans by the Fund collateralized by the underlying
instrument. This arrangement results in a fixed rate of return that is not
subject to market fluctuations during the Fund's holding period and not
necessarily related to the rate of return on the underlying instrument. The
value of the underlying securities, including accrued interest, will be at least
equal at all times to the total amount of the repurchase obligation, including
interest. The Fund bears a risk of loss in the event that the other party to a
repurchase agreement declares bankruptcy or defaults on its obligations and the
Fund 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 Fund seeks to assert
these rights, the risk of incurring expenses associated with asserting these
rights and the risk of losing all or part of the income from the agreement. Fred
Alger Management, Inc. ("Alger Management"), acting under the supervision of the
Fund's Board of Trustees, reviews the credit worthiness of those banks and
dealers with which the Fund enters 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.
WARRANTS AND RIGHTS
The Fund may invest in securities convertible into or exchangeable for equity
securities including warrants and rights. A warrant is a type of security that
entitles the holder to buy a proportionate amount of common stock at a specified
price, usually higher than the market price at the time of issuance, for a
period of years or to perpetuity. In contrast, rights, which also represent the
right to buy common shares, normally have a subscription price lower than the
current market value of the common stock and a life of two to four weeks.
Warrants are freely transferable and are traded on the major securities
exchanges.
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SPDRS
The Fund may invest in Standard & Poor's Depositary Receipts(R) (SPDRs, or
"Spiders"), securities representing ownership in a long-term unit investment
trust that holds a portfolio of common stocks tracking the performance of the S
& P 500(R) Index or a sector of that index.
ILLIQUID AND RESTRICTED SECURITIES
The Fund will not invest more than 15% of its net assets in "illiquid"
securities, which include restricted securities, securities for which there is
no readily available market and repurchase agreements with maturities of greater
than 7 days; however, restricted securities that are determined by the Board of
Trustees be be liquid are not subject to this limitation.
The Fund may invest in restricted securities governed by Rule 144A under the
Securities Act of 1933. In adopting Rule 144A, the Securities and Exchange
Commission specifically stated that restricted securities traded under Rule 144A
may be treated as liquid for purposes of investment limitations if the board of
trustees (or the fund's adviser acting subject to the board's supervision)
determines that the securities are in fact liquid. The Board has delegated its
responsibility to Alger Management to determine the liquidity of each restricted
security purchased 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 portfolio could be adversely
affected.
SHORT SALES
The Fund may sell securities "short against the box." While a short sale is the
sale of a security the Fund does not own, it is "against the box" if at all
times when the short position is open the Fund 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.
LENDING OF PORTFOLIO SECURITIES
In order to generate income and to offset expenses, the Fund may lend portfolio
securities with a value up to 331/3% of the Fund's total assets, including all
collateral for such loans, less liabilities exclusive of the obligation to
return such collateral, to brokers, dealers and other financial organizations.
The Fund will not lend securities to Alger Management or its affiliates. By
lending its securities, the Fund can increase its income by continuing to
receive interest or dividends on the loaned securities as well as by 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. The Fund will adhere to the following conditions whenever
its securities are loaned: (a) the Fund 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 loaned securities
including accrued interest exceeds the value of the collateral; (c) the Fund
must be able to terminate the loan at any time; (d) the Fund 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
Fund 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. The Fund bears a risk of loss in the event that the other party
to a stock loan transaction defaults on its obligations and the Fund is delayed
in or prevented from exercising its rights to dispose of the collateral
including the risk of a possible decline in the value of the collateral
securities during the period in which the Fund 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 transaction.
FOREIGN SECURITIES
The Fund 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 Fund by domestic corporations.
There may be less publicly available information about foreign issuers than
about domestic issuers, and foreign issuers are not subject to uniform
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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 subject to
less 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 bank or a foreign branch
of a domestic bank.
The Fund may purchase American Depositary Receipts ("ADRs"), American Depositary
Shares ("ADSs") or U.S. Dollar-denominated securities of foreign issuers which
are not subject to the 20% foreign securities limitation. ADRs and ADSs are
traded in U.S. securities markets and represent the securities of foreign
issuers. While ADRs and ADSs may not necessarily be denominated in the same
currency as the foreign securities they represent, many of the risks associated
with foreign securities may also apply to ADRs and ADSs.
OPTIONS
The Fund may purchase put and call options and sell (write) covered put and
covered call options on securities and securities indexes to increase gain or to
hedge against the risk of unfavorable price movements although, as in the past,
it does not currently intend to rely on these strategies extensively, if at all.
A call option on a security is a contract that gives the holder of the option
the right to buy from the writer (seller) of the call option, in return for a
premium paid, the security underlying the option at a specified exercise price
at any time during the term of the option. The writer of the call option has the
obligation upon exercise of the option to deliver the underlying security upon
payment of the exercise price during the option period. A put option on a
security is a contract that, in return for the premium, gives the holder of the
option the right to sell to the writer (seller) the underlying security at a
specified price during the term of the option. The writer of the put, who
receives the premium, has the obligation to buy the underlying security upon
exercise at the exercise price during the option period.
The Fund will not sell options that are not covered. A call option written by
the Fund on a security is "covered" if the Fund owns the underlying security
covered by the call or has an absolute and immediate right to acquire that
security without additional cash consideration (or for additional cash
consideration held in a segregated account by its custodian) upon conversion or
exchange of other securities held in its portfolio. A call option is also
covered if the Fund 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 Fund 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 Fund 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 Fund 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 Fund has
been assigned an exercise notice, the Fund will be unable to effect a closing
purchase transaction. Similarly, if the Fund 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 Fund so desires.
The Fund 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 Fund 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.
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An option position may be closed out only on an exchange which provides a
secondary market for an option of the same series. Although the Fund 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 Fund 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 Fund, as a covered call
option writer, is unable to effect a closing purchase transaction in a secondary
market, it will not be able to sell the underlying security until the option
expires or it delivers the underlying security upon exercise or otherwise covers
the position.
In addition to options on securities, the Fund 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 Fund is obligated, in return for the premium received, to
make delivery of this amount. The Fund may offset its position in stock index
options prior to expiration by entering into a closing transaction on an
exchange or it may let the option expire unexercised.
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 Fund 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 Fund's securities may not correlate precisely with
movements in the level of an index and, therefore, the use of options on indexes
cannot serve as a complete hedge and will depend, in part, on the ability of
Alger Management to predict correctly movements in the direction of the stock
market generally or of a particular industry. Because options on securities
indexes require settlement in cash, Alger Management may be forced to liquidate
portfolio securities to meet settlement obligations.
Although Alger Management will attempt to take appropriate measures to minimize
the risks relating to any trading by the Fund in put and call options, there can
be no assurance that the Fund will succeed in any option trading program it
undertakes.
The Fund will not purchase options if, as a result, the aggregate cost of all
outstanding options exceeds 10% of the Fund's total assets, although no more
than 5% will be committed to transactions entered into for non-hedging
(speculative) purposes.
STOCK INDEX FUTURES AND OPTIONS ON STOCK INDEX FUTURES
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 Fund, as seller, to
deliver to the buyer the net cash amount called for in the contract at a
specific future time. Put options on futures might be purchased to protect
against declines in the market values of securities occasioned by a decline in
stock prices and securities index futures might be sold to protect against a
general decline in the value of securities of the type that comprise the index.
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.
A stock index future obligates the seller to deliver (and the purchaser to take)
an amount of cash equal to a specific dollar amount times the difference between
the value of a specific stock index at the close of the last trading day of the
contract and the price at which the agreement is made. No physical delivery of
the underlying stocks in the index is made. While incidental to its securities
activities, the Fund may use index futures as a substitute for a comparable
market position in the underlying securities.
If the Fund uses futures, or options thereon, for hedging, the risk of imperfect
correlation increases as the composition of the Fund 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 Fund 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 Fund's net investment
results if market movements are not as anticipated when the hedge is
established.
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An option on a stock index futures contract, as contrasted with the direct
investment in such a contract, gives the purchaser the right, in return for the
premium paid, to assume a position in a stock index futures contract at a
specified exercise price at any time prior to the expiration date of the option.
The Fund will sell options on stock index futures contracts only as part of
closing purchase transactions to terminate its options positions. No assurance
can be given that such closing transactions can be effected or that there will
be correlation between price movements in the options on stock index futures and
price movements in the Fund's securities which are the subject of the hedge. In
addition, the Fund's purchase of such options will be based upon predictions as
to anticipated market trends, which could prove to be inaccurate.
The Fund'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 only, if at all, for bona fide hedging, risk management or other
portfolio management purposes. Typically, maintaining a futures contract or
selling an option thereon will require the Fund 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. 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 Fund.
If the Fund 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 either that the position can be offset
prior to settlement at an advantageous price, or that delivery will occur. In
order to cover its potential obligations if the Fund enters into futures
contracts or options thereon, the Fund will maintain a segregated account which
will contain only liquid assets in an amount equal to the total market value of
such futures contracts less the amount of initial margin on deposit for such
contracts.
The Fund 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 Fund'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 Fund may borrow money from banks and use it to purchase additional
securities. This borrowing is known as leveraging. Leveraging increases both
investment opportunity and investment risk. If the investment gains on
securities purchased with borrowed money exceed the interest paid on the
borrowing, the net asset value of the Fund's shares will rise faster than would
otherwise be the case. On the other hand, if the investment gains fail to cover
the cost (including interest) of borrowings, or if there are losses, the net
asset value of the Fund's shares will decrease faster than would otherwise be
the case. The Fund may also borrow from banks for temporary or emergency
purposes. The Fund is required 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 Fund 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.
INVESTMENT RESTRICTIONS
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. The Fund's investment objective is a fundamental policy. A
"nonfundamental policy" may be changed by vote of a majority of the Fund's Board
of Trustees at any time.
As a matter of fundamental policy, the Fund may not:
1. Issue senior securities, except in connection with borrowings permitted in
restriction 4 and except that the writing of covered options on securities and
stock indexes, and transactions in stock index futures and options thereon,
shall not be deemed to be the issuance of a senior security.
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2. Purchase securities on margin; but it may obtain such short-term credits from
banks as may be necessary for the clearance of purchases and sales of
securities.
3. Make short sales of securities or maintain a short position unless, at all
times when a short position is open, it owns an equal amount of such securities
or owns securities convertible into or exchangeable for, without payment of any
further consideration, securities of the same issuer at least equal in amount to
the securities sold short.
4. Borrow money, except that the Fund may borrow from banks if, immediately
after such borrowing the value of the total assets of the Fund (including the
amount borrowed) less its liabilities (not including any borrowing) is at least
300% of the amount of the borrowings.
5. Pledge, mortgage, hypothecate or otherwise encumber its assets except in
connection with permissible borrowings or investments.
6. Act as a securities underwriter, or act as a distributor of securities issued
by it except through an underwriter, acting as principal or agent, who may not
be obligated to sell or take up any specific amount of securities, except that
the Fund might be deemed an underwriter within the meaning of Section 2(11) of
the Securities Act of 1933 in making sales of securities not registered under
Federal Securities law.
7. Participate on a joint or joint and several basis in any securities trading
account.
8. Make any investment in a particular industry if, immediately after the making
of such investment, 25% or more of the Fund's total assets would be invested in
such industry.
9. Purchase or sell real estate or interests therein or real estate mortgages,
provided that the Fund may purchase marketable securities of real estate
investment trusts.
10. Purchase or sell commodities or commodity contracts, nor invest in oil, gas
or other mineral exploration development programs, including mineral leases,
except that the Fund may purchase or sell stock index futures contracts and
related options thereon if, thereafter, no more than 5% of its total assets are
invested in margin and premiums.
11. Make loans to others, except through purchasing qualified debt obligations,
lending its securities or entering into repurchase agreements.
12. Make any investment in warrants or rights if, immediately after the making
of such investment, more than 5% of the Fund's net assets would be so invested
or more than 2% of the Fund's net assets would be invested in warrants not
listed on a recognized domestic stock exchange, provided, however, that warrants
or rights which are attached to other securities shall be deemed to have no
value for purposes hereof.
13. Purchase or retain the securities of any issuer, if, to the knowledge of the
Treasurer of the Fund, those officers and directors of the Fund or the Adviser
owning individually more than 1/2 of 1% of the securities of such issuer
together own more than 5% of the securities of such issuer.
14. Purchase any security if, as a result, the Fund would then have more than 5%
of its total assets invested in securities of issuers (including predecessors)
that have been in continuous operation for less than three years. This
limitation shall not apply to investments in obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities.
15. Purchase the securities of any other investment company, except that it may
make such a purchase in the open market involving no commission or profit to a
sponsor or dealer (other than the customary broker's commission), provided that
not more than 5% of the Fund's total assets (taken at market or other current
value) would be invested in such securities immediately after the making of any
such investment, or the Fund may make such a purchase as part of a merger,
consolidation or acquisition of assets.
16. The Fund may purchase and sell (write) put and call options on securities
and stock indexes, but only if such options are exchange-traded or traded on an
automated quotation system of a national securities association; provided,
however, that options on securities written by the Fund must be covered.
The following restriction is nonfundamental:
17. The Fund may not invest more than 15% of its net assets in repurchase
agreements which have a maturity of longer than seven days or in other illiquid
securities, including securities that are illiquid by virtue of the absence of a
readily available market or legal or contractual restrictions on resale.
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Except in the case of the 300% 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 Fund's assets will not constitute a violation of the restriction.
PORTFOLIO TRANSACTIONS
Decisions to buy and sell securities and other financial instruments for the
Fund 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 the Fund are reviewed independently from
those of the other accounts managed by Alger Management, investments of the type
the Fund may make may also be made by these other accounts. When the Fund and
one or more other 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 the Fund or the
size of the position obtained or disposed of by the Fund.
Transactions in equity securities are in many cases effected on U.S. stock
exchanges and involve the payment of negotiated brokerage commissions. There is
generally no stated commission in the case of securities traded in the
over-the-counter markets, but the prices of those securities include undisclosed
commissions or mark-ups. Purchases and sales of money market instruments and
debt securities usually are principal transactions. These securities are
normally purchased directly from the issuer or from an underwriter or market
maker for the securities. The cost of securities purchased from underwriters
includes an underwriting commission or concession and the prices at which
securities are purchased from and sold to dealers include a dealer's mark-up or
mark-down. U.S. Government securities are generally purchased from underwriters
or dealers, although certain newly-issued U.S. Government securities may be
purchased directly from the U.S. Treasury or from the issuing agency or
instrumentality.
To the extent consistent with applicable provisions of the Act and the rules and
exemptions adopted by the Securities and Exchange Commission (the "SEC")
thereunder, as well as other regulatory requirements, the Fund's Board of
Trustees has determined that portfolio transactions will be executed through
Fred Alger & Company, Incorporated ("Alger Inc.") if, in the judgment of Alger
Management, the use of Alger Inc. is likely to result in price and execution at
least as favorable as those of other qualified broker-dealers and if, in
particular transactions, Alger Inc. charges the Fund a rate consistent with that
charged to comparable unaffiliated customers in similar transactions.
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, 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, provided to the Fund and/or the other accounts over which
Alger Management or its affiliates exercise investment discretion. 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 Fund are
not reduced by reason of its receiving brokerage and research service. The
Fund's Board of Trustees will periodically review the commissions paid by the
Fund to determine if the commissions paid over representative periods of time
are reasonable in relation to the benefits inuring to the Fund. During the
fiscal years ended October 31, 1998, October 31, 1997, and October 31, 1996, the
Fund paid an aggregate of approximately ------, ------, and ------ in brokerage
commissions, of which approximately ------, $127,576, and $17,275, respectively,
was paid to Alger Inc. Commissions paid during the year ended October 31, 1996
were significantly less than in the succeeding two years because of the large
cash flows into the Fund in 1997 and 1998. The commissions paid to Alger Inc.
during the fiscal year ended October 31, 1998 consti-
-8-
<PAGE>
tuted __% of the aggregate brokerage commissions paid by the Fund; during that
year, __% of the aggregate dollar amount of transactions by the Fund involving
the payment of brokerage commissions was effected through Alger Inc. Alger Inc.
does not engage in principal transactions with the Fund and, accordingly,
received no compensation in connection with securities purchased or sold in that
manner, which include securities traded in the over-the-counter markets, money
market investments and most debt securities.
NET ASSET VALUE
The Prospectus discusses the time at which the net asset value of the Fund is
determined for purposes of sales and redemptions. The New York Stock Exchange
("NYSE") is generally open on each Monday through Friday, except (i) New Year's
Day, Dr. Martin Luther King, Jr. Day, Presidents' Day (the third Monday in
February), Good Friday, Memorial Day (the last Monday in May), Independence Day,
Labor Day (the first Monday in September), Thanksgiving Day (the fourth Thursday
in November) and Christmas Day.
The assets of the Fund 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, which constitutes fair value as determined by
the Fund's Board of Trustees.
PURCHASES AND REDEMPTIONS
Shares of the Fund are offered continuously by the Fund and are distributed on a
best efforts basis by Alger Inc. as principal underwriter for the Fund pursuant
to a distribution agreement (the "Distribution Agreement"). Under the
Distribution Agreement, Alger Inc. bears all selling expenses, including the
costs of advertising and of printing prospectuses and distributing them to
prospective shareholders. Each of the officers of the Fund and Messrs. David D.
Alger and Fred M. Alger III, Trustees of the Fund, are "affiliated persons," as
defined in the Act, of the Fund and of Alger Inc.
GOVERNMENT DIRECT DEPOSIT AND PAYROLL SAVINGS PLAN
The Government Direct Deposit service allows you to arrange direct deposit of
U.S. federal government payments into your Fund account. The Payroll Savings
Plan allows you to designate an amount to be withheld from your payroll check
every pay period and deposited to your Fund account. The minimum investment
amount for each plan is $25. Both Government Direct Deposit and Payroll Savings
Plan are not available for Spectra sponsored retirement accounts such as IRAs.
PURCHASES THROUGH PROCESSING ORGANIZATIONS
You can buy shares through a "Processing Organization", which is a
broker-dealer, bank or other financial institution that purchases shares for its
customers. When shares are purchased this way, the Processing Organization,
rather than its customer, may be the shareholder of record of the shares.
Processing Organizations may impose charges and restrictions in addition to or
different from those applicable if you invest with the Fund directly. Therefore,
you should read the materials provided by the Processing Organization in
conjunction with the Prospectus. Certain Processing Organizations may receive
compensation from the Fund, Alger Inc., or any of its affiliates.
AUTOMATIC INVESTMENT PLAN
Deductions can be made from your bank account on the fifteenth and/or last
business day of each month. If the fifteenth falls on a weekend or a NYSE
holiday, the deduction shall be made on the next business day. In order to
participate, your account must be held by a bank which is a member of the
Automated Clearing House.
While there is no charge to shareholders for this service, a charge of $10.00
will be deducted from a shareholder's Fund account in the case of insufficient
funds. A shareholder's Automatic Investment Plan may be terminated at any time
without charge or penalty by the shareholder, the Fund, the Transfer Agent or
Alger Inc.
-9-
<PAGE>
TELEPURCHASE AND TELEREDEMPTION
You can apply for TelePurchase or TeleRedemption by completing a Telephone
Services Form and returning it to the Transfer Agent. Although the Fund is
authorized to charge a fee of $17 for each automated Clearing House redemption,
it does not currently intend to do so. To use these privileges, your bank must
be a member of the automated Clearing House. Shares held in any Spectra
retirement plan and shares issued in certificate form are not eligible for this
service.
The right of redemption of shares of the Fund may be suspended or the date of
payment postponed for more than seven days (a) for any periods during which the
New York Stock Exchange is closed (other than for customary weekend and holiday
closings), (b) when trading in the markets the Fund normally utilizes is
restricted, or an emergency, as defined by the rules and regulations of the SEC,
exists, making disposal of the Fund's investments or determination of its net
asset value not reasonably practicable or (c) for such other periods as the SEC
by order may permit for protection of the Fund's shareholders.
The Fund's transfer agent will reject any redemption request made within 15 days
after receipt of the purchase check, Telepurchase order, or Automatic Investment
Plan transfer against which such redemption is requested.
No interest will accrue on amounts represented by uncashed distribution or
redemption checks.
SIGNATURE GUARANTEES
The Transfer Agent will accept a signature guarantee by the following financial
institutions: a U.S. bank, trust company, broker, dealer, municipal securities
broker or dealer, government securities broker or dealer, credit union which is
authorized to provide signature guarantees, national securities exchange,
registered securities association or clearing agency.
SELLING SHARES BY TELEPHONE
The Fund, the transfer agent and their affiliates are not liable for acting in
good faith on telephone instructions relating to your account, so long as they
follow reasonable procedures to determine that the telephone instructions are
genuine. Such procedures may include recording the telephone calls and requiring
some form of personal identification. You should verify the accuracy of
telephone transactions immediately upon receipt of your confirmation statement.
Redemption requests generally will be paid on the next business day. This
service is not available within 60 days of changing your address or bank account
of record.
EXCHANGE PRIVILEGE
Shareholders may exchange shares of the Fund for shares of Alger Money Market
Portfolio of The Alger Fund (the "Portfolio"), another mutual fund managed by
Alger Management. Portfolio shares acquired in such exchanges, together with
Portfolio shares acquired through reinvestment of dividends on such shares, may
be exchanged for shares of the Fund. These exchanges will be effected at the
respective net asset values of the Fund and Portfolio next determined after the
exchange request is accepted, with no sales charge or transaction fee imposed.
Shares of the Portfolio received in an exchange will earn dividends beginning on
the next business day after the exchange. Before exchanging Fund shares for
Portfolio shares, an investor should carefully read a Prospectus describing the
Portfolio. To obtain a Prospectus for The Alger Fund and more information about
such exchanges, please call (800) 711-6141. The Fund reserves the right to
terminate, or modify this exchange privilege or to charge a per-exchange fee
upon notice to shareholders.
For tax purposes, an exchange of shares is treated as a sale of the shares
exchanged and therefore you may realize a taxable gain or loss when you exchange
shares.
SYSTEMATIC WITHDRAWAL PLAN
A systematic withdrawal plan (the "Withdrawal Plan") is available to
shareholders who own shares of the Fund with a value exceeding $10,000 and who
wish to receive specific amounts of cash periodically. Withdrawals of at least
$50 monthly (but no more than one percent of the value of a shareholder's shares
in the Fund) may be made under the Withdrawal Plan by redeeming as many shares
of the Fund as may be necessary to cover the stipulated withdrawal payment. To
the extent that withdrawals exceed dividends, distributions and appreciation of
a shareholder's investment in the Fund, there will be a reduction in the value
of the shareholder's investment and continued withdrawal payments may reduce the
shareholder's investment and ultimately exhaust it. Withdrawal payments should
not be considered as income from investment in a Fund.
Shareholders who wish to participate in the Withdrawal Plan and who hold their
shares in certificated form must deposit their share certificates of the Fund
from which withdrawals will be made with Alger Shareholder Services, Inc., as
agent for Withdrawal Plan members. All dividends and distributions on shares in
the Withdrawal Plan are automatically reinvested at net asset value in
additional shares of the Fund. For additional information regarding the
Withdrawal Plan, contact the Fund.
-10-
<PAGE>
UNDELIVERABLE DISTRIBUTION CHECKS
Accounts whose dividend/distribution checks have been returned as undeliverable
shall reinvest that dividend/distribution at the net asset value next determined
after the transfer agent receives the undelivered check. All future
dividend/distribution checks shall be reinvested automatically until the
shareholder(s) provide a written request for reinstatement of cash distributions
and a valid mailing address.
REDEMPTIONS IN KIND
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 the Fund to make payment of a
redemption order wholly or partly in cash, the Fund may pay the redemption
proceeds in whole or in part by a distribution "in kind" of securities from the
Fund, 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 the
Fund is obligated to redeem shares solely in cash up to the lesser of $250,000
or 1% of the net assets of the Fund during any 90-day period for any one
shareholder. If shares are redeemed in kind, the redeeming shareholder might
incur brokerage or other costs in selling the securities for cash. The method of
valuing securities used to make redemptions in kind will be the same as the
method the Fund uses to value its portfolio securities and such valuation will
be made as of the time the redemption price is determined.
MANAGEMENT
TRUSTEES AND OFFICERS OF THE FUND
The 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, and compensation during the year ended October 31, 1998
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, and
The Alger Fund, The Alger American Fund and The Alger Retirement Fund,
registered open-end management investment companies, for all of 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.
-11-
<PAGE>
NAME, AGE, POSITION WITH
THE FUND AND ADDRESS PRINCIPAL OCCUPATIONS
Fred M. Alger III (64)
Chairman of the Board
Chairman of the Boards of Alger Associates, Inc. ("Associates"), Alger Inc.,
Alger Management, Alger Properties, Inc. ("Properties"), Alger Shareholder
Services, Inc. ("Services"), Alger Life Insurance Agency, Inc. ("Agency"), The
Alger American Asset Growth Fund ("Asset Growth"), Fred Alger International
Advisory S.A. ("International"), and Analysts Resources, Inc. ("ARI").
David D. Alger (55)
President and Trustee
President and Director of Associates, Alger Management, Alger Inc., Properties,
Services, International and Agency; Executive Vice President and Director of
ARI; Director of Asset Growth.
Gregory S. Duch (47)
Treasurer
Executive Vice President, Treasurer and Director of Alger Management, Associates
and Properties; Executive Vice President and Treasurer of Alger Inc., ARI,
Services and Agency; Treasurer and Director of International.
Mary E. Marsden-Cochran (46)
Secretary
General Counsel, Vice President and Secretary of Associates, Alger Management,
Alger Inc., Properties, ARI, Services, and Agency (2/96-present); Secretary of
International (7/97-present), Associate General Counsel and Vice President,
Smith Barney Inc. (12/94-2/96); Blue Sky Attorney, AMT Capital (1/94-11/94).
Frederick A. Blum (45)
Assistant Secretary
and Assistant Treasurer
Senior Vice President of Alger Inc.
Arthur M. Dubow (65)
Trustee
P.O. Box 969
Wainscott, NY 11975
Trustee of The Arthur Dubow Foundation; private investor since 1985; Director of
Coolidge Investment Corporation; formerly Chairman of the Board of Institutional
Shareholder Services, Inc; formerly President of Fourth Estate, Inc.
Stephen E. O'Neil (66)
Trustee
805 Third Avenue
New York, NY 10022
Of Counsel to the law firm of Kohler & Barnes PC; private investor since 1981;
Director of NovaCare, Inc. and Brown-Forman Distillers Corporation; formerly
President and Vice Chairman of City Investing Company and Director of Centerre
Bancorporation and Syntro Corporation.
Nathan E. Saint-Amand, M.D. (61)
Trustee
2 East 88th Street
New York, NY 10128
Medical doctor in private practice.
John T. Sargent (74)
Trustee
14 E. 69th Street
New York, NY 10021
Private investor since 1987; Director of Atlantic Mutual Insurance Co.; formerly
Director of River Bank America.
No director, officer or employee of Alger Management or its affiliates receives
any compensation from the Fund for serving as an officer or Trustee of the Fund.
The Fund pays each Trustee who is not a director, officer or employee of Alger
Management or its affiliates an annual fee of $250.
The Fund did not offer its Trustees any pension or retirement benefits during or
prior to the fiscal year ended October 31, 1998. The following table provides
compensation amounts paid to disinterested Trustees of the Fund for the fiscal
year ended October 31, 1998.
-12-
<PAGE>
<TABLE>
<CAPTION>
COMPENSATION TABLE
TOTAL COMPENSATION PAID TO TRUSTEES FROM
THE ALGER RETIREMENT FUND,
AGGREGATE THE ALGER FUND,
COMPENSATION THE ALGER AMERICAN FUND,
FROM CASTLE CONVERTIBLE FUND, INC. AND
NAME OF PERSON, POSITION SPECTRA FUND SPECTRA FUND
------------------------ ------------------ ---------------------------------------
<S> <C> <C>
ARTHUR M. DUBOW, TRUSTEE $250 $28,250
STEPHEN E. O'NEIL, TRUSTEE $250 $28,250
NATHAN E. SAINT-AMAND, TRUSTEE $250 $28,250
JOHN T. SARGENT, TRUSTEE $187.50 $21,187.50
</TABLE>
INVESTMENT MANAGER
Alger Management serves as investment manager to the Fund pursuant to a written
agreement (the "Management Agreement"), subject to the supervision of the Board
of Trustees. The services provided by Alger Management under the Management
Agreement include: providing administrative services, making investment
decisions for the Fund, placing orders to purchase and sell securities on behalf
of the Fund, and selecting broker-dealers that, in its judgment, provide prompt
and reliable execution at favorable prices and reasonable commission rates. It
is anticipated that Alger Inc. will serve as the Fund's broker in effecting
substantially all of the Fund's transactions on securities exchanges and will
retain commissions in accordance with certain regulations of the Securities and
Exchange Commission. The Fund will consider sales of its shares as a factor in
the selection of broker-dealers to execute over-the-counter portfolio
transactions, subject to the requirements of best price and execution. Alger
Management employs professional securities analysts who provide research
services exclusively to the Fund and other accounts for which Alger Management
or its affiliates serve as investment adviser or subadviser.
Alger Management is owned by Alger Inc. which in turn is owned by Alger
Associates, Inc. ("Associates"), a financial services holding company. Fred M.
Alger III and his brother, David D. Alger, are the majority shareholders of
Associates and maybe deemed to control that company and its subsidiaries.
Alger Management pays the salaries of all officers who are employed by both it
and the Fund. Alger Management has agreed to maintain office facilities for the
Fund, furnish the Fund with statistical and research data, clerical, accounting
and bookkeeping services, and certain other services required by the Fund, and
to compute the net asset value, net income and realized capital gains or losses
of the Fund. Alger Management prepares semi-annual reports for the SEC and
shareholders, prepares federal and state tax returns and filings with state
securities commissions, maintains the Fund's financial accounts and records and
generally assists in all aspects of the Fund's operations. Alger Management
bears all expenses in connection with the performance of its services under the
Management Agreement.
Prior to February 12, 1996, Alger Management received no management fee but was
reimbursed for its expenses by the Fund. On February 12, 1996, the new
Management Agreement became effective which provides for the payment of an
investment management fee based upon the value of the average daily net assets
of the Fund. During the fiscal years ended October 31, 1998, October 31, 1997,
and October 31, 1996, Alger Management received ________, $573,068, and $99,209,
respectively, from the Fund under these arrangements. For the year ended October
31, 1996, the Fund was reimbursed for expenses exceeding applicable state
expense limitations by Alger management in the amount of $44,547. Alger
Management's fee is computed daily and paid monthly.
SHAREHOLDER SERVICING AGREEMENT
Under a Shareholder Servicing Agreement, the Fund pays Alger Inc. a shareholder
servicing fee of .25% of the value of the Fund's average daily net assets for
service and maintenance of shareholder accounts. Alger Inc. may pay some of this
fee to other organizations that also provide shareholder services and
maintenance of shareholder accounts. Payments under the Shareholder Servicing
Agreement are not tied exclusively to the shareholder servicing expenses
actually incurred by Alger Inc. and the payments may exceed expenses actually
incurred by Alger Inc. The Fund's Board of Trustees evaluates the
appropriateness of the Shareholder Servicing Agreement and its payment terms on
a periodic basis and in doing so considers all relevant factors, including
expenses borne by Alger Inc. and the amounts it receives under the Shareholder
Servicing Agreement. During the fiscal year ended October 31, 1998, the Fund
paid Alger Inc. $______ under the Shareholder Servicing Agreement.
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<PAGE>
CODE OF ETHICS
Alger Management personnel ("Access Persons") are permitted to engage in
personal securities transactions subject to the restrictions and procedures of
the Fund's Code of Ethics. Pursuant to the Code of Ethics, Access Persons
generally must preclear all personal securities transactions prior to trading
and are subject to certain prohibitions on personal trading. You can get a copy
of the Fund's Code of Ethics by calling the Fund toll-free at (800) 711-6141.
EXPENSES OF THE FUND
Operating expenses for the Fund generally consist of all costs not specifically
borne by Alger Management, including custodian fees, Trustees' fees, transfer
agency fees, legal fees, auditing costs, investment management fees, fees for
necessary professional and brokerage services, costs of regulatory compliance
and costs associated with maintaining legal existence and shareholder relations.
In addition, the Fund may compensate Alger Inc. for servicing shareholder
accounts. From time to time, Alger Management, in its sole discretion and as it
deems appropriate, may assume certain expenses of the Fund while retaining the
ability to be reimbursed by the Fund for such amounts prior to the end of the
fiscal year. This will have the effect of lowering the Fund's overall expense
ratio and of increasing return to investors, or the converse, at the time such
amounts are assumed or reimbursed, as the case may be.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP serves as independent public accountants for the Fund.
TAXES
The following is a summary of selected federal income tax considerations that
may affect the Fund and its shareholders. The summary is not intended to
substitute for individual tax advice and investors are urged to consult their
own tax advisers as to the federal, state and local tax consequences of
investing in the Fund.
The Fund 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, the Fund 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, the Fund
must, among other things, distribute to its shareholders at least 90% of its
taxable net investment income and net realized short-term capital gains. In so
qualifying the Fund may be restricted in the utilization of certain of the
investment techniques described above and in the Fund's prospectus. As a
regulated investment company, the Fund is subject to a non-deductible excise tax
of 4% with respect to certain undistributed amounts of income and capital gains
during the calendar year. The Fund expects to make additional distributions or
change the timing of its distributions so as to avoid the application of this
tax.
In general, any gain or loss on the redemption or exchange of Fund shares will
be long-term capital gain or loss if held by the shareholder for more than one
year, and will be short-term capital gain or loss if held for one year or less.
However, if a shareholder receives a distribution taxable as long-term capital
gain with respect to Fund shares, and redeems or exchanges the shares before
holding them for more than six months, any loss on the redemption or exchange up
to the amount of the distribution will be treated as a long-term capital loss.
Dividends of the Fund's investment income and distributions of its short-term
capital gains will be taxable as ordinary income. Distributions of long-term
capital gains will be taxable as such at the appropriate rate, regardless of the
length of time you have held shares of the Fund. Only dividends that reflect a
Fund's income from certain dividend-paying stocks will be eligible for the
federal dividends-received deduction for corporate shareholders.
If a shareholder fails to furnish a correct taxpayer identification number,
fails to fully report dividend or interest income, or fails to certify that he
or she has provided a correct taxpayer identification number and that he or she
is not subject to such withholding, then the shareholder may be subject to a 31
percent "backup withholding tax" with respect to (i) any taxable dividends and
distributions and (ii) any proceeds of any redemption of Fund shares.
CUSTODIAN AND TRANSFER AGENT
State Street Bank & Trust Company, 225 Franklin Street, Boston, Massachusetts
02110, serves as custodian of the Fund's assets pursuant to a custodian
agreement. 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 Fund, maintains the
shareholder account records for the Fund, handles certain communications between
shareholders and the Fund and distributes any dividends and distributions
payable by the Fund.
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<PAGE>
DIVERSIFICATION
The Fund is classified as a "diversified" investment company under the
Investment Company Act of 1940. A "diversified" investment company under the
Investment Company Act of 1940. A "diversified" investment company is required,
with respect to 75% of its assets, to limit its investment in an one issued
(other than the U.S. government) to no more than 5% of the investment company's
total assets. The Fund intends to continue to qualify as a "regulated investment
company" under the Internal Revenue Code; one of the requirements for such
qualification is a quarterly diversification test, applicable to 50% (rather
than 75%) of the Fund's assets, similar to the requirement stated above.
CERTAIN SHAREHOLDERS
Set forth below is certain information regarding significant shareholders of the
Fund. Charles Schwab & Co., Inc.--Special Custody Acct. owned beneficially or of
record ----% of the shares of the Fund at February ----, 1999, and may be deemed
to control the Fund, which may have the effect of proportionately diminishing
the voting power of other shareholders of the Fund.
The following table contains information regarding persons who are known by the
Fund to own beneficially or of record five percent or more of the shares of the
Fund. 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 the Fund's outstanding shares as of February __, 1999.
RECORD/BENEFICIAL
OWNERSHIP
------------------
Alger Associates, Inc. ---%/---%
Charles Schwab & Co., Inc.
Special Custody Acct.
101 Montgomery St.
San Francisco, CA 94104 ---%/---
RECORD/BENEFICIAL
OWNERSHIP
------------------
National Financial Services
161 Devonshire St.
Boston, MA 02110 ---%/---%
The Fund's Trustees and officers as a group hold less than 1% of the Fund's
outstanding shares.
ORGANIZATION
The Fund is a diversified, open-end management investment company. From its
inception in 1968 until February 12, 1996, the Fund was organized as a
Massachusetts business corporation, and it had operated as a registered
closed-end investment company since 1978. Shares of closed-end investment
companies, unlike those of open-end companies, are ordinarily not redeemable and
are not continuously offered for sale to the public. On February 12, 1996, the
Fund reorganized as a Massachusetts business trust and also converted to an
open-end investment company, or "mutual fund." In connection with the
reorganization, the name of the Fund was changed from "Spectra Fund, Inc." to
"Spectra Fund." The Fund is authorized to offer an unlimited number of shares.
Under the transfer agency agreement, Services is compensated on a per-account
and, for certain transactions, a per-transaction basis.
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 Trust'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.
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. In the interest of economy and convenience,
certificates representing shares of the Fund are physically issued only upon
specific written request of a shareholder.
-15-
<PAGE>
Massachusetts law provides that shareholders could, under certain circumstances,
be held personally liable for the obligations of the Fund. However, the Trust
Agreement disclaims shareholder liability for acts or obligations of the Fund
and requires that notice of such disclaimer be given in each agreement,
obligation or instrument entered into or executed by the Fund or a Trustee. The
Trust Agreement provides for indemnification from the Fund's property for all
losses and expenses of any shareholder held personally liable for the
obligations of the Fund. Thus, the risk of a shareholder's incurring financial
loss on account of shareholder liability is limited to circumstances in which
the Fund itself would be unable to meet its obligations, a possibility that the
Fund believes is remote. Upon payment of any liability incurred by the Fund, the
shareholder paying the liability will be entitled to reimbursement from the
general assets of the Fund. The Trustees intend to conduct the operations of the
Fund in a manner so as to avoid, as far as possible, ultimate liability of the
shareholders for liabilities of the Fund.
DETERMINATION OF PERFORMANCE
The Fund may include quotations of "total return" in advertisements or reports
to shareholders or prospective investors. Total return figures show the
aggregate or average percentage change in value of an investment in the Fund
from the beginning date of the measuring period to the end of the measuring
period. These figures reflect changes in the price of the Fund's shares and
assume that any income dividends and/or capital gains distributions made by the
Fund during the period were reinvested in shares of the Fund. Figures will be
given for recent short-, mid-, and long-term periods (ordinarily for 1, 5 and 10
years), including periods during which the Fund operated as a closed-end
investment company, and may be given for other periods as well (such as from
commencement of the Fund's operations, or on a year-by-year basis) and may
utilize dollar cost averaging. The Fund may also use "aggregate"total return
figures for various periods, representing the cumulative change in value of an
investment in the Fund for the specific period (again reflecting changes in
share net asset value 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). Total return will
vary based on changes in market conditions. In addition, since the deduction of
expenses is reflected in the total return figures, total return will also vary
based on the level of the Fund's expenses. Current total return quotations may
be obtained by contacting the Fund. Further information about the Fund's
performance is contained in its Annual Report to Shareholders, which may be
obtained without charge by contacting the Fund.
The average annual "total return" is computed according to formulas prescribed
by the SEC. These performance figures are calculated in the following manner:
A. Total Return--The Fund'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 Fund for the periods indicated below
were as follows:
FIVE TEN
YEARS YEARS
YEAR-ENDED ENDED ENDED
10/31/98 10/31/98 10/31/98
--------- ------- -------
---% ---% ---%
B. Yield--the Fund's net annualized yield described in the Prospectus is
computed according to the following formula:
a-b
YIELD = 2[(---- + 1)6 - 1]
cd
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = The average daily number of shares outstanding during the period
that were entitled to receive dividends.
d= the maximum offering price per share on the last day of the period.
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<PAGE>
IN GENERAL
Current performance information for the Fund may be obtained by calling the Fund
at the telephone number provided on the cover page of this Statement of
Additional Information. The Fund's quoted performance may not be indicative of
future performance. The Fund's performance will depend upon factors such as the
Fund's expenses and the types of instruments held by the Fund.
From time to time, advertisements or reports to shareholders may compare the
yield or performance of the Fund to that of other mutual funds with a similar
investment objective. The performance of the Fund, for example, might be
compared to rankings prepared by Lipper Analytical Services Inc., which is a
widely recognized, independent service that monitors the performance of mutual
funds, as well as to various unmanaged indices, such as the S&P 500 Index. In
addition, evaluations of the Fund published by nationally recognized ranking
services or articles regarding performance, rankings and other Fund
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 the Fund's performance for any future period.
FINANCIAL STATEMENTS
The Fund's financial statements for the year ended October 31, 199_, are
contained in the Annual Report to shareholders and are hereby incorporated by
reference. A copy of the Fund's Annual Report may be obtained free of charge by
telephoning (800) 711-6141.
-17-
<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.
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
A-1
<PAGE>
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 determined 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 10038
- -------------------------------------------
DISTRIBUTOR:
Fred Alger & Company, Incorporated
30 Montgomery Street
Jersey City, New Jersey 07302
- -------------------------------------------
TRANSFER AGENT:
Alger Shareholder Services, Inc.
30 Montgomery Street
Box 2001
Jersey City, New Jersey 07302
- -------------------------------------------
INDEPENDENT PUBLIC ACCOUNTANTS:
Arthur Andersen LLP
1345 Avenue of the Americas
New York, New York 10105
- -------------------------------------------
COUNSEL:
Hollyer Brady Smith Troxell
Barrett Rockett Hines & Mone LLP
551 Fifth Avenue
New York, New York 10176
- -------------------------------------------
No person has been authorized to give any information or to make any
representations other than those contained in the Prospectus, the Statement of
Additional Information or the Fund's official sales literature in connection
with the offering of the Fund's shares, and if given or made, such other
information or representations must not be relied on as having been authorized
by the Fund. The Prospectus does not constitute an offer in any state in which,
or to any person to whom, such offer may not lawfully be made.
|
| ONE WORLD TRADE CENTER
SPECTRA | SUITE 9333
FUND | NEW YORK, NEW YORK 10048
| (800) 711-6141
STATEMENT |
OF ADDITIONAL | FEBRUARY 26, 1999
INFORMATION |
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
(1) Financial Statements included in Part A:
Condensed Financial Information
(2) Financial Statements incorporated by
reference into Part B:
Report of Independent Public Accountants;
Schedule of Investments
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets for the
Years Ended October 31, 1998 and
October 31, 1997
Financial Highlights
Notes to Financial Statements
(b) Exhibits:
Exhibit No. Description of Exhibit
- ----------- ----------------------
1 Agreement and Declaration of Trust (1) [EDGAR 2/98]
2 By-laws of Registrant (1) [EDGAR 2/98]
3 Not applicable
4 Form of Specimen Share Certificate (3)
5 Investment Management Agreement (1) [EDGAR 2/98]
6 Distribution Agreement (1) [EDGAR 2/98]
7 Not applicable
<PAGE>
8 Custody Agreement (4)
9 Shareholder Servicing Agreement (1) [EDGAR 2/98]
10 Opinion and Consent of Hollyer Brady Smith Troxell
Barrett Rockett Hines & Mone LLP (3)
10(a) Opinion and Consent of Sullivan & Worcester
11 Consent of Arthur Andersen LLP
12 Not applicable
13 Not applicable
14 Not applicable
15 Not applicable
- -------------------
(1) Incorporated by reference to Registrant's Registration Statement (the
"Registration Statement") filed with the Securities and Exchange Commission
(the "SEC") on October 6, 1995.
(2) Incorporated by reference to Pre-Effective Amendment No. 1 to the
Registration Statement, filed with the SEC on December 4, 1995.
(3) Incorporated by reference to Pre-Effective Amendment No. 2 to the
Registration Statement, filed with the SEC on February 6, 1996.
(4) Incorporated by reference to Post-Effective Amendment No. 3 filed with the
SEC on February 28, 1997.
Item 25. Persons Controlled by or Under Common Control with Registrant
-------------------------------------------------------------
None.
<PAGE>
Item 26. Number of Holders of Securities
-------------------------------
As of November 30, 1998, there were 7879 record holders of Registrant's
shares.
Item 27. 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
<PAGE>
or proceeding) is asserted by such Trustee, officer orcontrolling 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 28. 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 28 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 Schdules A and D of Form ADV filed by Alger
Management pursuant to the Investment Advisers Act of 1940 (SEC File No.
801-06709).
Item 29. Principal Underwriter
---------------------
(a) Alger Inc. acts as principal underwriter for Registrant, The Alger
Fund, The Alger American Fund and The Alger Defined Contribution Trust and has
acted as subscription agent for Castle Convertible Fund, Inc.
(b) The information required by this Item 29 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 30. 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.
<PAGE>
Item 31. Management Services
-------------------
Not applicable.
Item 32. Undertakings
------------
(a) Not applicable.
(b) Not applicable.
(c) Registrant hereby undertakes to provide its Annual Report
without charge to any recipient of its Prospectus who requests
the information.
<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 22nd day of December, 1998.
SPECTRA FUND
By: /s/ David D. Alger
-------------------------------
David D. Alger, President
ATTEST: /s/ Gregory S. Duch
--------------------------------------
Gregory S. Duch, Treasurer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Fred M. Alger III* December 22, 1998
- ----------------------------------------------------- Chairman of the Board ----------------------
Fred M. Alger III
/s/ David D. Alger December 22, 1998
- ----------------------------------------------------- President and Trustee ----------------------
David D. Alger (Chief Executive Officer)
/s/ Gregory S. Duch December 22, 1998
- ----------------------------------------------------- Treasurer ----------------------
Gregory S. Duch (Chief Financial and Accounting
Officer)
/s/ Nathan E. Saint-Amand* December 22, 1998
- ----------------------------------------------------- Trustee ----------------------
Nathan E. Saint-Amand
/s/ Stephen E. O'Neil* December 22, 1998
- ----------------------------------------------------- Trustee ----------------------
Stephen E. O'Neil
/s/ Arthur M. Dubow* December 22, 1998
- ----------------------------------------------------- Trustee ----------------------
Arthur M. Dubow
/s/ John T. Sargent* December 22, 1998
- ----------------------------------------------------- Trustee ----------------------
John T. Sargent
*By: Gregory S. Duch
--------------------------
Gregory S. Duch
Attorney-in-Fact
</TABLE>
<PAGE>
Securities Act File No. 33-98102
Investment Company Act File No. 811-1743
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
---
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 x
---
---
Post-Effective Amendment No. 4 x
---
and/or
---
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 x
---
---
Amendment No. 17 x
---
(Check appropriate box or boxes)
SPECTRA FUND
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
--------------------------
E X H I B I T S
--------------------------
<PAGE>
INDEX TO EXHIBITS
Page Number
Exhibit in Sequential
No. Number System
--- -------------
10(a) Opinion of Counsel............. ...................... 45
11 Consent of Arthur Andersen LLP........................ 47
Boston
December 22, 1998
The Trustees of Spectra Fund
75 Maiden Lane
New York, New York 10038
Re: Spectra Fund
Amendment to Registration Statement on Form N-1A
-------------------------------------------------
Ladies and Gentlemen:
You have requested our opinion as to certain matters of Massachusetts law
in connection with the filing by Spectra Fund, a trust with transferable shares
established under Massachusetts law (the "TRUST"), of Post-Effective Amendment
No. 4 to its Registration Statement on Form N-1A (the "REGISTRATION STATEMENT")
under the Securities Act of 1933, as amended (the "SECURITIES ACT"),
Registration No. 33-98102, and Amendment No. 17 to its Registration Statement
under the investment Company Act, Registration No. 811-1743 (collectively, the
"AMENDMENT").
We acted as Massachusetts counsel to the Trust in connection with the
execution and delivery of its Declaration of Trust dated July 5, 1995 (the
"DECLARATION"), and the authorization by the Trustees of the Trust of the
issuance and sale of shares of beneficial interest, one mill ($.001) par value,
authorized by the Declaration (the "SHARES") which are to be registered pursuant
to the Amendment. In this connection, we have examined and are familiar with the
Declaration, the Bylaws of the Trust, the Amendment, substantially in the form
in which it is to be filed with the Securities and Exchange Commission (the
"SEC"), the forms of the Prospectus (the "PROSPECTUS") and the Statement of
Additional Information (the "SAI") included in the Amendment, certificates of
officers of the Trust as to actions of the Trustees, certificates of officers of
the Trust and of public officials as to other matters of fact, and such
questions of law and fact, as we have considered necessary or appropriate for
purposes of the opinion expressed herein. We have assumed the genuineness of the
signatures on, and the authenticity of, all documents furnished to us, and the
conformity to the originals of documents submitted to us as certified copies,
which facts we have not independently verified.
<PAGE>
Based upon and subject to the foregoing, we hereby advise you that, in our
opinion, under Massachusetts law:
1. The Trust is validly existing as a trust with transferable shares of the
type commonly called a Massachusetts business trust
2. The Trust is authorized to issue an unlimited number of Shares; the
Shares have been duly and validly authorized by all requisite action of
the Trustees of the Trust, and no action of the shareholders of the
Trust is required in such connection.
3. The Shares subject to the Registration Statement, when duly sokd, issued
and paid for as contemplated by the Prospectus and the SAI, will be
validly and legally issued, and fully paid and nonassessable by the
Trust.
With respect to the opinion stated in paragraph 3 above, we wish to point
out that the shareholders of a Massachusetts business trust may under some
circumstances be subject to assessment at the instance of creditors to pay the
obligations of such trust in the event that its assets are insufficient for the
purpose.
The letter expresses our opinions as the provisions of the DEclaration and
the laws of the Commonwealth of Massachusetts applying to business trusts
generally, but does not extend to the Massachusetts Securities Act, or to
federal securities Act, or to federal securities or other laws.
We hereby consent to the reference to us in the Prospectus, and to the
filing of this opinion with the SEC as an exhibit to the Registration Statement.
In giving such consent, we do not thereby admit that we come within the category
of persons whose consent is required under Section 7 of the Securities Act of
1933, as amended.
Very truly yours,
/s/SULLIVAN & WORCESTER LLP
---------------------------
SULLIVAN & WORCESTER LLP
ARTHUR
ANDERSEN
-------------------------
Arthur Andersen LLP
-------------------------
1345 Avenue of the Americas
New York NY 10105-0032
Writer's Direct Dial
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to
the use of our report dated December 12, 1997 on the
financial statements of Spectra Fund for the year ended
October 31, 1997 and to all references to our Firm
included in or made a part of the registration statement
of Spectra Fund filed on Form N-1A (Amendment No. 17),
Investment Company Act File No. 811-1743 with the
Securities and Exchange Commission.
/s/Arthur Andersen LLP
----------------------
ARTHUR ANDERSEN LLP
New York, New York
December 22, 1998
