As filed with the Securities and Exchange Commission
on February 27, 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. 3 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. 16 x
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(Check appropriate box or boxes)
SPECTRA FUND
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(Exact Name of Registrant as Specified in Charter)
75 MAIDEN LANE
NEW YORK, NEW YORK 10038
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(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.
75 MAIDEN LANE
NEW YORK, NY 10038
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(Name and Address of Agent for Service)
<PAGE>
It is proposed that this filing will become effective (check appropriate box):
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x 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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on (date) pursuant to paragraph (a) or Rule 485
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DECLARATION PURSUANT TO RULE 24f-2
Registrant has registered an indefinite number or amount of securities
under the Securities Act of 1933, as amended, pursuant to Securities (a)(1) of
Rule 24f-2 under the Investment Company Act of 1940, as amended. The Rule 24f-2
Notice for Registrant's fiscal year ended October 31, 1997 was filed on December
19, 1997.
SPECTRA FUND
FORM N-1A
CROSS REFERENCE SHEET
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PART A
ITEM NO. PROSPECTUS HEADING
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<S> <C> <C>
1. Cover Page............................................ Front Cover Page
2. Synopsis ............................................. Expenses
3. Condensed Financial Information ...................... Financial Highlights
4. General Description of Registrant .................... Front Cover Page; Investment Objective
and Policies; Investment Practices;
Management of the Fund
5. Management of the Fund ............................... Management of the Fund
5a. Management's Discussion of Fund Perfor-
mance ................................................ Management's Discussion of
Performance
6. Capital Stock and Other Securities ................... Front Cover Page; Management of the
Fund; Dividends and Taxes
7. Purchase of Securities Being Offered ................. How to Buy Shares; Net Asset Value
8. Redemption or Repurchase ............................. How to Sell Shares; How to Exchange
Shares
9. Pending Legal Proceedings ............................ Not Applicable
PART B HEADING IN STATEMENT OF
ITEM NO. ADDITIONAL INFORMATION
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10. Cover Page ........................................... Front Cover Page
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C>
11. Table of Contents .................................... Contents
12. General Information and History ...................... Not Applicable
13. Investment Objective and Policies .................... Investment Objective and Policies;
Appendix
14. Management of the Fund ............................... Management
15. Control Persons and Principal Holders of
Securities ......................................... Certain Shareholders
16. Investment Advisory and Other Services ............... Management; Custodian and Transfer
Agent; Purchases; See in the Prospectus
"Management of the Fund"
17. Brokerage Allocation and Other Practices ............. Investment Objective and Policies
18. Capital Stock and Other Securities ................... Organization; See in the Prospectus "Div-
idends and Taxes" and "Management of
the Fund"
19. Purchase, Redemption and Pricing of Secu-
rities Being Offered ................................. Net Asset Value; Purchases; Redemp-
tions
20. Tax Status ........................................... Taxes; See in the Prospectus "Taxes"
21. Underwriters ......................................... Purchases
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>
PROSPECTUS
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SPECTRA|75 Maiden Lane
FUND|New York, New York 10038
|(800) 711-6141
Spectra Fund (the "Fund") is a non-diversified mutual fund with the investment
objective of capital appreciation. It seeks to achieve this objective by
investing primarily in common stocks. There is no sales charge on purchases of
Fund shares.
This Prospectus, which should be retained for future reference, contains
important information that you should know before investing. A Statement of
Additional Information dated February 27, 1998 containing further information
about the Fund has been filed with the Securities and Exchange Commission and is
incorporated by reference into this Prospectus. It is available at no charge by
contacting the Fund at the address or phone number above.
TABLE OF CONTENTS
Page
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Expenses....................................... i
Financial Highlights........................... ii
Investment Objective and Policies.............. 1
Risk Factors and Investment Practices.......... 1
How to Buy Shares.............................. 4
Special Investor Services...................... 5
How to Sell Shares............................. 5
Management of the Fund......................... 6
Net Asset Value................................ 7
Dividends and Taxes............................ 8
Performance.................................... 8
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY ANY BANK, AND THE SHARES ARE NOT FEDERALLY
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE
FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECUR-
ITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
FEBRUARY 27, 1998
<PAGE>
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EXPENSES
The Table below is designed to assist you in understanding the direct and
indirect costs and expenses that you will bear as a shareholder. The Example
below shows the amount of expenses you would pay on a $1,000 investment in the
Fund. These amounts assume the reinvestment of all dividends and distributions,
and payment by the Fund of operating expenses as shown in the Table under Total
Fund Expenses. The Example is an illustration only and actual expenses may be
greater or less than those shown.
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases........................ None
Maximum Sales Load Imposed on Reinvested Dividends............. None
Redemption Fees................................................ None
Annual Fund Operating Expenses (as a percentage of average net assets)
Management Fees................................................ 1.50%
Other Expenses................................................. 0.62%
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Total Fund Expenses ........................................... 2.12%*
=====
EXAMPLE
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period:
One Year.................................... $ 22
Three Years................................. 66
Five Years.................................. 114
Ten Years................................... 245
i
<PAGE>
FINANCIAL HIGHLIGHTS
During the period July 1, 1975 to August 22, 1978, the Fund was an open-end
investment company. From August 23, 1978 through February 11, 1996 the Fund was
a closed-end investment company organized as a Massachusetts corporation. Since
February 12, 1996, the Fund has been an open-end investment company organized as
a Massachusetts business trust. The Financial Highlights for the fiscal periods
ended June 30, 1991 through October 31, 1997 have been audited by Arthur
Andersen LLP, the Fund's independent public accountants. 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. 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.
<TABLE>
<CAPTION>
SPECTRA FUND
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
Four
Months
Ended
Year Ended October 31, Oct. 31, Year Ended June 30,
--------------------------- ---------------------------------------------------
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%
======= ======= ====== ====== ====== ====== ====== ====== ====== ======
Average Commission Rate Paid. $.0711 $.0661
======= =======
(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 February 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.
</TABLE>
ii
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<TABLE>
<CAPTION>
Year Ended June 30,
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1988 1987 1986 1985 1984 1983 1982 1981
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<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $23.45 $27.28 $20.43 $16.91 $22.86 $11.80 $14.39 $ 9.17
------ ------ ------ ------ ------ ------ ------ ------
Net investment income (loss)... (0.19) (0.04) 0.01 (0.05) (0.04) (0.14) (0.02) (0.12)
Net realized and unrealized gain
(loss)on investments........... (2.34) 2.09 8.87 4.40 (4.35) 11.20 (2.57) 5.34
------ ------ ------ ------ ------ ------ ------ ------
Total from investment operations (2.53) 2.05 8.88 4.35 (4.39) 11.06 (2.59) 5.22
Dividends from net investment
income....................... -- -- -- -- -- -- -- --
Distributions from net
realized gains ............ (7.19) (5.88) (2.03) (0.83) (1.56) -- -- --
------ ------ ------ ------ ------ ------ ------ ------
Total Distributions............ (7.19) (5.88) (2.03) (0.83) (1.56) -- -- --
------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of year... $13.73 $23.45 $27.28 $20.43 $16.91 $22.86 $11.80 $14.39
====== ====== ====== ====== ====== ====== ====== ======
Total return(iii) ............. (1.36)%(v) 11.88%(v) 49.02%(v) 27.08%(v) (19.03)%(v) 93.73%(v) (18.00)%(v) 56.92%(v)
====== ====== ====== ====== ====== ====== ====== ======
Ratios and Supplemental Data:
Net assets, end of year
(000's omitted)............ $3,525 $6,021 $7,003 $5,244 $4,340 $5,870 $3,028 $3,694
====== ====== ====== ====== ====== ====== ====== ======
Ratio of expenses to average
net assets................. 3.05% 2.39% 2.25% 2.70% 2.73% 2.47% 3.10% 2.59%
====== ====== ====== ====== ====== ====== ====== ======
Ratio of net investment income
(loss) to average net assets (1.07)% (0.19)% 0.07% (0.27) % (0.23)% (0.82)% (0.19)% (0.90)%
====== ====== ====== ====== ====== ====== ====== ======
Portfolio Turnover Rate...... 139.59% 127.30% 122% 106% 84% 94% 85% 94%
====== ====== ====== ====== ====== ====== ====== ======
Average Commission Rate Paid.
</TABLE>
<TABLE>
<CAPTION>
Year Ended June 30,
------------------------------------------------------
1980 1979 1978 1977 1976
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 7.23 $ 5.98 $ 4.87 $ 4.99 $ 4.14
------ ------ ------ ------ ------
Net investment income (loss)... (0.14) (0.11) (0.02) 0.00 0.01
Net realized and unrealized gain
(loss)on investments........... 2.08 1.36 1.14 (0.11) 0.88
------ ------ ------ ------ ------
Total from investment operations 1.94 1.25 1.12 (0.11) 0.89
Dividends from net investment
income....................... -- -- (0.01) (0.01) (0.04)
Distributions from net
realized gains ............ -- -- -- -- --
------ ------ ------ ------ ------
Total Distributions............ -- -- (0.01) (0.01) (0.04)
------ ------ ------ ------ ------
Net asset value, end of year... $ 9.17 $ 7.23 $ 5.98 $ 4.87 $ 4.99
====== ====== ====== ====== ======
Total return(iii) ............. 26.83%(v) 20.90%(v) 22.94%(v) (2.14)%(v) 21.84%(v)
====== ====== ====== ====== ======
Ratios and Supplemental Data:
Net assets, end of year
(000's omitted)............
$2,355 $1,857 $2,077 $1,910 $2,248
Ratio of expenses to average ====== ====== ====== ====== ======
net assets................. 4.19% 3.92% 2.64% 1.57% 1.84%
====== ====== ====== ====== ======
Ratio of net investment income
(loss) to average net assets (1.66)% (1.65)% (0.48)% 0.15% 0.26%
====== ====== ====== ====== ======
Portfolio Turnover Rate...... 133% 162% 142% 124% 167%
====== ====== ====== ====== ======
Average Commission Rate Paid.
</TABLE>
iii
<PAGE>
INVESTMENT OBJECTIVE
AND POLICIES
The Fund's investment objective and the restrictions summarized in the next
paragraph are fundamental which means that they may not be changed without
shareholder approval. Except where otherwise indicated, all other investment
policies and practices described below and elsewhere in this Prospectus are not
fundamental, so the Fund's Board of Trustees may change them without shareholder
approval. There is no guarantee that the Fund's objective will be achieved.
As a matter of fundamental policy, the Fund will not: (1) invest more than
25% of its total assets in any one industry; (2) borrow money or pledge its
assets, except that the Fund may borrow from banks so long as it maintains asset
coverage of at least 300% with respect to all borrowings and may pledge its
assets in connection with permissible borrowings or investments; (3) invest more
than 5% of its total assets in securities of issuers (other than U.S. government
securities) that have been in continuous operation for less than three years; or
(4) make loans to others, except through purchasing qualified debt obligations,
lending its securities or entering into repurchase agreements. The Statement of
Additional Information contains additional investment restrictions as well as
additional information on the Fund's investment practices.
The investment objective of the Fund is capital appreciation. The Fund seeks
to achieve its objective primarily by investing in equity securities, such as
common or preferred stocks, or securities convertible into or exchangeable for
equity securities, including warrants and rights. The Fund will invest
principally in companies whose securities are traded on domestic stock exchanges
or in the over-the-counter market. Investing in equity securities involves
inherent risks since the Fund's price per share generally fluctuates with
changes in stock market prices. Many factors affect stock prices including
economic and financial trends and expectations about business activity and, as a
result, there can be a wide variability of returns on stocks in any one year.
The 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.
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.
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 and
to hedge against the risk of unfavorable price movements, and may enter into
futures contracts on securities indexes and purchase and sell call and put
options on these futures contracts.
RISK FACTORS AND
INVESTMENT PRACTICES
The Fund may use the investment strategies and invest in the types of
securities described below, which may involve certain risks. The Statement of
Additional Information contains more detailed information about these practices
and information about other investment practices of the Fund.
1
<PAGE>
REPURCHASE AGREEMENTS
In a repurchase agreement, the Fund buys a security at one price and
simultaneously agrees to sell it back at a higher price. In the event of a
bankruptcy or default of the other party to the repurchase agreement, the Fund
could experience costs and delays in liquidating the underlying security, which
is held as collateral, and the Fund might incur a loss if the value of the
collateral held declines during this period.
ILLIQUID AND RESTRICTED SECURITIES
The Fund will not invest more than 15% of its net assets in illiquid
securities, including restricted securities that have not been determined to be
liquid. An investment may be illiquid because of the absence of an active
trading market, making it difficult to sell promptly at an acceptable price. A
restricted security is one that has a contractual restriction on its resale or
which cannot be sold publicly until it is registered under the Securities Act of
1933. The Fund may purchase securities eligible for resale under Rule 144A of
the Securities Act of 1933. This rule permits otherwise restricted securities to
be sold to certain institutional buyers. Under the policies and procedures
established by the Fund's Board of Trustees, the Fund's investment manager, Fred
Alger Management, Inc. ("Alger Management") determines the liquidity of the
Fund's Rule 144A investments.
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. Any such loan will be continuously secured by collateral at least
equal to the value of the securities loaned. Such lending could result in delays
in receiving additional collateral or in the recovery of the securities or
possible loss of rights in the collateral should the borrower fail financially.
FOREIGN SECURITIES
The Fund may invest up to 20% of its total assets in foreign securities.
Investing in securities of foreign companies and foreign governments, which
generally are denominated in foreign currencies, may involve certain risk and
opportunity considerations not typically associated with investing in domestic
companies and could cause the Fund to be affected favorably or unfavorably by
changes in currency exchange rates and revaluations of currencies. 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 also be less publicly
available information about foreign issuers than about domestic issuers. In
addition, securities of some foreign issuers are less liquid and more volatile
than securities of comparable domestic issuers and foreign brokerage commissions
are generally higher than in the United States. Foreign securities markets may
also be less liquid, more volatile and less subject to government supervision
than those in the United States. Generally, the Fund does not invest in foreign
securities. If it does so in the future, the Fund intends to limit such
investments to more established issuers and markets.
The Fund may purchase American Depositary Receipts ("ADRs"), American
Depositary Shares ("ADSs") or U.S. dollar-denominated securities of foreign
issuers which are not included in 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 buy and sell (write) listed options in order to obtain
additional return or to hedge the value of its portfolio. As a matter of
fundamental policy, the Fund may write options on securities only
2
<PAGE>
if such options are covered. Although the Fund will generally purchase or write
only those options for which there appears to be an active secondary market,
there is no assurance that a liquid secondary market on an exchange will exist
for any particular option. 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. The Fund may purchase and sell put and
call options on stock indexes in order to increase its gross income or to hedge
its portfolio against price fluctuations.
The writing and purchase of options is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. Additional discussion of these risks
and techniques is included in the Statement of Additional Information.
STOCK INDEX FUTURES AND OPTIONS ON
STOCK INDEX FUTURES
The Fund may purchase and sell stock index futures contracts and options on
stock index futures contracts. These investments may be made only for hedging,
not speculative, purposes. Hedging transactions are made to reduce the risk of
price fluctuations.
There can be no assurance of the Fund's successful use of stock index futures
as a hedging device. If Alger Management uses a hedging instrument at the wrong
time or judges market conditions incorrectly, hedging strategies may reduce the
Fund's return. The Fund could also experience losses if the prices of its
futures and options positions were not correlated with its other investments or
if it could not close out a position because of an illiquid market for the
future or option.
LEVERAGE THROUGH 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 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.
PORTFOLIO TURNOVER
Portfolio changes will generally be made without regard to the length of time
a security has been held or whether a sale would result in a profit or loss.
Higher levels of portfolio activity generally result in higher transaction costs
and may also result in taxes on realized capital gains to be borne by the Fund's
shareholders.
DIVERSIFICATION
The Fund is classified as a "non-diversified" investment company under the
Investment Company Act of 1940. A "diversified" investment company is required,
with respect to 75% of its total assets, to limit its investment in any one
issuer (other than the U.S. Government) to no more than 5% of the investment
company's total assets. Because the Fund is not subject to this requirement, its
portfolio may at times not show as much diversification among securities, and
thus diversification of risk, as it would if the Fund had elected to register as
a "diversified" company. However, 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.
3
<PAGE>
HOW TO BUY SHARES
IN GENERAL
You can buy shares of the Fund in any of the following ways: through the
Fund's transfer agent; through a Processing Organization, as discussed below;
through Fred Alger & Company, Incorporated ("Alger Inc."), the Fund's
distributor; or automatically from your bank account through an Automatic
Investment Plan. The Fund or the transfer agent may reject any purchase order.
The offering price of a share is its net asset value.
You can open a Fund account with a minimum initial investment of $1,000 and
make additional investments of at least $100 at any time. There is no sales
charge on purchases or redemptions of Fund shares. The Fund reserves the right
to redeem all of the shares of any shareholder, other than a shareholder which
is an IRA or other tax-deferred retirement plan, whose account falls below $500
due to redemptions. The Fund will give shareholders 60 days' prior written
notice in which to purchase sufficient additional shares to avoid such
redemption. The Fund reserves the right to waive the minimum investment amounts.
PURCHASES THROUGH THE TRANSFER AGENT
You can buy shares through Alger Shareholder Services, Inc., the Fund's
transfer agent, by filling out the New Account Application and returning it with
a check drawn on a U.S. bank to Alger Shareholder Services, Inc. at 30
Montgomery Street, Box 2001, Jersey City, NJ 07302. You can also purchase shares
by wire transfer according to the instructions below.
Purchases will be processed at the next net asset value calculated after your
order is received and accepted. If your purchase is made by check or wire and is
received by the close of business of the New York Stock Exchange (normally 4:00
p.m. Eastern time), your account will be credited on the day of receipt. If your
purchase is received after such time, it will be credited the next business day.
Third-party checks will not be honored except in the case of employer sponsored
retirement plans.
WIRE TRANSFERS
Investors establishing new accounts by wire transfer should forward their
completed New Account Applications to the transfer agent, stating that the
account was established by wire transfer and the date and amount of the
transfer. Further information regarding wire transfers is available by calling
(800) 711-6141.
The following information should be included in wire transfers to Fund
accounts:
1. State Street Bank & Trust Company, Boston, MA 02101
2. ABA #011000028
3. BNF = Spectra Fund
4. AC - 00797548
5. ORIGINATOR TO BENEFICIARY INFORMATION (OBI):
30-Shareholder Account Number (if new account, indicate such), Shareholder
Name, Social Security or Taxpayer Identification Number
EXAMPLE:
State Street Bank & Trust Company,
Boston, MA 02101
ABA #011000028
BNF = Spectra Fund
AC-00797548
OBI = Spectra Fund
30-123456789 or 30-New Account
John & Jane Doe
123-45-6789
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. 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 this Prospectus. Certain Processing
Organizations may receive compensation from the Fund, Alger Inc., or any of its
affiliates. You will be charged a fee for any check returned by your bank.
4
<PAGE>
SPECIAL INVESTOR SERVICES
AUTOMATIC INVESTMENT PLAN
The Fund offers an Automatic Investment Plan which permits you to make
regular transfers to your Fund account from your bank account (minimum $100) on
the last business day of every month. Your bank must be a member of the
Automated Clearing House.
RETIREMENT PLANS
Shares of the Fund are available as an investment for your retirement plans,
including regular IRAs, Keogh Plans, corporate pension and profit-sharing plans,
Simplified Employee Pension IRAs, SIMPLE IRAs, Roth IRAs, education IRAs, 401(k)
Plans and 403(b) Plans. The minimum initial investment for a retirement plan
account is $250. Please call the Fund at (800) 711-6141 to receive the
appropriate documents which contain important information and applications.
HOW TO SELL SHARES
You can sell (redeem) some or all of your shares on any business day. Your
shares will be sold at the next net asset value calculated after your redemption
request is received and accepted by the transfer agent and your payment will be
made by check within seven days. Redemptions may be suspended and payments
delayed under certain emergency circumstances as determined by the Securities
and Exchange Commission. The Fund's transfer agent will reject any redemption
request made within 15 days after receipt of the purchase check order against
which such redemption is requested. You can sell your shares in any of the
following ways: by mail, by telephone or through a Processing Organization.
SELLING SHARES BY MAIL
You should send a letter of instruction to the transfer agent that includes
your name, account number, the number of shares or dollar amount and where you
want the money to be sent. The letter must be signed by all registered owners
and, if the redemption is for more than $5,000 or if the proceeds are to be sent
to an address other than the address of record, the signature must be
guaranteed. 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.
If you have a certificate for your Fund shares, you should mail your
certificate to the transfer agent with a letter of instruction to deposit the
shares in your account for redemption.
SELLING SHARES BY TELEPHONE
You automatically have the ability to make redemptions by telephone unless
you refuse the telephone redemption privilege. To sell shares by telephone,
please call (800) 711-6141. Redemption requests will generally be paid on the
next business day. If your proceeds are less than $5,000, they will be mailed to
your address of record. If the proceeds are more than $5,000 you may choose
either to have them mailed to your address of record or wired to your designated
bank account. This service is not available within 90 days of changing your
address or bank account of record.
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.
SYSTEMATIC WITHDRAWAL PLAN
If your account is $10,000 or more, you can establish a Systematic Withdrawal
Plan to receive payments of at least $50 on a monthly, quarterly or annual
basis. The maximum monthly withdrawal is one percent of the current account
value in the Fund at the time you begin participation in the Plan.
5
<PAGE>
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.
REDEMPTION IN KIND
Under unusual circumstances, shares of the Fund may be redeemed "in kind,"
which means that the redemption proceeds will be paid with securities which are
held by the Fund. Please refer to the Statement of Additional Information for
more details.
MANAGEMENT OF THE FUND
ORGANIZATION
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.
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.
BOARD OF TRUSTEES
The Fund is governed by a Board of Trustees which is responsible for
protecting the interests of shareholders under Massachusetts law. The Statement
of Additional Information contains general background information about each
Trustee and officer of the Fund.
INVESTMENT MANAGER
Alger Management is the Fund's investment manager and is responsible for the
overall administration of the Fund, subject to the supervision of the Board of
Trustees. Alger Management makes investment decisions for the Fund, places
orders to purchase and sell securities on behalf of the Fund and selects
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 has been in the business of providing investment advisory
services since 1964
6
<PAGE>
and, as of January 31, 1998, had approximately $7.8 billion under management,
consisting of $4.5 billion in mutual fund accounts and $3.3 billion in other
advisory accounts. 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 may be deemed to control that company and its
subsidiaries.
CERTAIN SHAREHOLDERS
At February 2, 1998, Charles Schwab & Co., Inc.--Special Custody Acct. held
45.83% of the Fund's shares and could therefore be deemed to control the Fund as
of that date.
PORTFOLIO MANAGERS
David D. Alger, Seilai Khoo and Ron Tartaro are primarily responsible for
the day-to-day management of the Fund. Mr. Alger has been employed by Alger
Management as Executive Vice President and Director of Research since 1971 and
as President since 1995. Ms. Khoo has been employed by Alger Management since
1989 as a Senior Research Analyst until 1995 and as a Senior Vice President
since 1995. Mr. Tartaro has been employed by Alger Management since 1990 as a
Senior Research Analyst until 1995 and as a Senior Vice President since 1995.
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.
FEES AND EXPENSES
The Fund pays Alger Management a management fee computed daily and paid
monthly at an annual rate of 1.50% of the value of the Fund's average daily net
assets. The management fee paid by the Fund is higher than that paid by most
other registered investment companies. Prior to February 12, 1996, Alger
Management received no management fee but was reimbursed for its expenses by the
Fund.
The Fund pays other expenses related to its daily operations, such as
custodian fees, Trustees' fees, transfer agency fees, legal fees and auditing
costs. More information about the Fund's investment management agreement and
other expenses paid by the Fund is included in the Statement of Additional
Information, which also contains information about the Fund's brokerage policies
and practices.
DISTRIBUTOR
Alger Inc. serves as the Fund's distributor and also distributes the shares
of other mutual funds managed by Alger Management.
TRANSFER AGENT
Alger Shareholder Services, Inc., an affiliate of Alger Management, serves as
transfer agent for the Fund. Certain record-keeping services that would
otherwise be performed by Alger Shareholder Services, Inc. may be performed by
other entities providing similar services to their customers who invest in the
Funds. The Fund, Alger Shareholder Services, Inc., Alger Inc. or any of its
affiliates may elect to enter into a contract to pay them for such services.
SHAREHOLDER SERVICING AGREEMENT
The Fund pays Alger Inc. a shareholder servicing fee of .25% of the value of
the average daily net assets of the Fund for ongoing service and maintenance of
shareholder accounts. Alger Inc. may compensate other organizations from this
fee who provide personal service and maintenance of shareholder accounts.
NET ASSET VALUE
The price of one share of the Fund is its "net asset value." The net asset
value is computed by adding the value of the Fund's investments plus cash and
other assets, deducting liabilities and then dividing the result by the number
of its shares outstanding. The net asset value is calculated as of the close of
business (normally 4:00 p.m. Eastern time) on each day the New York Stock
Exchange is open.
7
<PAGE>
DIVIDENDS AND TAXES
DIVIDENDS
Dividends and distributions will be automatically reinvested on the payment
date in additional Fund shares at net asset value, unless you elected on the New
Account Application to have all dividends and distributions paid in cash.
Dividends are declared and paid annually. Distributions of any net realized
short-term and long-term capital gains usually will be made annually after the
close of the fiscal year in which the gains are earned.
TAXES
The Fund intends to qualify and elect to be treated each year as a "regulated
investment company" for federal income tax purposes. A regulated investment
company is not subject to regular income tax on any income or capital gains
distributed to its shareholders if it, among other things, distributes at least
90 percent of its investment company taxable income to them within applicable
time periods.
For federal income tax purposes dividends and distributions are taxable to
you whether paid in cash or reinvested in additional shares. You may also be
liable for tax on any gain realized upon the redemption of shares in the Fund.
Shortly after the close of each calendar year, you will receive a statement
setting forth the dollar amounts of dividends and any distributions for the
prior calendar year and the tax status of the dividends and distributions for
federal income tax purposes. You should consult your tax adviser to assess the
federal, state and local tax consequences of investing in the Fund. This
discussion is not intended to address the tax consequences of an investment by a
nonresident alien.
PERFORMANCE
All performance figures are based on historical earnings and are not intended
to indicate future 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 1, 5, and 10 year periods, 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 Statement of Additional Information further describes the method used to
determine the yields and total return figures.
8
<PAGE>
APPENDIX
CORPORATE BOND RATINGS
Bonds rated Aa by Moody's Investors Service, Inc. ("Moody's") are judged by
Moody's to be of high quality by all standards. Together with bonds rated Aaa
(Moody's highest rating) they comprise what are generally known as high-grade
bonds. Aa bonds are rated lower than Aaa bonds because margins of protection may
not be as large as those of Aaa bonds, or fluctuation of protective elements may
be of greater amplitude, or there may be other elements present that make the
long-term risks appear somewhat larger than those applicable to Aaa securities.
Bonds that are rated A by Moody's possess many favorable investment attributes
and are to be considered as upper medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present that suggest a susceptibility to impairment in the future.
Moody's Baa rated bonds are considered as medium-grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and, in
fact, have speculative characteristics as well.
Bonds rated Ba by Moody's are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class. Bonds which are rated B by Moody's generally
lack characteristics of a desirable investment. Assurance of interest and
principal payments or of maintenance of other terms of the contract over any
long period of time may be small.
Moody's applies the numerical modifiers 1, 2 and 3 to each generic rating
classification from Aa through B. The modifier 1 indicates that the security
ranks in the higher end of its generic rating category; the modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates that the issue ranks in the
lower end of its generic rating category.
Bonds rated AA by Standard & Poor's Corporation ("S&P") are judged by S&P to
be high-grade obligations and in the majority of instances differ only in small
degree from issues rated AAA (S&P's highest rating). Bonds rated AAA are
considered by S&P to be the highest grade obligations and possess the ultimate
degree of protection as to principal and interest. With AA bonds, as with AAA
bonds, prices move with the long-term money market. Bonds rated A by S&P have a
strong capacity to pay principal and interest, although they are somewhat more
susceptible to the adverse effects of changes in circumstances and economic
conditions.
S&P's BBB rated bonds, or medium-grade category bonds, are borderline
between definitely sound obligations and those where the speculative elements
begin to predominate. These bonds have adequate asset coverage and normally are
protected by satisfactory earnings. Their susceptibility to changing conditions,
particularly to depressions, necessitates constant watching. These bonds
generally are more responsive to business and trade conditions than to interest
rates. This group is the lowest that qualifies for commercial bank investment.
Bonds rated BB and B by S&P are regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. These ratings may be modified by
the addition of a plus or minus sign to show relative standing within the major
rating categories. Debt rated BB has less near-term vulnerability to default
than other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions that could lead
to inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating. Debt rated B has a greater
vulnerability to default but currently has the capacity to meet interest
payments and principal repayments. Adverse business, financial or economic
conditions will likely impair capacity or willingness to pay interest and repay
principal. The B rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied BB or BB- rating.
A-1
<PAGE>
APPENDIX
(continued)
Bonds rated AAA by Fitch Investors Service, Inc. ("Fitch") are judged by
Fitch to be strictly high grade, broadly marketable, suitable for investment by
trustees and fiduciary institutions and liable to but slight market fluctuation
other than through changes in the money rate. The prime feature of an AA bond is
a showing of earnings several times or many times interest requirements, with
such stability of applicable earnings that safety is beyond reasonable question
whatever changes occur in conditions. Bonds rated AA by Fitch are judged by
Fitch to be of safety virtually beyond question and are readily salable, whose
merits are not unlike those of the AAA class, but whose margin of safety is less
strikingly broad. The issue may be the obligation of a small company, strongly
secured but influenced as to rating by the lesser financial power of the
enterprise and more local type of market.
Bonds rated Duff-1 are judged by Duff and Phelps, Inc. ("Duff") to be of the
highest credit quality with negligible risk factors; only slightly more than U.
S. Treasury debt. Bonds rated Duff-2, 3 and 4 are judged by Duff to be of high
credit quality with strong protection factors. Risk is modest but may vary
slightly from time to time because of economic conditions.
COMMERCIAL PAPER RATINGS
Moody's Commercial Paper ratings are opinions of the ability of issuers to
repay punctually promissory obligations not having an original maturity in
excess of nine months. The rating Prime-1 is the highest commercial paper rating
assigned by Moody's. Issuers rated Prime-1, or related supporting institutions,
are considered to have a superior capacity for repayment of short-term
promissory obligations. Issuers rated Prime-2, or related supporting
institutions, are considered to have a strong capacity for repayment of
short-term promissory obligations. This will normally be evidenced by many of
the characteristics of issuers rated Prime-l, but to a lesser degree. Earnings
trends and coverage ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample liquidity is maintained.
Commercial paper ratings of S&P are current assessments of the likelihood of
timely payment of debts having original maturities of no more than 365 days.
Commercial paper rated A-1 by S&P indicates that the degree of safety regarding
timely payment is either overwhelming or very strong. Those issues deter mined
to possess overwhelming safety characteristics are denoted A-1+. Capacity for
timely payment on commercial paper rated A-2 is strong, but the relative degree
of safety is not as high as for issues designated A-1. The rating Fitch-1
(Highest Grade) is the highest commercial paper rating assigned by Fitch. Paper
rated Fitch-1 is regarded as having the strongest degree of assurance for timely
payment. The rating Fitch-2 (Very Good Grade) is the second highest commercial
paper rating assigned by Fitch which reflects an assurance of timely payment
only slightly less in degree than the strongest issues.
The rating Duff-1 is the highest commercial paper rating assigned by Duff.
Paper rated Duff-1 is regarded as having very high certainty of timely payment
with excellent liquidity factors which are supported by ample asset protection.
Risk factors are minor. Paper rated Duff-2 is regarded as having good certainty
of timely payment, good access to capital markets and sound liquidity factors
and company fundamentals. Risk factors are small.
A-2
<PAGE>
No person has been authorized to give any information or to make any
representations other than those contained in this 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. This Prospectus does not constitute an offer in any state in which,
or to any person to whom, such offer may not be lawfully made.
----------
INVESTMENT MANAGER:
Fred Alger Management, Inc.
75 Maiden Lane
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
AUDITORS:
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
SP27
SPECTRA|Meeting the challenge
FUND|of investing
|
|
PROSPECTUS|February 27, 1998
|
<PAGE>
STATEMENT OF
ADDITIONAL INFORMATION
February 27, 1998
SPECTRA|75 Maiden Lane
FUND|New York, New York 10038
|(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 27, 1998. 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.
CONTENTS
Investment Objective and Policies............................... 2
Net Asset Value................................................. 8
Purchases....................................................... 8
Redemptions..................................................... 8
Management...................................................... 9
Taxes........................................................... 11
Custodian and Transfer Agent.................................... 12
Certain Shareholders............................................ 12
Organization.................................................... 12
Determination of Performance.................................... 13
Financial Statements............................................ 13
Appendix........................................................ A-1
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
CERTAIN SECURITIES AND INVESTMENT TECHNIQUES
The Prospectus discusses the investment objective of the Fund and the policies
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.
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 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 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.
RESTRICTED SECURITIES
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). Because institutional trading in restricted securities is relatively
new, it is not possible to predict how institutional markets will develop. If
institutional trading in restricted securities were to decline to limited
levels, the liquidity of the Fund's portfolio could be adversely affected.
-2-
<PAGE>
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
The Fund may lend securities 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.
It should be noted that there may be less publicly available information about
foreign issuers than about domestic issuers, and foreign issuers are not subject
to uniform accounting, auditing and financial reporting standards and
requirements comparable to those of domestic issuers. Securities of some foreign
issuers are less liquid and more volatile than securities of comparable domestic
issuers and foreign brokerage commissions are generally higher than in the
United States. Foreign securities markets may also be less liquid, more volatile
and less subject to government supervision than those in the United States.
Investments in foreign countries could be affected by other factors not present
in the United States, including expropriation, confiscatory taxation and
potential difficulties in enforcing contractual obligations. Securities
purchased on foreign exchanges may be held in custody by a foreign bank or a
foreign branch of a domestic bank.
OPTIONS
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.
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
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<PAGE>
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.
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 purchase or write only those options for which there appears to be an
active secondary market, there is no assurance that a liquid secondary market on
an exchange will exist for any particular option. In such event it might not be
possible to effect closing transactions in particular options, so that the 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 the Fund's writing of put and call options, there can be
no assurance that the Fund will succeed in any option-writing program it
undertakes.
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
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<PAGE>
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. With respect to stock indexes that
are permitted investments, the Fund intends to purchase and sell futures
contracts on the stock index for which it can obtain the best price with
considerations also given to liquidity. While incidental to its securities
activities, the Fund may use index futures as a substitute for a comparable
market position in the underlying securities.
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 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.
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 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 for bona fide hedging, risk management or other portfolio management
purposes. Typically, maintaining a futures contract or selling an option thereon
requires 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 that the
position can be offset prior to settlement at an advantageous price, nor that
delivery will occur. In order to cover its potential obligations when the Fund
enters into futures contracts and options thereon, the Fund will maintain a
segregated account with its custodian 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.
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
out-
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<PAGE>
standing voting securities" of the Fund, which is defined in the Act as the
lesser of (a) 67 percent or more of the shares present at a Fund meeting if the
holders of more than 50 percent of the outstanding shares of the Fund are
present or represented by proxy or (b) more than 50 percent of the outstanding
shares. A "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.
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.
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<PAGE>
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.
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, 1997, October 31, 1996, and October 31, 1995, the
Fund paid an aggregate of approximately $127,576, $17,275, and $11,681,
respectively, in commissions to Alger Inc. in connection with portfolio
transactions. The commissions paid to Alger Inc. during the fiscal year ended
October 31, 1997 constituted 99% of the aggregate bro-
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<PAGE>
kerage commissions paid by the fund; during that year, 99% of the aggregate
dollar amount of transactions by the Fund involving the payment of brokerage
commissions was effected through Alger Inc. Alger Inc. does not engage in
principal transactions with the Fund and, accordingly, 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 is
currently 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), July 4th, Labor Day (the
first Monday in September), Thanksgiving Day (the fourth Thursday in November)
and Christmas Day and (ii) the preceding Friday when any one of those holidays
falls on a Saturday, or the subsequent Monday when any one of those holidays
falls on a Sunday.
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
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.
PURCHASES THROUGH PROCESSING ORGANIZATIONS
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 charge their customers a fee in connection with services
offered to customers.
AUTOMATIC INVESTMENT PLAN
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.
REDEMPTIONS
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 (the "NYSE") 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.
No interest will accrue on amounts represented by uncashed distribution or
redemption checks.
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.
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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.
MANAGEMENT
TRUSTEES AND OFFICERS OF THE FUND
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, 1997 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 75 Maiden Lane, New York, New York 10038.
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<TABLE>
<CAPTION>
NAME, POSITION WITH
THE FUND AND ADDRESS PRINCIPAL OCCUPATIONS
<S> <C> <C>
Fred M. Alger III (63) Chairman of the Boards of Alger Associates, Inc. ("Associates"), Alger Inc.,
Chairman of the Board Alger Management, Alger Properties, Inc. ("Properties"), Alger Shareholder Services, Inc.
("Services"), Alger Life Insurance Agency, Inc. ("Agency"), The Alger American Asset Growth
Fund, Fred Alger International Advisory S.A. ("International"), and Analysts Resources, Inc.
("ARI").
David D. Alger (54) President and Director of Associates, Alger Management, Alger Inc.,
President and Trustee Properties, Services, International and Agency; Executive Vice President and Director of ARI.
Gregory S. Duch (46) Executive Vice President, Treasurer and Director of Alger Management,
Treasurer Associates and Properties; Executive Vice President and Treasurer of Alger Inc., ARI,
Services and Agency; Treasurer and Director of International.
Mary E. Marsden-Cochran (45) General Counsel, Vice President and Secretary, Associates, Alger
Secretary Management, Alger Inc., Properties, ARI, Services, International and Agency (2/96-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 (44) Senior Vice President of Alger Inc.
Assistant Secretary
And Assistant Treasurer
Arthur M. Dubow (64) Trustee of The Arthur Dubow Foundation; private investor since 1985;
Trustee Director of Coolidge Investment Corporation; formerly Chairman of the
P.O. Box 969 Board of Institutional Shareholder Services, Inc. formerly President of
Wainscott, NY 11975 Fourth Estate, Inc.
Stephen E. O'Neil (65) Of Counsel to the law firm of Kohler & Barnes PC; private
Trustee investor since 1981; Director of NovaCare, Inc. and Brown-Forman
805 Third Avenue Distillers Corporation; formerly President and Vice Chairman
New York, NY 10022 of City Investing Company and Director of Centerre
Bancorporation and Syntro Corporation.
Nathan E. Saint-Amand, M. D. (60) Medical doctor in private practice.
Trustee
2 East 88th Street
New York, NY 10128
John T. Sargent (73) Private investor since 1987; Director of Atlantic Mutual Insurance Co.;
Trustee formerly Director of River Bank America.
14 E. 69th Street
New York, NY 10021
No director, officer or employee of Alger Management or its affiliates will
receive any compensation from the Fund for serving as an officer or Trustee of
the Fund. The Fund pays each Trustee who is not a director, officer or employee
of Alger Management or its affiliates 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, 1997. The following table provides
compensation amounts paid to disinterested Trustees of the Fund for the fiscal
year ended October 31, 1997.
</TABLE>
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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.
NAME OF PERSON, POSITION SPECTRA FUND AND SPECTRA FUND
- ------------------------ ------------ ----------------
Arthur M. Dubow, Trustee $250 $28,500
Stephen E. O'Neill, Trustee $250 $28,500
Nathan E. Saint-Amand, Trustee $250 $28,500
John T. Sargent, Trustee $250 $28,500
INVESTMENT MANAGER
Alger Management serves as investment manager to the Fund pursuant to a written
agreement (the "Management Agreement"). Certain of the services provided by, and
the fees paid by the Fund to, Alger Management under the Management Agreement
are described in the Prospectus. 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, 1997, October 31, 1996,
and October 31, 1995, Alger Management received $573,068, $99,209, and $78,214
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.
SHAREHOLDER SERVICING AGREEMENT
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.
EXPENSES OF THE FUND
Operating expenses for the Fund generally consist of all costs not specifically
borne by Alger Management, including investment management fees, fees for
necessary professional and brokerage services, costs of regulatory compliance
and costs associated with maintaining legal existence and shareholder relations.
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
-11-
<PAGE>
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 for the Fund 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.
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 45.83% of the shares of the Fund at February 2, 1998, 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 75 Maiden Lane, New
York, New York 10038. All holdings are expressed as a percentage of the Fund's
outstanding shares as of February 2, 1998.
Record/Beneficial
Ownership
------------------
Alger Associates, Inc............... 7.23%/7.23%
Charles Schwab & Co., Inc.
Special Custody Acct.
101 Montgomery St.
San Francisco, CA 94104............. 45.83%/--
National Financial Services
161 Devonshire St.
Boston, MA 02110.................... 9.12%/9.12%
The Fund's Trustees and officers as a group hold less than 1% of the Fund's
outstanding shares.
ORGANIZATION
The Fund is organized as a business trust under the laws of the Commonwealth of
Massachusetts pursuant to an Agreement and Declaration of Trust dated July 5,
1995 (the "Trust Agreement").
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 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.
-12-
<PAGE>
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.
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 "total return" described in the Prospectus, 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
10/31/97 10/31/97 10/31/97
-------- -------- --------
26.45% 27.86% 22.51%
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, 1997, 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 by telephoning
(800) 711-6141.
-13-
<PAGE>
INVESTMENT MANAGER:
Fred Alger Management, Inc.
75 Maiden Lane
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
- --------------------------------------------------------------------------------
SPECTRA|Meeeting the challenge
FUND|of investing
|
STATEMENT|
OF ADDITIONAL|February 27, 1998
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, 1997 and
October 31, 1996
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 (2)
11 Consent of Arthur Andersen LLP
12 Not applicable
13 Not applicable
14 Not applicable
15 Not applicable
16 Schedule for computation of performance quotations provided
in the Statement of Additional Information
- -------------------
(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. 2 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 February 23, 1998, there were 6002 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 certifies that it meets
all of the requirements for effectiveness of this Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933, and 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 27th day of
February, 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* February 27, 1998
- ----------------------------------------------------- Chairman of the Board ----------------------
Fred M. Alger III
/s/ David D. Alger February 27, 1998
- ----------------------------------------------------- President and Trustee ----------------------
David D. Alger (Chief Executive Officer)
/s/ Gregory S. Duch February 27, 1998
- ----------------------------------------------------- Treasurer ----------------------
Gregory S. Duch (Chief Financial and Accounting
Officer)
/s/ Nathan E. Saint-Amand* February 27, 1998
- ----------------------------------------------------- Trustee ----------------------
Nathan E. Saint-Amand
/s/ Stephen E. O'Neil* February 27, 1998
- ----------------------------------------------------- Trustee ----------------------
Stephen E. O'Neil
/s/ Arthur M. Dubow* February 27, 1998
- ----------------------------------------------------- Trustee ----------------------
Arthur M. Dubow
/s/ John T. Sargent* February 27, 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. 3 x
---
and/or
---
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 x
---
---
Amendment No. 16 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
--- -------------
1 Agreement and Declaration of Trust ...................
2 Bylaws ...............................................
5 Investment Management Agreement ......................
6 Distribution Agreement ...............................
9 Shareholder Servicing Agreement ......................
11 Consent of Arthur Andersen LLP........................
16 Schedule for computation of performance quota-
tions provided in the Statement of Additional
Information...........................................
Exhibit 1
SPECTRA FUND
----------------------------
AMENDED AND RESTATED
AGREEMENT AND DECLARATION OF TRUST
----------------------------
Dated: February 18, 1997
Principal Place of Business:
c/o Fred Alger Management, Inc.
75 Maiden Lane
New York, New York 10038
Massachusetts Office and Name and Name and Address of Agent for
Address of Initial Trustee: Service of Process:
Thomas E. Weesner, Esq. CT Corporation System
Sullivan & Worcester 2 Oliver Street
One Post Office Square Boston, Massachusetts 02109
Boston. Massachusetts 02109
<PAGE>
AMENDED AND RESTATED
DECLARATION OF TRUST
SPECTRA FUND
TABLE OF CONTENTS
PROVISION PAGE
RECITALS .................................................................... 1
ARTICLE 1 THE TRUST .................................................... 1
1.1 Name ......................................................... 1
1.2 Location ..................................................... 2
1.3 Nature of Trust .............................................. 2
1.4 Definitions .................................................. 2
1.5 Real Property to be Converted into Personal Property ......... 5
ARTICLE 2 PURPOSE OF THE TRUST ......................................... 5
ARTICLE 3 POWERS OF THE TRUSTEES ....................................... 5
3.1 Powers in General ............................................ 5
(a) Investments ......................................... 6
(b) Disposition of Assets ............................... 6
(c) Ownership Powers..................................... 6
(d) Form of Holding ..................................... 7
(e) Reorganization, etc. ................................ 7
(f) Voting Trusts, etc. ................................. 7
(g) Contracts, etc. ..................................... 7
(h) Guarantees, etc. .................................... 7
(i) Partnerships, etc. .................................. 7
(j) Insurance ........................................... 7
(k) Pensions, etc. ...................................... 8
(1) Power of Collection and Litigation .................. 8
(m) Issuance and Repurchase of Shares ................... 8
(n) Offices ............................................. 8
(o) Expenses ............................................ 8
(p) Agents, etc ......................................... 8
(q) Accounts ............................................ 8
(r) Valuation ........................................... 8
(s) Indemnification ..................................... 8
(t) General ............................................. 9
3.2 Borrowings; Financings, Issuance of Securities ............... 9
3.3 Deposits ..................................................... 9
3.4 Allocations .................................................. 9
3.5 Further Powers; Limitations .................................. 9
<PAGE>
-ii-
PROVISION PAGE
ARTICLE 4 TRUSTEES AND OFFICERS ........................................ 10
4.1 Number, Designation, Election, Term, etc. .................... 10
(a) [Intentionally omitted]
(b) Number .............................................. 10
(c) Election and Term ................................... 10
(d) Resignation and Retirement .......................... 10
(e) Removal ............................................. 10
(f) Vacancies ........................................... 11
(g) Acceptance of Trusts ................................ 11
(h) Effect of Death, Resignation, etc. .................. 11
(i) Conveyance .......................................... 11
(j) No Accounting ....................................... 11
4.2 Trustees' Meetings; Participation by Telephone, etc. ......... 11
4.3 Committees, Delegation ....................................... 12
4.4 Officers ..................................................... 12
4.5 Compensation of Trustees and Officers ........................ 12
4.6 Ownership of Shares and Securities of the Trust .............. 12
4.7 Right of Trustees and Officers to Own Property and to
Engage in Business; Authority of Trustees
to Permit Others to Do Likewise ......................... 12
4.8 Reliance on Experts .......................................... 13
4.9 Surety Bonds.................................................. 13
4.10 Apparent Authority of Trustees and Officers .................. 13
4.11 Other Relationships Not Prohibited ........................... 13
4.12 Payment of Trust Expenses .................................... 14
4.13 Ownership of the Trust Property .............................. 14
ARTICLE 5 DELEGATION OF MANAGERIAL RESPONSIBILITIES .................... 14
5.1 Appointment; Action by Less than All Trustees ................ 14
5.2 Certain Contracts ............................................ 14
(a) Advisory ............................................ 15
(b) Administration ...................................... 15
(c) Distribution ........................................ 15
(d) Custodian ........................................... 15
(e) Transfer and Dividend Disbursing Agency ............. 16
(f) Shareholder Servicing ............................... 16
(g) Accounting .......................................... 16
ARTICLE 6 PORTFOLIOS AND SHARES ........................................ 16
6.1 Description of Portfolios and Shares ......................... 16
(a) Shares; Portfolios; Series and Classes of Shares .... 16
(b) Establishment, etc. of Additional Portfolios;
Authorization of Shares ...........................17
<PAGE>
-iii-
PROVISION PAGE
(c) Character of Separate Portfolios and Shares Thereof . 17
(d) Consideration for Shares ............................ 17
6.2 Establishment and Designation of the Spectra Portfolio
and the Shares Thereof; General Provisions
for All Portfolios .................................. 17
(a) Assets Belonging to Portfolios ...................... 18
(b) Liabilities of Portfolios ........................... 18
(c) Dividends ........................................... 18
(d) Liquidation ......................................... 19
(e) Voting .............................................. 19
(f) Redemption by Shareholder ........................... 19
(g) Redemption at the Option of the Trust ............... 20
(h) Net Asset Value ..................................... 20
(i) Transfer ............................................ 20
(j) Equality ............................................ 20
(k) Rights of Fractional Shares ......................... 21
(1) Conversion Rights ................................... 21
6.3 Ownership of Shares .......................................... 21
6.4 Investments in the Trust ..................................... 21
6.5 No Preemptive Rights ......................................... 21
6.6 Status of Shares ............................................. 21
ARTICLE 7 SHAREHOLDERS' VOTING POWERS AND MEETINGS ..................... 22
7.1 Voting Powers ................................................ 22
7.2 Number of Votes and Manner of Voting; Proxies ................ 22
7.3 Meetings ..................................................... 22
7.4 Record Dates ................................................. 23
7.5 Quorum and Required Vote ..................................... 23
7.6 Action by Written Consent .................................... 23
7.7 Inspection of Records ........................................ 23
7.8 Additional Provisions ........................................ 23
ARTICLE 8 LIMITATION OF LIABILITY; INDEMNIFICATION ..................... 24
8.1 Trustees, Shareholders, etc. Not Personally Liable; Notice ... 24
8.2 Trustees' Good Faith Action; Expert Advice; No Bond or Surety. 24
8.3 Indemnification of Shareholders .............................. 24
8.4 Indemnification of Trustees, Officers, etc. .................. 25
8.5 Compromise Payment ........................................... 25
8.6 Indemnification Not Exclusive, etc. .......................... 26
8.7 Liability of Third Persons Dealing with Trustees ............. 26
ARTICLE 9 DURATION; REORGANIZATION; AMENDMENTS ......................... 26
9.1 Duration and Termination of Trust ............................ 26
9.2 Reorganization ............................................... 26
<PAGE>
-iv-
PROVISION PAGE
9.3 Amendments; etc.. ........................................... 27
9.4 Filing of Copies of Declaration and Amendments .............. 27
ARTICLE 10 MISCELLANEOUS ............................................... 27
10.1 Governing Law ............................................... 27
10.2 Counterparts ................................................ 28
10.3 Reliance by Third Parties ................................... 28
10.4 References; Headings ........................................ 28
10.5 Use of the Name "Spectra" ................................... 28
SIGNATURES ................................................................. 28
ACKNOWLEDGMENT ............................................................. 29
<PAGE>
AMENDED AND RESTATED
AGREEMENT AND DECLARATION OF TRUST
OF
SPECTRA FUND
Dated _____________ __, 199__
This AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST, dated the
___ day of ______ 199
WITNESSETH THAT:
WHEREAS, Spectra Fund, a trust with transferable shares under the laws
of Massachusetts (the "TRUST"), was established on July 5, 1995 pursuant to an
Agreement and Declaration of Trust of that date (referred to in these Recitals
as the "DECLARATION"); and
WHEREAS, the Declaration provides that the assets held by the Trustees
be divided into separate portfolios, each with its own separate investment
assets, investment objectives, policies and purposes, and that the beneficial
interest in each such portfolio shall be divided into transferable Shares of
Beneficial Interest, a separate Series of Shares for each portfolio, all in
accordance with the provisions hereinafter set forth; and
WHEREAS, the Declaration provides that the Trust be managed and
operated as a trust with transferable shares under the laws of Massachusetts, of
the type commonly known as and referred to as a Massachusetts business trust, in
accordance with the provisions hereinafter set forth, and
WHEREAS, the Declaration provides that the Declaration and all
amendments thereto may be restated as a single instrument if executed by a
Majority of the Trustees; and
WHEREAS, the Declaration has been amended in certain respects, and the
Trustees of the Trust desire to effect such a restatement,
NOW, THEREFORE, the Trustees hereby declare that they will hold all
money and property of every type and description which they now hold or may
hereafter in any way acquire in their capacity as such Trustees. together with
the income therefrom and the proceeds thereof, IN TRUST NEVERTHELESS, to manage
and dispose of the same for the benefit of the holders from time to time of the
Shares of Beneficial Interest of the several Series issued and to be issued
hereunder and in the manner and subject to the provisions hereof, to wit:
ARTICLE 1
THE TRUST
SECTION 1.1 NAME. The name of the Trust shall be
"SPECTRA FUND"
and so far as may be practicable the Trustees Shall conduct the Trust's
activities, execute all documents and Declaration of Trust, except where the
context otherwise requires) shall refer to the Trustees in their capacity as
trustees, and not individually or personally, and shall not refer to the
officers, agents or employees of the Trust or of such Trustees, or to the
holders of the Shares of Beneficial Interest of the Trust, of any Series or
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Class. If the Trustees determine that the use of such name is not practicable,
legal or convenient at any time or in any jurisdiction, or if the Trust is
required to discontinue the use of such name pursuant to Section 10.5 hereof,
then subject to that Section, the Trustees may use such other designation, or
they may adopt such other name for the Trust as they deem proper, and the Trust
may hold property and conduct its activities under such designation or name.
SECTION 1.2 LOCATION. The Trust shall have an office in Boston,
Massachusetts, unless changed by the Trustees to another location in
Massachusetts or elsewhere, but such office need not be the sole or principal
office of the Trust. The Trust may have such other offices or places of business
as the Trustees may from time to time determine to be necessary or expedient.
SECTION 1.3 NATURE OF TRUST. The Trust shall be a trust with
transferable shares under the laws of The Commonwealth of Massachusetts, of the
type referred to in Section 1 of Chapter 182 of the Massachusetts General Laws
and commonly termed a Massachusetts business trust The Trust is not intended to
be, shall not be deemed to be, and shall not be treated as, a general
partnership, limited partnership, joint venture, corporation or joint stock
company. The Shareholders shall be beneficiaries and their relationship to the
Trustees shall be solely in that capacity in accordance with the rights
conferred upon them hereunder.
SECTION 1.4 DEFINITIONS As used in this Agreement and Declaration of
Trust, the following terms shall have the meanings set forth below unless the
context thereof otherwise requires:
"ACCOUNTING AGENT" shall have the meaning designated in Section 5.2(g)
hereof,
"ADMINISTRATOR" shall have the meaning designated in Section 5.2(b)
hereof.
"AFFILIATED PERSON" shall have the meaning assigned to it in the 1940
Act.
"BYLAWS" shall mean the Bylaws of the Trust, as amended from time to
time.
"CERTIFICATE OF DESIGNATION" shall have the meaning designated in
Section 6.1 hereof.
"CERTIFICATE OF TERMINATION" shall have the meaning designated in
Section 6.1 hereof.
"CLASS" or "CLASSES" shall mean, with respect to any Series, any Shares
of such Series in respect of which the Trustees shall from time to time fix and
determine any special provisions relating to sales charges, any rights of
redemption and the price, terms and manner of redemption, special and relative
rights as to dividends and other distributions and on liquidation, sinking or
purchase fund provisions, conversion rights, and conditions under which the
Shareholders of such Class shall have separate voting rights or no voting
rights.
"COMMISSION" shall have the same meaning as in the 1940 Act.
"CONTRACTING PARTY" shall have the meaning designated in the preamble
to Section 5.2 hereof.
"COVERED PERSON" shall have the meaning designated in Section 8.4
hereof.
"CUSTODIAN" shall have the meaning designated in Section 5.2(d) hereof.
"DECLARATION" and "DECLARATION OF TRUST" shall mean this Agreement and
Declaration of Trust and all amendments or modifications thereof as from time to
time in effect. References in this Agreement and
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Declaration of Trust to 9'hereof', "HEREIN" and "HEREUNDER" shall be deemed to
refer to the Declaration of Trust generally, and shall not be limited to the
particular text, Article or Section in which such words appear.
"DISABLING CONDUCT" shall have the meaning designated in Section 8.4
hereof.
"DISTRIBUTOR" shall have the meaning designated in Section 5.2(c)
hereof.
"DIVIDEND DISBURSING AGENT" shall have the meaning designated in
Section 5.2(e) hereof.
"GENERAL ITEMS" shall have the meaning defined in Section 6.2(a)
hereof.
"INTERNAL REVENUE CODE shall mean the Internal Revenue Code of 1986, as
from time to time amended and in effect, or any substituted statute dealing with
the same general subject matter as the Internal Revenue Code of 1986, as in
effect on June 27, 1995, and in either case the rules and regulations thereunder
as from time to time interpreted and applied by applicable case law thereunder.
"INVESTMENT ADVISER" shall have the meaning stated in Section 5.2(a)
hereof.
"MAJORITY OF THE TRUSTEES" shall mean a majority of the Trustees in
office at the time in question. At any time at which there shall be only one (1)
Trustee in office, such term shall mean such Trustee.
"MAJORITY SHAREHOLDER VOTE," as used with respect to the election of
any Trustee at a meeting of Shareholders, shall mean the vote for the election
of such Trustee of a plurality of all outstanding Shares of the Trust, without
regard to Series or Class, represented in person or by proxy and entitled to
vote thereon, provided that a quorum (as determined in accordance with Section
7.5 hereof) is present, and as used with respect to any other action required or
permitted to be taken by Shareholders, shall mean the affirmative vote for such
action of the holders of that number of all outstanding Shares (or, where a
separate vote of Shares of any particular Series or Class is to be taken, the
affirmative vote of that number of the outstanding Shares of that Series or
Class) of the Trust which constitutes: (i) a majority of all Shares (or of
Shares of the particular Series or Class) represented in person or by proxy and
entitled to vote on such action at the meeting of Shareholders at which such
action is to be taken, provided that a quorum (as determined in accordance with
Section 7.5 hereof) is present; or (ii) if such action is to be taken by written
consent of Shareholders, a majority of all Shares (or of Shares of the
particular Series or Class) issued and outstanding and entitled to vote on such
action; PROVIDED, that (iii) as used with respect to any action requiring the
affirmative vote of "a majority of the outstanding voting securities", as the
quoted phrase is defined in the 1940 Act, of the Trust or of any Series or
Class, "MAJORITY SHAREHOLDER VOTE" means the vote for such action at a meeting
of Shareholders of the smallest majority of all outstanding Shares of the Trust
(or of Shares of the particular Series or Class) entitled to vote on such action
which satisfies such 1940 Act voting requirement.
"1940 ACT" shall mean the provisions of the Investment Company Act of
1940 and the rules and regulations thereunder, both as amended from time to
time, and any order or orders thereunder which may from time to time be
applicable to the Trust.
"PERSON" shall mean and include individuals, as well as corporations,
limited partnerships, general partnerships, joint stock companies, joint
ventures, associations, banks, trust companies, land trusts, business trusts or
other organizations established under the laws of any jurisdiction whether or
not considered to be legal entities, and governments and agencies and political
subdivisions thereof.
"PORTFOLIO" or "PORTFOLIOS" shall mean one or more of the separate
components of the assets of the Trust which are now or hereafter established and
designated under or in accordance with the provisions of Article 6 hereof.
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"PORTFOLIO ASSETS" shall have the meaning defined in Section 6.2(a)
hereof.
"PRINCIPAL UNDERWRITER" shall have the meaning designated in Section
5.2(c) hereof.
"PROSPECTUS," as used with respect to any Portfolio or Series of
Shares, shall mean the prospectus relating to such Portfolio or Series which
constitutes part of the currently effective Registration Statement of the Trust
under the Securities Act of 1933, as such prospectus may be amended or
supplemented from time to time.
"SECURITIES" shall mean any and all bills, notes, bonds, debentures or
other obligations or evidences of indebtedness, certificates of deposit,
bankers' acceptances, commercial paper, repurchase agreements or other money
market instruments; stocks, shares or other equity ownership interests; and
warrants, options or other instruments representing rights to subscribe for,
purchase, receive or otherwise acquire or to sell, transfer, assign or otherwise
dispose of, and scrip, certificates, receipts or other instruments evidencing
any ownership rights or interests in, any of the foregoing and "when issued" and
"delayed delivery" contracts for securities, issued, guaranteed or sponsored by
any governments, political subdivisions or governmental authorities, agencies or
instrumentalities, by any individuals, firms, companies, corporations,
syndicates, associations or trusts, or by any other organizations or entities
whatsoever, irrespective of their forms or the names by which they may be
described, whether or not they be organized and operated for profit, and whether
they be domestic or foreign with respect to The Commonwealth of Massachusetts or
the United States of America.
"SECURITIES OF THE TRUST" shall mean any Securities issued by the
Trust.
"SERIES" shall mean one or more of the series of Shares authorized by
the Trustees, each to represent the beneficial interests in one of the
Portfolios of the Trust.
"SHAREHOLDER" shall mean as of any particular time any Person shown of
record at such time on the books of the Trust as a holder of outstanding Shares
of any Series or Class, and shall include a pledgee into whose name any such
Shares are transferred in pledge.
"SHAREHOLDER SERVICING AGENT" shall have the meaning designated in
Section 5.2(f) hereof.
"SHARES" shall mean the transferable units into which the beneficial
interest in the Trust and each Portfolio of the Trust (as the context may
require) shall be divided from time to time, and includes fractions of Shares as
well as whole Shares. All references herein to "Shares" which are not
accompanied by a reference to any particular Series or Portfolio shall be deemed
to apply to outstanding Shares without regard to Series or Class.
"SINGLE CLASS VOTING" as used with respect to any matter to be acted
upon at a meeting or by written consent of Shareholders, shall mean a style of
voting in which each holder of one or more Shares shall be entitled to one vote
on the matter in question for each Share standing in his name on the records of
the Trust, irrespective of Series or Class, and all outstanding Shares of all
Series or Class vote as a single class.
"STATEMENT OF ADDITIONAL INFORMATION," as used with respect to any
Series or Class of Shares, shall mean the statement of additional information
relating to such Series or Class, which constitutes part of the currently
effective Registration Statement of the Trust under the Securities Act of 1933,
as such statement of additional information may be amended or supplemented from
time to time.
"TRANSFER AGENT" shall have the meaning defined in Section 5.2(e)
hereof.
"TRUST" shall have the meaning stated in the first "Whereas" clause set
forth above.
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"TRUST PROPERTY" shall mean, as of any particular time, any and all
property which shall have been transferred, conveyed or paid to the Trust or the
Trustees, and all interest, dividends, income, earnings, profits and gains
therefrom, and proceeds thereof, including any proceeds derived from the sale,
exchange or liquidation thereof, and any hinds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, and which at
such time is owned or held by, or for the account of, the Trust or the Trustees.
without regard to the Portfolio to which such property is allocated.
"TRUSTEES" shall mean, collectively, all individuals who at the time in
question have been duly elected or appointed as Trustees of the Trust in
accordance with the provisions hereof and who have qualified and are then in
office. At any time at which there shall be only one (1) Trustee in office, such
term shall mean such single Trustee.
SECTION 1.5 REAL PROPERTY TO BE CONVERTED INTO PERSONAL PROPERTY.
Notwithstanding any other provision hereof, any real property at any time
forming part of the Trust Property shall be held in trust for sale and
conversion into personal property at such time or times and in such manner and
upon such terms as the Trustees shall approve, but the Trustees shall have power
until the termination of this Trust to postpone such conversion as long as they
in their uncontrolled discretion shall think fit, and for the purpose of
determining the nature of the interest of the Shareholders therein, all such
real property shall at all times be considered as personal property.
ARTICLE 2
PURPOSE OF THE TRUST
The purpose of the Trust shall be to engage in the business of being an
investment company, and as such of subscribing for, purchasing or otherwise
acquiring, holding for investment or trading in, borrowing, lending and selling
short, selling, assigning, negotiating or exchanging and otherwise disposing of,
and turning to account, realizing upon and generally dealing in and with, in any
manner, (a) Securities of all kinds, (b) precious metals and other minerals,
contracts to purchase and sell, and other interests of every nature and kind in,
such metals or minerals, and (c) rare coins and other numismatic items, and all
as the Trustees in their discretion shall determine to be necessary, desirable
or appropriate, and to exercise and perform any and every act, thing or power
necessary, suitable or desirable for the accomplishment of such purpose, the
attainment of any of the objectives or the furtherance of any of the powers
given hereby which are lawful purposes, objects or powers of a trust with
transferable shares of the type commonly termed a Massachusetts business trust;
and to do every other act or acts or thing or things incidental or appurtenant
to or growing out of or in connection with the aforesaid objectives, purposes or
powers, or any of them, which a trust of the type commonly termed a
Massachusetts business trust is not now or hereafter prohibited from doing,
exercising or performing.
ARTICLE 3
POWERS OF THE TRUSTEES
SECTION 3.1 POWERS IN GENERAL. The Trustees shall have, without other
or further authorization, full, entire, exclusive and absolute power, control
and authority over, and management of, the business of the Trust and over the
Trust Property, to the same extent as if the Trustees were the sole owners of
the business and property of the Trust in their own right, and with such powers
of delegation as may be permitted by this Declaration, subject only to such
limitations as may be expressly imposed by this Declaration of Trust or by
applicable law. The enumeration of any specific power or authority herein shall
not be construed as limiting
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the aforesaid power or authority or any specific power or authority. Without
limiting the foregoing, the Trustees may adopt Bylaws not inconsistent with this
Declaration of Trust providing for the conduct of the business and affairs of
the Trust and may amend and repeal them to the extent that such Bylaws do not
reserve that right to the Shareholders; they may select, and from time to time
change, the fiscal year of the Trust; they may adopt and use a seal for the
Trust, PROVIDED, that unless otherwise required by the Trustees, it shall not be
necessary to place the seal upon, and its absence shall not impair the validity
of, any document, instrument or other paper executed and delivered by or on
behalf of the Trust; they may from time to time in accordance with the
provisions of Section 6.1 hereof establish one or more Portfolios to which they
may allocate such of the Trust Property, subject to such liabilities, as they
shall deem appropriate, each such Portfolio to be operated by the Trustees as a
separate and distinct investment medium and with separately defined investment
objectives and policies and distinct investment purposes, all as established by
the Trustees, or from time to time changed by them; they may as they consider
appropriate elect and remove officers and appoint and terminate agents and
consultants and hire and terminate employees, any one or more of the foregoing
of whom may be a Trustee; they may appoint from their own number, and terminate,
any one or more committees consisting of one or more Trustees, including without
implied limitation an Executive Committee, which may, when the Trustees are not
in session and subject to the 1940 Act, exercise some or all of the power and
authority of the Trustees as the Trustees may determine; in accordance with
Section 5.2 they may employ one or more Investment Advisers, Administrators and
Custodians and may authorize any Custodian to employ sub-custodians or agents
and to deposit all or any part of such assets in a system or systems for the
central handling of Securities, retain Transfer, Dividend Disbursing, Accounting
or Shareholder Servicing Agents or any of the foregoing, provide for the
distribution of Shares by the Trust through one or more Distributors, Principal
Underwriters or otherwise, set record dates or times for the determination of
Shareholders entitled to participate in, benefit from or act with respect to
various matters; and in general they may delegate to any officer of the Trust,
to any Committee of the Trustees and to any employee, Investment Adviser,
Administrator, Distributor, Custodian, Transfer Agent, Dividend Disbursing
Agent, or any other agent or consultant of the Trust, such authority, powers,
functions and duties as they consider desirable or appropriate for the conduct
of the business and affairs of the Trust, including without implied limitation
the power and authority to act in the name of the Trust and of the Trustees, to
sign documents and to act as attorney-in-fact for the Trustees Without limiting
the foregoing and to the extent not inconsistent with the 1940 Act or other
applicable law, the Trustees shall have power and authority:
(a) INVESTMENTS. To invest and reinvest cash and other
property; to buy, for cash or on margin, and otherwise acquire and
hold, Securities created or issued by any Persons, including Securities
maturing after the possible termination of the Trust; to make payment
therefor in any lawful manner in exchange for any of the Trust
Property; and to hold cash or other property uninvested without in any
event being bound or limited by any present or future law or custom in
regard to investments by trustees;
(b) DISPOSITION OF ASSETS. To lend, sell, exchange, mortgage,
pledge, hypothecate, grant security interests in, encumber, negotiate,
convey. transfer or otherwise dispose of, and to trade in, any and all
of the Trust Property, free and clear of all trusts, for cash or on
terms, with or without advertisement, and on such terms and conditions
as to payment, security or otherwise, all as they shall deem necessary
or expedient;
(c) OWNERSHIP POWERS. To vote or give assent, or exercise any
and all other rights, powers and privileges of ownership with respect
to. and to perform any and all duties and obligations as owners of, any
Securities or other property forming part of the Trust Property, the
same as any individual might do; to exercise powers and rights of
subscription or otherwise which in any manner arise out of ownership of
Securities, and to receive powers of attorney from, and to execute and
deliver proxies or powers of attorney to, such Person or Persons as the
Trustees shall deem proper, re-
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ceiving from or granting to such Person or Persons such power and
discretion with relation to Securities or other property of the Trust,
all as the Trustees shall deem proper;
(d) FORM OF HOLDING. To hold any Security or other property in
a form not indicating any trust, whether in bearer, unregistered or
other negotiable form, or in the name of the Trustees or of the Trust,
or of the Portfolio to which such Securities or property belong, or in
the name of a Custodian, subcustodian or other nominee or nominees, or
otherwise, upon such terms, in such manner or with such powers, as the
Trustees may determine, and with or without indicating any trust or the
interest of the Trustees therein;
(e) REORGANIZATION, ETC. To consent to or participate in any
plan for the reorganization, consolidation or merger of any corporation
or issuer, any Security of which is or was held in the Trust or any
Portfolio; to consent to any contract, lease, mortgage, purchase or
sale of property by such corporation or issuer, and to pay calls or
subscriptions with respect to any Security forming part of the Trust
Property;
(f) VOTING TRUSTS, ETC. To join with other holders of any
Securities in acting through a committee, depository, voting trustee or
otherwise, and in that connection to deposit any Security with, or
transfer any Security to, any such committee, depository or trustee,
and to delegate to them such power and authority with relation to any
Security (whether or not so deposited or transferred) as the Trustees
shall deem proper, and to agree to pay, and to pay, such portion of the
expenses and compensation of such committee, depository or trustee as
the Trustees shall deem proper;
(g) CONTRACTS, ETC. To enter into, make and perform all such
obligations, contracts, agreements and undertakings of every kind and
description, with any Person or Persons, as the Trustees shall in their
discretion deem expedient in the conduct of the business of the Trust,
for such terms as they shall see fit, whether or not extending beyond
the term of office of the Trustees, or beyond the possible expiration
of the Trust, to amend, extend, release or cancel any such obligations,
contracts, agreements or understandings, and to execute, acknowledge,
deliver and record all written instruments which they may deem
necessary or expedient in the exercise of their powers;
(h) GUARANTEES, ETC. To endorse or guarantee the payment of
any notes or other obligations of any Person, to make contracts of
guaranty or suretyship, or otherwise assume liability for payment
thereof; and to mortgage and pledge the Trust Property or any part
thereof to secure any of or all such obligations;
(i) PARTNERSHIPS, ETC. To enter into joint ventures, general
or limited partnerships and any other combinations or associations;
(j) INSURANCE. To purchase and pay for entirely out of Trust
Property such insurance as they may deem necessary or appropriate for
the conduct of the business, including, without limitation, insurance
policies insuring the assets of the Trust and payment of distributions
and principal on its portfolio investments, and insurance policies
insuring the Shareholders, Trustees, officers, employees, agents,
consultants, Investment Advisers, managers, Administrators,
Distributors, Principal Underwriters, or other independent contractors,
or any thereof (or any Person connected therewith), of the Trust,
individually, against all claims and liabilities of every nature
arising by reason of holding, being or having held any such office or
position, or by reason of any action alleged to have been taken or
omitted by any such Person in any such capacity. including any action
taken or omitted that may be determined to constitute negligence,
whether or not the Trust would have the power to indemnify such Person
against such liability;
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(k) PENSIONS, ETC. To pay pensions for faithful service, as
deemed appropriate by the Trustees, and to adopt, establish and carry
out pension, profit-sharing, share bonus, share purchase, savings,
thrift and other retirement, incentive and benefit plans, trusts and
provisions, including the purchasing of life insurance and annuity
contracts as a means of providing such retirement and other benefits,
for any or all of the Trustees, officers, employees and agents of the
Trust;
(1) POWER OF COLLECTION AND LITIGATION. To collect, sue for
and receive all sums of money coming due to the Trust, to employ
counsel, and to commence, engage in, prosecute, intervene in, join,
defend, compound, compromise, adjust or abandon, in the name of the
Trust, any and all actions, suits, proceedings, disputes, claims,
controversies, demands or other litigation or legal proceedings
relating to the Trust, the business of the Trust, the Trust Property,
or the Trustees, officers, employees, agents and other independent
contractors of the Trust, in their capacity as such, at law or in
equity, or before any other bodies or tribunals, and to compromise,
arbitrate or otherwise adjust any dispute to which the Trust may be a
party, whether or not any suit is commenced or any claim shall have
been made or asserted;
(m) ISSUANCE AND REPURCHASE OF SHARES. To issue, sell,
repurchase, redeem, retire, cancel, acquire, hold, resell, reissue,
dispose of, transfer, and otherwise deal in Shares of any Series, and,
subject to Article 6 hereof; to apply to any such repurchase,
redemption, retirement, cancellation or acquisition of Shares of any
Series, any of the Portfolio Assets belonging to the Portfolio to which
such Series relates, whether constituting capital or surplus or
otherwise, to the full extent now or hereafter permitted by applicable
law; PROVIDED, that any Shares belonging to the Trust shall not be
voted, directly or indirectly;
(n) OFFICES. To have one or more offices, and to carry on all
or any of the operations and business of the Trust, in any of the
States, Districts or Territories of the United States, and in any and
all foreign countries, subject to the laws of such State, District,
Territory or country;
(o) EXPENSES. To incur and pay any and all such expenses and
charges as they may' deem advisable (including without limitation
appropriate fees to themselves as Trustees), and to pay all such sums
of money for which they may be held liable by way of damages, penalty,
fine or otherwise;
(p) AGENTS, ETC. To retain and employ any and all such
servants, agents, employees, attorneys, brokers, investment advisers,
accountants, architects, engineers, builders, escrow agents,
depositories, consultants, ancillary trustees, custodians, agents for
collection, insurers, banks and officers, as they think best for the
business of the Trust or any Portfolio, to supervise and direct the
acts of any of the same, and to fix and pay their compensation and
define their duties;
(q) ACCOUNTS. To determine, and from time to time change, the
method or form in which the accounts of the Trust shall be kept;
(r) VALUATION. Subject to the requirements of the 1940 Act, to
determine from time to time the value of all or any part of the Trust
Property and of any services, Securities, property, or other
consideration to be furnished to or acquired by the Trust, and from
time to time to revalue all or any part of the Trust Property in
accordance with such appraisals or other information as is, in the
Trustees' sole judgment, necessary and satisfactory;
(s) INDEMNIFICATION. In addition to the mandatory
indemnification provided for in Article 8 hereof and to the extent
permitted by law, to indemnify or enter into agreements with re-
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spect to indemnification with any Person with whom this Trust has
dealings, including, without limitation, any independent contractor, to
such extent as the Trustees shall determine; and
(t) GENERAL. To do all such other acts and things and to
conduct, operate, carry on and engage in such other lawful businesses
or business activities as they shall in their sole and absolute
discretion consider to be incidental to the business of the Trust or
any Portfolio as an investment company, and to exercise all powers
which they shall in their discretion consider necessary, useful or
appropriate to carry on the business of the Trust or any Portfolio, to
promote any of the purposes for which the Trust is formed, whether or
not such things are specifically mentioned herein, in order to protect
or promote the interests of the Trust or any Portfolio, or otherwise to
carry out the provisions of this Declaration.
SECTION 3.2 BORROWINGS; FINANCINGS; ISSUANCE OF SECURITIES The Trustees
shall have power to borrow or in any other manner raise such sum or sums of
money, and to incur such other indebtedness for goods or services, or for or in
connection with the purchase or other acquisition of property, as they shall
deem advisable for the purposes of the Trust, in any manner and on any terms,
and to evidence the same by negotiable or non-negotiable Securities which may
mature at any time or times, even beyond the possible date of termination of the
Trust; to issue Securities of any type for such cash, property, services or
other considerations, and at such time or times and upon such terms, as they may
deem advisable; and to reacquire any such Securities. Any such Securities of the
Trust may, at the discretion of the Trustees, be made convertible into Shares of
any Series, or may evidence the right to purchase, subscribe for or otherwise
acquire Shares of any Series, at such times and on such terms as the Trustees
may prescribe.
SECTION 3.3 DEPOSITS. Subject to the requirements of the 1940 Act, the
Trustees shall have power to deposit any moneys or Securities included in the
Trust Property with any one or more banks, trust companies or other banking
institutions, whether or not such deposits will draw interest Such deposits are
to be subject to withdrawal in such manner as the Trustees may determine, and
the Trustees shall have no responsibility for any loss which may occur by reason
of the failure of the bank. trust company or other balancing institution with
which any such moneys or Securities have been deposited, other than liability
based on their gross negligence or willful fault.
SECTION 3.4 ALLOCATIONS. The Trustees shall have power to determine
whether moneys or other assets received by the Trust shall be charged or
credited to income or capital, or allocated between income and capital,
including the power to amortize or fail to amortize any part or all of any
premium or discount, to treat any part or all of the profit resulting from the
maturity or sale of any asset, whether purchased at a premium or at a discount,
as income or capital, or to apportion the same been income and capital, to
apportion the sale price of any asset between income and capital, and to
determine in what manner any expenses or disbursements are to be borne as
between income and capital, whether or not in the absence of the power and
authority conferred by this Section 3.4 such assets would be regarded as income
or as capital or such expense or disbursement would be charged to income or to
capital, to treat any dividend or other distribution on any investment as income
or capital, or to apportion the same between income and capital; to provide or
fail to provide reserves, including reserves for depreciation, amortization or
obsolescence in respect of any Trust Property in such amounts and by such
methods as they shall determine, to allocate less than all of the consideration
paid for Shares of any Series to the shares of beneficial interest account of
the Portfolio to which such Shares relate and to allocate the balance thereof to
paid-in capital of that Portfolio, and to reallocate such amounts from time to
time; all as the Trustees may reasonably deem proper.
SECTION 3.5 FURTHER POWERS; LIMITATIONS. The Trustees shall have power
to do all such other matters and things, and to execute all such instruments, as
they deem necessary, proper or desirable in order to carry out, promote or
advance the interests of the Trust, although such matters or things are not
herein specifically mentioned. Any determination as to what is in the interests
of the Trust made by the Trustees in
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good faith shall be conclusive. In construing the provisions of this Declaration
of Trust, the presumption shall be in favor of a grant of power to the Trustees.
The Trustees shall not be required to obtain any court order to deal with the
Trust Property. The Trustees may limit their right to exercise any of their
powers through express restrictive provisions in the instruments evidencing or
providing the terms for any Securities of the Trust or in other contractual
instruments adopted on behalf of the Trust.
ARTICLE 4
TRUSTEES AND OFFICERS
SECTION 4.1 NUMBER, DESIGNATION, ELECTION, TERM, ETC.
[Subsection (a) of this Section 4.1 is intentionally omitted.].
(b) NUMBER. The Trustees serving as such, whether named below
or hereafter becoming Trustees, may, by a written instrument signed by a
Majority of the Trustees (or by an officer of the Trust pursuant to the
vote of a Majority of the Trustees), increase or decrease the number of
Trustees to a number other than the number theretofore determined. No
decrease in the number of Trustees shall have the effect of removing any
Trustee from office prior to the expiration of his term, but the number
of Trustees may be decreased in conjunction with the removal of a
Trustee pursuant to subsection (e) of this Section 4.1.
(c) ELECTION AND TERM. The Trustees shall be elected by the
Shareholders of the Trust at the first meeting of Shareholders
immediately prior to the initial public offering of Shares of the Trust,
and the term of office of any Trustees in office before such election
shall terminate at the time of such election. Subject to Section 16(a)
of the 1940 Act and to the preceding sentence of this subsection (c),
the Trustees shall have the power to set and alter the terms of office
of the Trustees, and at any time to lengthen or shorten their own terms
or make their terms of unlimited duration, to elect their own successors
and, pursuant to subsection (f) of this Section 4.1 to appoint Trustees
to fill vacancies; PROVIDED, that Trustees shall be elected by a
Majority Shareholder Vote at any such time or times as the Trustees
shall determine that such action is required under Section 16(a) of the
1940 Act or, if not so required, that such action is advisable; and
PROVIDED, that, after the initial election of Trustees by the
Shareholders, the term of office of any incumbent Trustee shall continue
until the termination of this Trust or his earlier death, resignation,
retirement, bankruptcy, adjudicated incompetency or other incapacity or
removal, or if not so terminated, until the election of such Trustee's
successor in office has become effective in accordance with this
subsection (c).
(d) RESIGNATION AND RETIREMENT. Any Trustee may resign his
trust or retire as a Trustee, by a written instrument signed by him and
delivered to the other Trustees or to any officer of the Trust, and such
resignation or retirement shall take effect upon such delivery or upon
such later date as is specified in such instrument.
(e) REMOVAL. Any Trustee may be removed with or without cause
at any time: (i) by written instrument, signed by at least two-thirds
(2/3) of the number of Trustees prior to such removal, specifying the
date upon which such removal shall become effective; or (ii) by vote of
Shareholders holding not less than two-thirds (2/3) of the Shares of
each Series then outstanding, cast in person or by proxy at any meeting
called for the purpose; or (iii) by a written declaration signed by
Shareholders holding not less than two-thirds (2/3) of the Shares of
each Series then outstanding and filed with the Trust's Custodian.
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(f) VACANCIES. Any vacancy or anticipated vacancy resulting
from any reason, including an increase in the number of Trustees, may
(but need not unless required by the 1940 Act) be filled by a Majority
of the Trustees, subject to the provisions of Section 16(a) of the 1940
Act, through the appointment in writing of such other individual as
such remaining Trustees in their discretion shall determine; PROVIDED,
that if there shall be no Trustees in office, such vacancy or vacancies
shall be filled by vote of the Shareholders. Any such appointment or
election shall be effective upon such individual's written acceptance
of his appointment as a Trustee and his agreement to be bound by the
provisions of this Declaration of Trust, except that any such
appointment in anticipation of a vacancy to occur by reason of
retirement, resignation or increase in the number of Trustees to be
effective at a later date shall become effective only at or after the
effective date of said retirement, resignation or increase in the
number of Trustees.
(g) ACCEPTANCE OF TRUSTS. Any individual appointed as a
Trustee under subsection (f), and any individual elected as a Trustee
under subsection (c), of this Section 4.1 who was not, immediately
prior to such election, acting as a Trustee, shall accept such
appointment or election in writing and agree in such writing to be
bound by the provisions hereof; and whenever such individual shall have
executed such writing and any conditions to such appointment or
election shall have been satisfied, such individual shall become a
Trustee and the Trust Property shall vest in the new Trustee, together
with the continuing Trustees, without any further act or conveyance.
(h) EFFECT OF DEATH, RESIGNATION, ETC. No vacancy, whether
resulting from the death, resignation, retirement, removal or
incapacity of any Trustee, an increase in the number of Trustees or
otherwise, shall operate to annul or terminate the Trust hereunder or
to revoke or terminate any existing agency or contract created or
entered into pursuant to the terms of this Declaration of Trust. Until
such vacancy is filled as provided in this Section 4.1, the Trustees in
office (if any), regardless of their number, shall have all the powers
granted to the Trustees and shall discharge all the duties imposed upon
the Trustees by this Declaration. A written instrument certifying the
existence of such vacancy signed by a Majority of the Trustees shall be
conclusive evidence of the existence of such vacancy.
(i) CONVEYANCE. In the event of the resignation or removal of
a Trustee or his otherwise ceasing to be a Trustee, such former Trustee
or his legal representative shall, upon request of the continuing
Trustees, execute and deliver such documents as may be required for the
purpose of consummating or evidencing the conveyance to the Trust or
the remaining Trustees of any Trust Property held in such former
Trustee's name, but the execution and delivery of such documents shall
not be requisite to the vesting of title to the Trust Property in the
remaining Trustees, as provided in subsection (g) of this Section 4.1
and in Section 4.13 hereof.
(j) NO ACCOUNTING. Except to the extent required by the 1940
Act or under circumstances which would justify his removal for cause,
no Person ceasing to be a Trustee (nor the estate of any such Person)
shall be required to make an accounting to the Shareholders or
remaining Trustees upon such cessation.
SECTION 4.2 TRUSTEES' MEETINGS; PARTICIPATION BY TELEPHONE, ETC. An
annual meeting of Trustees shall be held not later than the last day of the
fourth month after the end of each fiscal year of the Trust and special meetings
may be held from time to time, in each case, upon the call of such officers as
may be thereunto authorized by the Bylaws or vote of the Trustees, or by any two
(2) Trustees, or pursuant to a vote of the Trustees adopted at a duly
constituted meeting of the Trustees, and upon such notice as shall be provided
in the Bylaws. The Trustees may act with or without a meeting, and a written
consent to any matter, signed by a Majority of the Trustees, shall be equivalent
to action duly taken at a meeting of the Trustees. duly called and held. Except
as otherwise provided by the 1940 Act or other applicable law, or by this Decla-
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ration of Trust or the Bylaws, any action to be taken by the Trustees may be
taken by a majority of the Trustees present at a meeting of Trustees (a quorum,
consisting of at least a Majority of the Trustees, being present), within or
without Massachusetts. If authorized by the Bylaws, all or any one or more
Trustees may participate in a meeting of the Trustees or any Committee thereof
by means of conference telephone or similar means of communication by means of
which all Persons participating in the meeting can hear each other, and
participation in a meeting pursuant to such means of communication shall
constitute presence in person at such meeting. The minutes of any meeting thus
held shall be prepared in the same manner as a meeting at which all participants
were present in person.
SECTION 4.3 COMMITTEES; DELEGATION. The Trustees shall have power,
consistent with their ultimate responsibility to supervise the affairs of the
Trust, to delegate from time to time to an Executive Committee, and to one or
more other Committees, or to any single Trustee, the doing of such things and
the execution of such deeds or other instruments, either in the name of the
Trust or the names of the Trustees or as their attorney or attorneys in fact, or
otherwise as the Trustees may from time to time deem expedient, and any
agreement, deed, mortgage, lease or other instrument or writing executed by the
Trustee or Trustees or other Person to whom such delegation was made shall be
valid and binding upon the Trustees and upon the Trust.
SECTION 4.4 OFFICERS. The Trustees shall annually elect such officers
or agents, who shall have such powers, duties and responsibilities as the
Trustees may deem to be advisable, and as they shall specify by resolution or in
the Bylaws. Except as may be provided in the Bylaws, any officer elected by the
Trustees may be removed at any time with or without cause. Any two (2) or more
offices may be held by the same individual.
SECTION 4.5 COMPENSATION OF TRUSTEES AND OFFICERS. The Trustees shall
fix the compensation of all officers and Trustees. Without limiting the
generality of any of the provisions hereof, the Trustees shall be entitled to
receive reasonable compensation for their general services as such, and to fix
the amount of such compensation, and to pay themselves or any one or more of
themselves such compensation for special services, including legal, accounting,
or other professional services, as they in good faith may deem reasonable. No
Trustee or officer resigning and (except where a right to receive compensation
for a definite future period shall be expressly provided in a written agreement
with the Trust, duly approved by the Trustees) no Trustee or officer removed
shall have any right to any compensation as such Trustee or officer for any
period following his resignation or removal, or any right to damages on account
of his removal, whether his compensation be by the month, by the year or
otherwise.
SECTION 4.6 OWNERSHIP OF SHARES AND SECURITIES OF THE TRUST. Any
Trustee, and any officer, employee or agent of the Trust, and any organization
in which any such Person is interested, may acquire, own, hold and dispose of
Shares of any Series or Class, and other Securities of the Trust for his or its
individual account, and may exercise all rights of a holder of such Shares or
Securities to the same extent and in the same manner as if such Person were not
such a Trustee, officer, employee or agent of the Trust; subject, in the case of
Trustees and officers, to the same limitations as directors or officers (as die
case may be) of a Massachusetts business corporation; and the Trust may issue
and sell or cause to be issued and sold and may purchase any such Shares or
other Securities from any such Person or any such organization, subject only to
the general limitations, restrictions or other provisions applicable to the sale
or purchase of Shares of such Series or other Securities of the Trust generally.
SECTION 4.7 RIGHT OF TRUSTEES AND OFFICERS TO OWN PROPERTY AND TO
ENGAGE IN BUSINESS; AUTHORITY OF TRUSTEES TO PERMIT OTHERS TO DO LIKEWISE. The
Trustees, in their capacity as Trustees, and (unless otherwise specifically
directed by vote of the Trustees) the officers of the Trust in their capacity as
such, shall not be required to devote their entire time to the business and
affairs of the Trust. Except as otherwise specifically provided by vote of the
Trustees, or by agreement in any particular case, any Trustee or officer of the
Trust may acquire, own, hold and dispose of; for his own individual account any
property, and acquire, own,
<PAGE>
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hold, any on and dispose of, for his own individual account, any business entity
or business activity, whether similar or dissimilar to any property or business
entity or business activity invested in or carried on by the Trust, and without
first offering the same as an investment opportunity to the Trust, and may
exercise all rights in respect thereof as if he were not a Trustee or officer of
the Trust. The Trustees shall also have power, generally or in specific cases,
to permit employees or agents of the Trust to have the same rights (or lesser
rights) to acquire, hold, own and dispose of property and businesses, to carry
on businesses, and to accept investment opportunities without offering them to
the Trust, as the Trustees have by virtue of this Section 4.7.
SECTION 4.8 RELIANCE ON EXPERTS. The Trustees and officers may consult
with counsel, engineers, brokers, appraisers, auctioneers, accountants,
investment bankers, securities analysts or other Persons (any of which may be a
firm in which one or more of the Trustees or officers is or are members or
otherwise interested) whose profession gives authority to a statement made by
them on the subject in question, and who are reasonably deemed by the Trustees
or officers in question to be competent, and the advice or opinion of such
Persons shall be fit and complete personal protection to all of the Trustees and
officers in respect of any action taken or suffered by them in good faith and in
reliance on or m accordance with such advice or opinion. In discharging their
duties, Trustees and officers, when acting in good faith, may rely upon
financial statements of the Trust represented to them to be correct by any
officer of the Trust having charge of its books of account, or stated in a
written report by an independent certified public accountant fairly to present
the financial position of the Trust. The Trustees and officers may rely, and
shall be personally protected in acting, upon any instrument or other document
believed by them to be genuine.
SECTION 4.9 SURETY BONDS. No Trustee, officer, employee or agent of the
Trust shall, as such, be obligated to give any bond or surety or other security
for the performance of any of his duties, unless required by applicable law or
regulation, or unless the Trustees shall otherwise determine in any particular
case.
SECTION 4.10 APPARENT AUTHORITY OF TRUSTEES AND OFFICERS. No purchaser,
lender, transfer agent or other Person dealing with the Trustees or any officer
of the Trust shall be bound to make any inquiry concerning the validity of any
transaction purporting to be made by the Trustees or by such officer, or to make
inquiry concerning or be liable for the application of money or property paid,
loaned or delivered to or on the order of the Trustees or of such officer.
SECTION 4.11 OTHER RELATIONSHIPS NOT PROHIBITED. The fact that:
(i) any of the Shareholders, Trustees or officers of the Trust
is a shareholder, director, officer, partner, trustee, employee,
manager, adviser, principal underwriter or distributor or agent of or
for any Contracting Party (as defined in Section 5.2 hereof), or of or
for any parent or affiliate of any Contracting Party, or that the
Contracting Party or any parent or affiliate thereof is a Shareholder
or has an interest in the Trust or any Portfolio, or that
(ii) any Contracting Party may have a contract providing for
the rendering of any similar services to one or more other
corporations, trusts, associations, partnerships, limited partnerships
or other organizations, or have other business or interests,
shall not affect the validity of any contract for the performance and assumption
of services, duties and responsibilities to, for or of the Trust and/or the
Trustees or disqualify any Shareholder, Trustee or officer of the Trust from
voting upon or executing the same or create any liability or accountability to
the Trust or to the holders of Shares of any Series; PROVIDED, that, in the case
of any relationship or interest referred to in the preceding clause (i) on the
part of any Trustee or officer of the Trust, either (x) the material facts as to
such relationship or interest have been disclosed to or are known by the
Trustees not having any such relationship or interest and the contract involved
is approved in good faith by a majority of such Trustees not having any
<PAGE>
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such relationship or interest (even though such unrelated or disinterested
Trustees are less than a quorum of all of the Trustees), (y) the material facts
as to such relationship or interest and as to the contract have been disclosed
to or are known by the Shareholders entitled to vote thereon and the contract
involved is specifically approved in good faith by vote of the Shareholders, or
(z) the specific contract involved is fair to the Trust as of the time it is
authorized, approved or ratified by the Trustees or by the Shareholders.
SECTION 4.12 PAYMENT OF TRUST EXPENSES. The Trustees are authorized to
pay or to cause to be paid out of the principal or income of the Trust, or
partly out of principal and partly Out of income, and according to any
allocation to particular Portfolios made by them pursuant to Section 6.2(b)
hereof, all expenses, fees, charges, taxes and liabilities incurred or arising
in connection with the business and affairs of the Trust or in connection with
the management thereof; including, but not limited to, the Trustees'
compensation and such expenses and charges for the services of the Trust's
officers, employees, Investment Adviser, Administrator, Distributor, Principal
Underwriter, auditor, counsel, Custodian, Transfer Agent, Dividend Disbursing
Agent, Accounting Agent, Shareholder Servicing Agent, and such other agents,
consultants, and independent contractors and such other expenses and charges as
the Trustees may deem necessary or proper to incur.
SECTION 4.13 OWNERSHIP OF THE TRUST PROPERTY. Legal title to all the
Trust Property shall be vested in the Trustees as joint tenants, except that the
Trustees shall have power to cause legal title to any Trust Property to be held
by or in the name of one or more of the Trustees, or in the name of the Trust,
or of any particular Portfolio, or in the name of any other Person as nominee,
on such terms as the Trustees may determine; PROVIDED that the interest of the
Trust and of the respective Portfolio therein is appropriately protected. The
right, title and interest of the Trustees in the Trust Property shall vest
automatically in each Person who may hereafter become a Trustee Upon the
termination of the term of office of a Trustee as provided in Section 4.1(c),
(d) or (e) hereof; such Trustee shall automatically cease to have any right,
title or interest in any of the Trust Property, and the right, title and
interest of such Trustee in the Trust Property shall vest automatically in the
remaining Trustees. Such vesting and cessation of title shall be effective
whether or not conveyancing documents have been executed and delivered pursuant
to Section 4.1(i) hereof.
ARTICLE 5
DELEGATION OF MANAGERIAL RESPONSIBILITIES
SECTION 5.1 APPOINTMENT; ACTION BY LESS THAN ALL TRUSTEES. The Trustees
shall be responsible for the general operating policy of the Trust and for the
general supervision of the business of the Trust conducted by officers, agents,
employees or advisers of the Trust or by independent contractors, but the
Trustees shall not be required personally to conduct all the business of the
Trust and, consistent with their ultimate responsibility as stated herein, the
Trustees may appoint, employ or contract with one or more officers, employees
and agents to conduct, manage and/or supervise the operations of the Trust, and
may grant or delegate such authority to such officers, employees and/or agents
as the Trustees may, in their sole discretion, deem to be necessary or
desirable, without regard to whether such authority is normally granted or
delegated by trustees. With respect to those matters of the operation and
business of the Trust which they shall elect to conduct themselves, except as
otherwise provided by this Declaration or the Bylaws, if any, the Trustees may
authorize any single Trustee or defined group of Trustees, or any committee
consisting of a number of Trustees less than the whole number of Trustees then
in office without specification of the particular Trustees required to be
included therein, to act for and to bind the Trust, to the same extent as the
whole number of Trustees could do, either with respect to one or more particular
matters or classes of matters, or generally.
SECTION 5.2 CERTAIN CONTRACTS. Subject to compliance with the
provisions of the 1940 Act, but notwithstanding any limitations of present and
future law or custom in regard to delegation of powers by trustees generally,
the Trustees may, at any time and from time to time in their discretion and
without limiting
<PAGE>
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the generality of their powers and authority otherwise set forth herein, enter
into one or more contracts with any one or more corporations, trusts,
associations, partnerships, limited partnerships or other types of
organizations, or individuals ("CONTRACTING PARTY"), to provide for the
performance and assumption of some or all of the following services, duties and
responsibilities to, for or on behalf of the Trust and/or any Portfolio, and/or
the Trustees, and to provide for the performance and assumption of such other
services, duties and responsibilities in addition to those set forth below, as
the Trustees may deem appropriate:
(a) ADVISORY. An investment advisory or management agreement
whereby the In-vestment Adviser shall undertake to furnish the Trust
such management, investment advisory or supervisory, administrative,
accounting, legal, statistical and research facilities and services,
and such other facilities and services, if any, as the Trustees shall
from time to time consider desirable, all upon such terms and
conditions as the Trustees may in their discretion determine to be not
inconsistent with this Declaration, the applicable provisions of the
1940 Act or any applicable provisions of the Bylaws. Any such advisory
or management agreement and any amendment thereto shall be subject to
approval by a Majority Shareholder Vote at a meeting of the
Shareholders of the Trust. Notwithstanding any provisions of this
Declaration, the Trustees may authorize the Investment Adviser (subject
to such general or specific instructions as the Trustees may from time
to time adopt) to effect purchases, sales, loans or exchanges of
portfolio securities of the Trust on behalf of the Trustees or may
authorize any officer or employee of the Trust or any Trustee to effect
such purchases, sales, loans or exchanges pursuant to recommendations
of the Investment Adviser (and all without further action by the
Trustees). Any such purchases, sales, loans and exchanges shall be
deemed to have been authorized by all of the Trustees. The Trustees
may, in their sole discretion, call a meeting of Shareholders in order
to submit to a vote of Shareholders at such meeting the approval of
continuance of any such investment advisory or management agreement. If
the Shareholders of any Portfolio should fail to approve any such
investment advisory or management agreement, the Investment Adviser may
nonetheless serve as Investment Adviser with respect to any other
Portfolio whose Shareholders shall have approved such contract.
(b) ADMINISTRATION. An agreement whereby the agent, subject to
the general supervision of the Trustees and in conformity with any
policies of the Trustees with respect to the operations of the Trust
and each Portfolio, will supervise all or any part of the operations of
the Trust and each Portfolio, and will provide all or any part of the
administrative and clerical personnel, office space and office
equipment and services appropriate for the efficient administration and
operations of the Trust and each Portfolio (any such agent being herein
referred to as an "ADMINISTRATOR").
(c) DISTRIBUTION. An agreement providing for the sale of
Shares of any one or more Series, or Classes of any Series, to net the
Trust not less than the net asset value per Share (as described in
Section 6.2(h) hereof) and pursuant to which the Trust may appoint the
other party to such agreement as its principal underwriter or sales
agent for the distribution of such Shares. The agreement shall contain
such terms and conditions as the Trustees may m their discretion
determine to be not inconsistent with this Declaration, the applicable
provisions of the 1940 Act and any applicable provisions of the Bylaws
(any such agent being herein referred to as a "DISTRIBUTOR" or a
"PRINCIPAL UNDERWRITER", as the case may be).
(d) CUSTODIAN. The appointment of a bank or trust company
having an aggregate capital, surplus and undivided profits (as shown in
its last published report) of at least two million dollars ($2,000,000)
as custodian of the Securities and cash of the Trust and of each
Portfolio and of the accounting records in connection therewith (any
such agent being herein referred to as a "CUSTODIAN").
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(e) TRANSFER AND DIVIDEND DISBURSING AGENCY. An agreement with
an agent to maintain records of the ownership of outstanding Shares and
the issuance and redemption and the transfer thereof (any such agent
being herein referred to as a "TRANSFER AGENT"), and to disburse any
dividends declared by the Trustees and in accordance with the policies
of the Trustees and/or the instructions of any particular Shareholder
to reinvest any such dividends (any such agent being herein referred to
as a "DIVIDEND DISBURSING AGENT").
(f) SHAREHOLDER SERVICING. An agreement with an agent to
provide service with respect to the relationship of the Trust and its
Shareholders, records with respect to Shareholders and their Shares,
and similar matters (any such agent being herein referred to as a
"Shareholder SERVICING Agent").
(g) ACCOUNTING. An agreement with an agent to handle all or
any part of the accounting responsibilities, whether with respect to
the Trust's properties, Shareholders or otherwise (any such agent being
herein referred to as an "ACCOUNTING AGENT").
The same Person may be the Contracting Party for some or all of the services,
duties and responsibilities to, for and of the Trust and/or the Trustees, and
the contracts with respect thereto may contain such terms interpretive of or in
addition to the delineation of the services, duties and responsibilities
provided for, including provisions that are not inconsistent with the 1940 Act
relating to the standard of duty of and the rights to indemnification of the
Contracting Party and others, as the Trustees may determine Nothing herein shall
preclude, prevent or limit the Trust or a Contracting Party from entering into
sub-contractual arrangements relative to any of the matters referred to in
subsections (a) through (g) of this Section 5.2.
ARTICLE 6
PORTFOLIOS AND SHARES
SECTION 6.1 DESCRIPTION OF PORTFOLIOS AND SHARES.
(a) SHARES; PORTFOLIOS; SERIES AND CLASSES OF SHARES. The beneficial
interest in the Trust shall be divided into Shares having a nominal or par value
of one mil ($.001) per Share, of which an unlimited number may be issued. The
Trustees shall have the power and authority (without any requirement of
Shareholder approval) from time to time to establish and designate one or more
separate, distinct and independent Portfolios, in addition to the Spectra
Portfolio established and designated by Section 6.2 hereof, into which the
assets of the Trust shall be divided, to authorize a separate Series of Shares
for each such additional Portfolio (each of which Series, including without
limitation the Spectra Series authorized in Section 6.2 hereof, shall represent
beneficial interests only in the Portfolio with respect to which such Series was
authorized), and to authorize two or more separate Classes of Shares of any such
Series, as they deem necessary or desirable and to fix and determine the
relative rights and preferences as between the shares of the respective Series
as to rights of redemption and the price, terms and manner of redemption,
special and relative rights as to dividends and other distributions and on
liquidation, sinking or purchase fund provisions, conversion rights. and
conditions under which the Shareholders of the several Series shall have
separate voting rights or no voting rights. The Trustees shall have the power to
classify or reclassify any unissued Shares of any Series, or any Shares of any
Series previously issued and reacquired by the Trust (including in either case
any Shares of the Spectra Portfolio established and designated by Section 6.2
hereof) into any number of additional Classes of such Series by from time to
time setting or changing in one or more respects provisions applicable to such
Class or Classes relating to sales charges, any rights of redemption and the
price, terms and manner of redemption, special and relative rights as to
dividends and other distributions and on liquidation, sinking or purchase fund
provisions and conversion rights, and (subject to Article 7 hereof) the
conditions under which the Shareholders of the several Classes shall have
separate voting rights or no voting rights. Except
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as otherwise provided as to a particular Portfolio herein, or in the Certificate
of Designation therefor, the Trustees shall have all the rights and powers, and
be subject to all the duties and obligations, with respect to each such
Portfolio and the assets and affairs thereof as they have under this Declaration
with respect to the Trust and the Trust Property in general.
(b) ESTABLISHMENT, ETC. OF PORTFOLIOS; AUTHORIZATION OF SHARES. The
establishment and designation of any Portfolio (in addition to the Spectra
Portfolio established and designated in Section 6.2 hereof) and the
authorization of the Shares thereof shall be effective upon the execution by a
Majority of the Trustees (or by an officer of the Trust pursuant to the vote of
a Majority of the Trustees) of an instrument setting forth such establishment
and designation and the relative rights and preferences of the Shares of the
Series representing the beneficial interests in such Portfolio and the manner in
which the same may be amended (a "CERTIFICATE OF DESIGNATION"), which may
provide that the number of Shares of such Series that may be issued is
unlimited, or may limit the number issuable. At any time (a) that there are no
Shares outstanding of the Series that represents the beneficial interests in any
Portfolio previously established and designated, including the Spectra Series
established and designated by Section 6.2 hereof, or (b) any shares of a
particular Class previously established and designated for any Series, and also,
in the case of any Class of a Series of which there are outstanding no Shares of
any other Class of such Series which are convertible into Shares of the
particular Class, the Trustees may by an instrument executed by a Majority of
the Trustees (or by an officer of the Trust pursuant to the vote of a Majority
of the Trustees) terminate such Portfolio and the Series representing the
beneficial interests therein, or such Class, as the case may be, and the
establishment and designation thereof and the authorization of its Shares (a
"CERTIFICATE OF Termination"). Each Certificate of Designation, Certificate of
Termination and any instrument amending a Certificate of Designation shall have
the status of an amendment to this Declaration of Trust, and shall be filed as
provided m Section 9.4 hereof, but such filing shall not be a prerequisite to
the effectiveness thereof.
(c) CHARACTER OF SEPARATE PORTFOLIOS AND SHARES THEREOF. Each Portfolio
established hereunder shall be a separate component of the assets of the Trust,
and the holders of Shares of the Series representing the beneficial interests in
that Portfolio shall be considered Shareholders of such Portfolio, but such
Shareholders shall also be considered Shareholders of the Trust for purposes of
receiving reports and notices and, except as otherwise provided herein or in the
Certificate of Designation of a particular Portfolio as to such Portfolio, or as
required by the 1940 Act or other applicable law, the right to vote, all without
distinction by Series.
(d) CONSIDERATION FOR SHARES. The Trustees may issue Shares of any
Series for such consideration (which may include property subject to, or
acquired in connection with the assumption of, liabilities) and on such terms as
they may determine (or for no consideration if pursuant to a Share dividend or
split-up), all without action or approval of the Shareholders. All Shares when
so issued on the terms determined by the Trustees shall be fully paid and
non-assessable may be subject to mandatory contribution back to the Trust as
provided in Section 6.2) hereof). The Trustees may classify or reclassify any
unissued Shares, or any Shares of any Series previously issued and reacquired by
the Trust, into Shares of one or more other Portfolios that may be established
and designated from time to time.
SECTION 6.2 ESTABLISHMENT AND DESIGNATION OF THE SPECTRA PORTFOLIO AND
OF THE SHARES THEREOF GENERAL PROVISIONS FOR ALL PORTFOLIOS. Without limiting
the authority of the Trustees set forth in Section 6.1(a) hereof to establish
and designate further Portfolios, there are hereby established and designated
the Spectra Portfolio and the Shares thereof, which shall be known as the
Spectra Series; an unlimited number of Shares of such Series may be issued. The
Shares of the Spectra Series, and the Shares representing the beneficial
interest in any further Portfolios that may from time to time be established and
designated by the Trustees shall (unless the Trustees otherwise determine with
respect to some further Portfolio at the time of establishing and designating
the same) have the following relative rights and preferences:
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(a) ASSETS BELONGING TO PORTFOLIOS. Any portion of the Trust
Property allocated to a particular Portfolio, and all consideration
received by the Trust for the issue or sale of Shares of such
Portfolio, together with all assets in which such consideration is
invested or reinvested, all interest, dividends, income, earnings,
profits and gains therefrom, and proceeds thereof, including any
proceeds derived from the sale, exchange or liquidation of such assets,
and any funds or payments derived from any reinvestment of such
proceeds in whatever form the same may be, shall be held by the
Trustees in trust for the benefit of the holders of Shares of that
Portfolio and shall irrevocably belong to that Portfolio for all
purposes, and shall be so recorded upon the books of account of the
Trust, and the Shareholders of such Portfolio shall not have, and shall
be conclusively deemed to have waived, any claims to the assets of any
Portfolio of which they are not Shareholders. Such consideration,
assets, interest, dividends, income, earnings, profits, gains and
proceeds, together with any General Items allocated to that Portfolio
as provided in the following sentence, arc herein referred to
collectively as "PORTFOLIO ASSETS" of such Portfolio, and as assets
"BELONGING TO" that Portfolio. In the event that there are any assets,
income, earnings, profits, and proceeds thereof, funds, or payments
which are not readily identifiable as belonging to any particular
Portfolio (collectively "GENERAL Items"), the Trustees shall allocate
such General Items to and among any one or more of the Portfolios
established and designated from time to time in such manner and on such
basis as they, in their sole discretion, deem fair and equitable; and
any General Items so allocated to a particular Portfolio shall belong
to and be part of the Portfolio Assets of that Portfolio. Each such
allocation by the Trustees shall be conclusive and binding upon the
Shareholders of all Portfolios for all purposes.
(b) LIABILITIES OF PORTFOLIOS. The assets belonging to each
particular Portfolio shall be charged with the liabilities in respect
of that Portfolio and all expenses, costs, charges and reserves
attributable to that Portfolio, and any general liabilities, expenses,
costs, charges or reserves of the Trust which are not readily
identifiable as pertaining to any particular Portfolio shall be
allocated and charged by the Trustees to and among any one or more of
the Portfolios established and designated from time to time in such
manner and on such basis as the Trustees in their sole discretion deem
fair and equitable. The indebtedness, expenses, costs, charges and
reserves allocated and so charged to a particular Portfolio are herein
referred to as "LIABILITIES OF' that Portfolio. Each allocation of
liabilities, expenses, costs, charges and reserves by the Trustees
shall be conclusive and binding upon the Shareholders of all Portfolios
for all purposes. Any creditor of any Portfolio may look only to the
assets of that Portfolio to satisfy such creditor's debt, and the
creditors of a particular Class of a Portfolio may look only to the
share of that Class in the assets of the Portfolio to which it pertains
to satisfy their claims.
(c) DIVIDENDS. Dividends and distributions on Shares of a
particular Series may be paid with such frequency as the Trustees may
determine, which may be daily or otherwise pursuant to a standing
resolution or resolutions adopted only once or with such frequency as
the Trustees may determine, to the Shareholders of that Series, from
such of the income, accrued or realized, and capital gains, realized or
unrealized, and out of the assets belonging to the Portfolio to which
such Series pertains, as the Trustees may determine, after providing
for actual and accrued liabilities of that Portfolio. All dividends and
distributions on Shares of a Series without separate Classes shall be
distributed pro rata to the holders of Shares of that Series in
proportion to the number of such Shares held by such holders at the
date and time of record established for the payment of such dividends
or distributions. Dividends and distributions on the Shares of a
Portfolio having separate Classes of Shares shall be in such amount as
may be declared from time to time by the Trustees, and such dividends
and distributions may vary as between such Classes to reflect differing
allocations among such Classes of the liabilities, expenses, costs.
charges and reserves of such Portfolio, and any resultant differences
between the net asset value of such several Classes, to such extent and
for such purposes as the Trustees may deem appropriate, but dividends
and distributions on the Shares of a particular Class shall be
distributed pro rata to the Shareholders of that Class in proportion to
the
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number of such Shares held by such holders at the date and time of
record established for the payment of such dividends and distributions.
Notwithstanding the last two preceding sentences, the Trustees may
determine, in connection with any dividend or distribution program or
procedure, that no dividend or distribution shall be payable on Shares
as to which the Shareholder's purchase order and/or payment have not
been received by the time or times established by the Trustees under
such program or procedure, or that dividends or distributions shall be
payable on Shares which have been tendered by the holder thereof for
redemption or repurchase, but the redemption or repurchase proceeds of
which have not yet been paid to such Shareholder. Dividends and
distributions on the Shares of a Series may be made in cash or Shares
of any Class of that Series or a combination thereof as determined by
the Trustees, or pursuant to any program that the Trustees may have in
effect at the time for the election by each Shareholder of the mode of
the making of such dividend or distribution to that Shareholder. Any
such dividend or distribution paid in Shares will be paid at the net
asset value thereof as determined in accordance with subsection (h) of
this Section 6.2.
(d) LIQUIDATION. In the event of the liquidation or
dissolution of the Trust, the Shareholders of each Portfolio of which
Shares are outstanding shall be entitled to receive, when and as
declared by the Trustees, the excess of the Portfolio Assets over the
liabilities of such Portfolio. The assets so distributable to the
Shareholders of any particular Series without separate Classes of
Shares shall be distributed among such Shareholders in proportion to
the number of Shares of that Series held by them and recorded on the
books of the Trust. The assets so distributable to the Shareholders of
any Portfolio having separate Classes of Shares shall be allocated
among such Classes in proportion to the respective aggregate net asset
value of the outstanding Shares thereof, and shall be distributed to
the Shareholders of each such Class in proportion to the number of
Shares of that Class held by them and recorded on the books of the
Trust The liquidation of any Portfolio, or any Class of any Portfolio,
may be authorized by vote of a Majority of the Trustees, subject to the
affirmative vote of "a majority of the outstanding voting securities"
of the Series representing the beneficial interests in that Portfolio,
or in that Class of such Series, as the quoted phrase is defined in the
1940 Act. determined in accordance with clause (iii) of the definition
of "MAJORITY SHAREHOLDER VOTE" in Section 1.4 hereof.
(e) VOTING. The Shareholders shall have the voting rights set
forth in or determined under Article 7 hereof.
(f) REDEMPTION BY SHAREHOLDER. Each holder of Shares of a
particular Series or Class shall have the right at such times as may be
permitted by the Trust, but no less frequently than once each week, to
require the Trust to redeem all or any part of such Shares at a
redemption price equal to the net asset value per Share of that Series
or Class next determined in accordance with subsection (h) of this
Section 6.2 after the Shares are properly tendered for redemption;
PROVIDED, that the Trustees may from time to time, in their discretion,
determine and impose a fee for such redemption, and the proceeds of the
redemption of Shares (including a fractional Share) of any Series or
Class shall be reduced by the amount of any applicable contingent
deferred sales charge payable on such redemption pursuant to the terms
of the initial issuance of the Shares of such Series or Class (to the
extent consistent with the 1940 Act or regulations or exemptions
thereunder). The redemption price of Shares redeemed under this
subsection (e) shall be paid in cash; PROVIDED, HOWEVER, that if the
Trustees determine, which determination shall be conclusive, that
conditions exist with respect to any Series or Shares, or one or more
Classes of any Series, which make payment wholly in cash unwise or
undesirable, the Trust may make payment wholly or partly in Securities
or other assets belonging to the Portfolio to which such Series or
Class pertains, at the value of such Securities or assets used in such
determination of net asset value. Notwithstanding the foregoing, the
Trust may postpone payment of the redemption price and may suspend the
right of the holders of Shares of any Series
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or Class to require the Trust to redeem such Shares during any period
or at any time when and to the extent permissible under the 1940 Act.
(g) REDEMPTION AT THE OPTION OF THE TRUST. Each Share of any
Portfolio shall be subject to redemption at the option of the Trust at
the redemption price which would be applicable if such Share were then
being redeemed by the Shareholder pursuant to subsection (f) of this
Section 6.2 (i) at any time, if the Trustees determine in their sole
discretion that failure to so redeem may have materially adverse
consequences to the holders of the Shares of the Trust or of any
Portfolio, or (ii) upon such other conditions with respect to
maintenance of Shareholder accounts of a minimum amount as may from
time to time be determined by the Trustees and set forth in the then
current Prospectus of such Portfolio. Upon such redemption the holders
of the Shares so redeemed shall have no further right with respect
thereto other than to receive payment of such redemption price.
(h) NET ASSET VALUE. Subject to the provisions of the two
sentences immediately following, the net asset value per Share of any
Series without Classes, or of any Class of a Series having separate
Classes, at any time shall be the quotient obtained by dividing the
value of the net assets of the Portfolio to which such Series or Class
pertains, at such time (being the current value of the assets belonging
to such Portfolio, or the share of such Class therein, less the then
existing liabilities or such Portfolio, or the share of such Class in
such liabilities) by the total number of Shares of that Series or Class
then outstanding, all determined in accordance with the methods and
procedures, including without limitation those with respect to
rounding, established by the Trustees from time to time. The aggregate
net asset value of the several Classes of a Portfolio having separate
Classes of Shares shall be separately computed, and may vary from one
another. The Trustees shall establish procedures for the allocation of
investment income or capital gains and expenses and liabilities of a
Portfolio having separate Classes of Shares among the several Classes
of such Portfolio, in order to reflect the varying net asset values of,
and the liabilities and expenses attributable to, such Classes. The
Trustees may determine to maintain the net asset value per Share of any
Portfolio at a designated constant dollar amount and in connection
therewith may adopt procedures not inconsistent with the 1940 Act for
the continuing declaration of income attributable to that Portfolio as
dividends payable in additional Shares of that Portfolio at the
designated constant dollar amount and for the handling of any losses
attributable to that Portfolio. Such procedures may provide that in the
event of any loss each Shareholder shall be deemed to have contributed
to the shares of beneficial interest account of that Portfolio his pro
rata portion of the total number of Shares required to be canceled in
order to permit the net asset value per Share of that Portfolio to be
maintained, after reflecting such loss, at the designated constant
dollar amount. Each Shareholder of the Trust shall be deemed to have
expressly agreed, by investing in any Portfolio with respect to which
the Trustees shall have adopted any such procedure, to make the
contribution referred to in the preceding sentence in the event of any
such loss.
(i) TRANSFER. All Shares of the Trust shall be transferable,
but transfers of Shares of a particular Portfolio will be recorded on
the Share transfer records of the Trust applicable to that Portfolio
only at such times as Shareholders shall have the right to require the
Trust to redeem Shares of that Portfolio and at such other times as may
be permitted by the Trustees.
(j) EQUALITY. All Shares of each Series without Classes shall
represent an equal proportionate interest in the assets belonging to
the Portfolio to which such Series pertains (subject to the liabilities
of that Portfolio), and each Share of any such Portfolio shall be equal
to each other Share thereof. All Shares of each Class of Shares of any
Series having separate Classes of Shares shall represent an equal
proportionate interest in the share of such Class in the assets
belonging to the Portfolio to which such Series pertains, subject to a
like share of the liabilities of such Portfolio, adjusted for any
liabilities specifically allocable to that Class, and each Share of any
such Class shall
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be equal to each other Share thereof but the interests represented by
the Shares of the different Classes of a Series having separate Classes
of Shares shall reflect any distinctions among the several Classes of
such Series existing under this Section 6.2 or Section 7.1 hereof, or
under the Certificate of Designation for the Portfolio to which such
Series pertains. The Trustees may from time to time divide or combine
the Shares of any Series, or any Class of any Series, into a greater or
lesser number of Shares of that Series or Class without thereby
changing the proportionate beneficial interest in the assets belonging
to the Portfolio to which such Series pertains, or in any way affecting
the rights of the holders of Shares of any other Series or Class.
(k) RIGHTS OF FRACTIONAL SHARES. Any fractional Share of any
Series or Class of Shares shall carry proportionately all the rights
and obligations of a whole Share of that Series or Class, including
rights and obligations with respect to voting, receipt of dividends and
distributions, redemption of Shares, and liquidation of the Trust or of
the Portfolio to which they pertain.
(1) CONVERSION RIGHTS. Subject to compliance with the
requirements of the 1940 Act, the Trustees shall have the authority to
provide that holders of Shares of any Series shall have the right to
convert said Shares into Shares of one or more other Series in
accordance with such requirements and procedures as the Trustees may
establish.
SECTION 6.3 OWNERSHIP OF SHARES. The ownership of Shares shall be
recorded on the books of the Trust or of a Transfer Agent or similar agent for
the Trust, which books shall be maintained separately for the Shares of each
Series and Class that has been authorized. Certificates evidencing the ownership
of Shares need not be issued except as the Trustees may otherwise determine from
time to time, and the Trustees shall have power to call outstanding Share
certificates and to replace them with book entries. The Trustees may make such
rules as they consider appropriate for the issuance of Share certificates, the
use of facsimile signatures, the transfer of Shares and similar matters. The
record books of the Trust as kept by the Trust or any Transfer Agent or similar
agent, as the case may be, shall be conclusive as to who are the Shareholders
and as to the number of Shares of each Series and/or Class held from time to
time by each such Shareholder.
The holders of Shares of each Portfolio shall upon demand disclose to
the Trustees in writing such information with respect to their direct and
indirect ownership of Shares of such Portfolio as the Trustees deem necessary to
comply with the provisions of the Internal Revenue Code, or to comply with the
requirements of any other authority.
SECTION 6.4 INVESTMENTS IN THE TRUST. The Trustees may accept
investments in any Portfolio of the Trust from such Persons and on such terms
and for such consideration, not inconsistent with the provisions of the 1940
Act, as they from time to time authorize. The Trustees may authorize any
Distributor, Principal Underwriter, Custodian, Transfer Agent or other Person to
accept orders for the purchase of Shares that conform to such authorized terms
and to reject any purchase orders for Shares, whether or not conforming to such
authorized terms.
SECTION 6.5 NO PREEMPTIVE RIGHTS. No Shareholder, by virtue of holding
Shares of any Portfolio, shall have any preemptive or other right to subscribe
to any additional Shares of that Portfolio, or to any shares of any other
Portfolio, or any other Securities issued by the Trust.
SECTION 6.6 STATUS OF SHARES. Every Shareholder, by virtue of having
become a Shareholder, shall be held to have expressly assented and agreed to the
terms hereof and to have become a party hereto. Shares shall be deemed to be
personal property, giving only the rights provided herein. Ownership of Shares
shall not entitle the Shareholder to any title in or to the whole or any part of
the Trust Property or right to call for a partition or division of the same or
for an accounting, nor shall the ownership of Shares constitute the Shareholders
partners. The death of a Shareholder during the continuance of the Trust shall
not operate to
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terminate the Trust or any Portfolio, nor entitle the representative of any
deceased Shareholder to an accounting or to take any action in court or
elsewhere against the Trust or the Trustees, but only to the rights of said
decedent under this Declaration of Trust.
ARTICLE 7
SHAREHOLDERS VOTING POWERS AND MEETINGS
SECTION 7.1 VOTING POWERS. The Shareholders shall have power to vote
only (i) for the election or removal of Trustees as provided in Sections 4.1(c)
and (e) hereof; (ii) with respect to the approval or termination in accordance
with the 1940 Act of any contract with a Contracting Party as provided in
Section 5.2 hereof as to which Shareholder approval is required by the 1940 Act,
(iii) with respect to any termination or reorganization of the Trust or any
Portfolio to the extent and as provided in Sections 9.1 and 9.2 hereof; (iv)
with respect to any amendment of this Declaration of Trust to the extent and as
provided in Section 9.3 hereof, (v) to the same extent as the stockholders of a
Massachusetts business corporation as to whether or not a court action,
proceeding or claim should or should not be brought or maintained derivatively
or as a class action on behalf of the Trust or any Portfolio, or the
Shareholders of any of them (PROVIDED HOWEVER, that a Shareholder of a
particular Portfolio shall not in any event be entitled to maintain a derivative
or class action on behalf of any other Portfolio or the Shareholders thereof),
and (vi) with respect to such additional matters relating to the Trust as may be
required by the 1940 Act, this Declaration of Trust, the Bylaws or any
registration of the Trust with the Commission (or any successor agency) or any
State, or as the Trustees may consider necessary or desirable. If and to the
extent that the Trustees shall determine that such action is required by law or
by this Declaration, they shall cause each matter required or permitted to be
voted upon at a meeting or by written consent of Shareholders to be submitted to
a separate vote of the outstanding Shares of each Portfolio entitled to vote
thereon; PROVIDED, that (i) when expressly required by the 1940 Act or by other
law, actions of Shareholders shall be taken by Single Class Voting of all
outstanding Shares of each Series and Class whose holders are entitled to vote
thereon; and (ii) when the Trustees determine that any matter to be submitted to
a vote of Shareholders affects only the rights or interests of Shareholders of
one or more but not all Series, or one or more but not all Classes of a single
Series (including without limitation any distribution plan pursuant to Rule
12b-1 under the 1940 Act applicable to such Series or Class), then only the
Shareholders of the Series or Classes so affected shall be entitled to vote
thereon. Without limiting the generality of the foregoing, and except as
required by the 1940 Act or other law, the Shareholders of each Class shall have
exclusive voting rights with respect to the provisions of any distribution plan
adopted by the Trustees pursuant to Rule 12b-1 under the 1940 Act (a "Plan")
applicable to such Class.
SECTION 7.2 NUMBER OF VOTES AND MANNER OF VOTING; PROXIES On each
matter submitted to a vote of the Shareholders, each holder of Shares of any
Series shall be entitled to a number of votes equal to the number of Shares of
such Series standing in his name on the books of the Trust. There shall be no
cumulative voting in the election of Trustees. Shares may be voted in person or
by proxy. A proxy with respect to Shares held in the name of two (2) or more
Persons shall be valid if executed by any one of them unless at or prior to
exercise of the proxy the Trust receives a specific written notice to the
contrary from any one of them. A proxy purporting to be executed by or on behalf
of a Shareholder shall be deemed valid unless challenged at or prior to its
exercise and the burden of proving invalidity shall rest on the challenger.
Until Shares are issued, the Trustees may exercise all rights of Shareholders
and may take any action required by law, this Declaration of Trust or the Bylaws
to be taken by Shareholders.
SECTION 7.3 MEETINGS. Meetings of Shareholders may be called by the
Trustees from time to time for the purpose of taking action upon any matter
requiring the vote or authority of the Shareholders as herein provided, or upon
any other matter deemed by the Trustees to be necessary or desirable. Written
notice of any meeting of Shareholders shall be given or caused to be given by
the Trustees by mailing such notice at least seven (7) days before such meeting,
postage prepaid, stating the time, place and purpose of the
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meeting, to each Shareholder at the Shareholder's address as it appears on the
records of the Trust. The Trustees shall promptly call and give notice of a
meeting of Shareholders for the purpose of voting upon removal of any Trustee of
the Trust when requested to do so in writing by Shareholders holding not less
than ten percent (10%) of the Shares then outstanding. If the Trustees shall
fail to call or give notice of any meeting of Shareholders for a period of
thirty (30) days after written application by Shareholders holding at least ten
percent (10%) of the Shares then outstanding requesting that a meeting be called
for any other purpose requiring action by the Shareholders as provided herein or
in the Bylaws, then Shareholders holding at least ten percent (10%) of the
Shares then outstanding may call and give notice of such meeting, and thereupon
the meeting shall be held in the manner provided for herein in case of call
thereof by the Trustees.
SECTION 7.4 RECORD DATES. For the purpose of determining the
Shareholders who are entitled to vote or act at any meeting or any adjournment
thereof, or who are entitled to participate in any dividend or distribution, or
for the purpose of any other action, the Trustees may from time to time close
the transfer books for such period, not exceeding thirty (30) days (except at or
in connection with the termination of the Trust), as the Trustees may determine,
or without closing the transfer books the Trustees may fix a date and time not
more than sixty (60) days prior to the date of any meeting of Shareholders or
other action as the date and time of record for the determination of
Shareholders entitled to vote at such meeting or any adjournment thereof or to
be treated as Shareholders of record for purposes of such other action, and any
Shareholder who was a Shareholder at the date and time so fixed shall be
entitled to vote at such meeting or any adjournment thereof or to be treated as
a Shareholder of record for purposes of such other action, even though he has
since that date and time disposed of his Shares, and no Shareholder becoming
such after that date and time shall be so entitled to vote at such meeting or
any adjournment thereof or to be treated as a Shareholder of record for purposes
of such other action.
SECTION 7.5 QUORUM AND REQUIRED VOTE. A majority of the Shares entitled
to vote on a matter shall be a quorum for the transaction of business with
respect to such matter at a Shareholders' meeting, but any lesser number shall
be sufficient for adjournments. Any adjourned session or sessions may be held
within a reasonable time after the date set for the original meeting without the
necessity of further notice. A Majority Shareholder Vote at a meeting of which a
quorum is present shall decide any question, except when a different vote is
required or permitted by any provision of the 1940 Act or other applicable law
or by this Declaration of Trust or the By-Laws, or when the Trustees shall in
their discretion require a larger vote or the vote of a majority or larger
fraction of the Shares of one or more particular Series or Class.
SECTION 7.6 ACTION BY WRITTEN CONSENT. Subject to the provisions of the
1940 Act and other applicable law, any action taken by Shareholders may be taken
without a meeting if a majority of Shareholders entitled to vote on the matter
(or such larger proportion thereof or of the Shares of any particular Series as
shall be required by the 1940 Act or by any express provision of this
Declaration of Trust or the Bylaws or as shall be permitted by the Trustees)
consent to the action in writing and if the writings in which such consent is
given are filed with the records of the meetings of Shareholders, to the same
extent and for the same period as proxies given in connection with a
Shareholders' meeting. Such consent shall be treated for all purposes as a vote
taken at a meeting of Shareholders.
SECTION 7.7 INSPECTION OF RECORDS. The records of the Trust shall be
open to inspection by Shareholders to the same extent as is permitted
stockholders of a Massachusetts business corporation under the Massachusetts
Business Corporation Law.
SECTION 7.8 ADDITIONAL PROVISIONS. The Bylaws may include further
provisions for Shareholders' votes and meetings and related matters not
inconsistent with the provisions hereof.
<PAGE>
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ARTICLE 8
LIMITATION OF LIABILITY; INDEMNIFICATION
SECTION 8.1 TRUSTEES, SHAREHOLDERS, ETC. NOT PERSONALLY LIABLE; NOTICE.
The Trustees and officers of the Trust, in incurring any debts, liabilities or
obligations, or in taking or omitting any other actions for or in connection
with the Trust, are or shall be deemed to be acting as Trustees or officers of
the Trust and not in their own capacities. No Shareholder shall be subject to
any personal liability whatsoever in tort, contract or otherwise to any other
Person or Persons in connection with the assets or the affairs of the Trust or
of any Portfolio, and subject to Section 8.4 hereof, no Trustee, officer,
employee or agent of the Trust shall be subject to any personal liability
whatsoever in tort, contract, or otherwise, to any other Person or Persons in
connection with the assets or affairs of the Trust or of any Portfolio, save
only that arising from his own willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of his office or the
discharge of his functions. The Trust (or if the matter relates only to a
particular Portfolio, that Portfolio) shall be solely liable for any and all
debts, claims, demands, judgments, decrees, liabilities or obligations of any
and every kind, against or with respect to the Trust or such Portfolio in tort,
contract or otherwise in connection with the assets or the affairs of the Trust
or such Portfolio, and all Persons dealing with the Trust or any Portfolio shall
be deemed to have agreed that resort shall be had solely to the Trust Property
of the Trust or the Portfolio Assets of such Portfolio, as the case may be, for
the payment or performance thereof.
The Trustees shall use their best efforts to ensure that every note,
bond, contract, instrument, certificate or undertaking made or issued by the
Trustees or by any officers or officer shall give notice that this Declaration
of Trust is on file with the Secretary of The Commonwealth of Massachusetts and
shall recite to the effect that the same was executed or made by or on behalf of
the Trust or by them as Trustees or Trustee or as officers or officer, and not
individually, and that the obligations of such instrument are not binding upon
any of them or the Shareholders individually but are binding only upon the
assets and property of the Trust, or the particular Portfolio in question, as
the case may be, but the omission thereof shall not operate to bind any Trustees
or Trustee or officers or officer or Shareholders or Shareholder individually,
or to subject the Portfolio Assets of any Portfolio to the obligations of any
other Portfolio.
SECTION 8.2 TRUSTEES' GOOD FAITH ACTION: EXPERT ADVICE; NO BOND OR
SURETY. The exercise by the Trustees of their powers and discretion hereunder
shall be binding upon everyone interested. Subject to Section 8.4 hereof, a
Trustee shall be liable for his own willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of the
office of Trustee, and for nothing else, and shall not be liable for errors of
judgment or mistakes of fact or law. Subject to the foregoing, (i) the Trustees
shall not be responsible or liable in any event for any neglect or wrongdoing of
any officer, agent, employee, consultant, Investment Adviser, Administrator,
Distributor or Principal Underwriter, Custodian or Transfer Agent, Dividend
Disbursing Agent, Shareholder Servicing Agent or Accounting Agent of the Trust,
nor shall any Trustee be responsible for the act or omission of any other
Trustee, (ii) the Trustees may take advice of counsel or other experts with
respect to the meaning and operation of this Declaration of Trust and their
duties as Trustees, and shall be under no liability for any act or omission m
accordance with such advice or for failing to follow such advice; and (iii) in
discharging their duties, the Trustees, when acting in good faith, shall be
entitled to rely upon the books of account of the Trust and upon written reports
made to the Trustees by any officer appointed by them, any independent public
accountant, and (with respect to the subject matter of the contract involved)
any officer, partner or responsible employee of a Contracting Party appointed by
the Trustees pursuant to Section 5.2 hereof. The Trustees as such shall not be
required to give any bond or surety or any other security for the performance of
their duties.
SECTION 8.3 INDEMNIFICATION OF SHAREHOLDERS. If any Shareholder (or
former Shareholder) of the Trust shall be charged or held to be personally
liable for any obligation or liability of the Trust solely by
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reason of being or having been a Shareholder and not because of such
Shareholder's acts or omissions or for some other reason, the Trust (upon proper
and timely request by the Shareholder) shall assume the defense against such
charge and satisfy any judgment thereon, and the Shareholder or former
Shareholder (or the heirs, executors, administrators or other legal
representatives thereof, or in the case of a corporation or other entity, its
corporate or other general successor) shall be entitled (but solely out of the
assets of the Portfolio of which such Shareholder or former Shareholder is or
was the holder of Shares) to be held harmless from and indemnified against all
loss and expense arising from such liability.
SECTION 8.4 INDEMNIFICATION OF TRUSTEES, OFFICERS. ETC. Subject to the
limitations set forth hereinafter in this Section 8.4, the Trust shall indemnify
(from the assets of the Portfolio or Portfolios to which the conduct in question
relates) each of its Trustees and officers (including Persons who serve at the
Trust's request as directors, officers or trustees of another organization in
which the Trust has any interest as a shareholder, creditor or otherwise
[hereinafter, together with such Person's heirs, executors, administrators or
personal representative, referred to as a "COVERED PERSON")) against all
liabilities, including but not limited to amounts paid in satisfaction of
judgments, in compromise or as fines and penalties, and expenses, including
reasonable accountants' and counsel fees, incurred by any Covered Person in
connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court or administrative or
legislative body, in which such Covered Person may be or may have been involved
as a party or otherwise or with which such Covered Person may be or may have
been threatened, while in office or thereafter, by reason of being or having
been such a Trustee or officer, director or trustee, except with respect to any
matter as to which it has been determined that such Covered Person (i) did not
act in good faith in the reasonable belief that such Covered Person's action was
in or not opposed to the best interests of the Trust or (ii) had acted with
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of such Covered Person's office (either and both
of the conduct described in clauses (i) and (ii) of this sentence being referred
to hereafter as "DISABLING CONDUCT") A determination that the Covered Person is
entitled to indemnification may be made by (i) a final decision on the merits by
a court or other body before whom the proceeding was brought that the Covered
Person to be indemnified was not liable by reason of Disabling Conduct, (ii)
dismissal of a court action or an administrative proceeding against a Covered
Person for insufficiency of evidence of Disabling Conduct, or (iii) a reasonable
determination, based upon a review of the facts, that the indemnitee was not
liable by reason of Disabling Conduct by (a) a vote of a majority of a quorum of
Trustees who are neither "interested persons" of the Trust as defined in Section
2(a)( 19) of the 1940 Act nor parties to the proceeding, or (b) an independent
legal counsel in a written opinion. Expenses including accountants' and counsel
fees so incurred by any such Covered Person (but excluding amounts paid in
satisfaction of judgments, in compromise or as fines or penalties), may be paid
from time to time by the Portfolio or Portfolios to which the conduct in
question related in advance of the final disposition of any such action, suit or
proceeding, PROVIDED, that the Covered Person shall have undertaken to repay the
amounts so paid to such Portfolio or Portfolios if it is ultimately determined
that indemnification of such expenses is not authorized under this Article 8 and
(i) the Covered Person shall have provided security for such undertaking, (ii)
the Trust shall be insured against losses arising by reason of any lawful
advances, or (iii) a majority of a quorum of the disinterested Trustees, or an
independent legal counsel in a written opinion, shall have determined, based on
a review of readily available facts (as opposed to a full trial-type inquiry),
that there is reason to believe that the Covered Person ultimately will be found
entitled to indemnification.
SECTION 8.5 COMPROMISE PAYMENT. As to any matter disposed of by a
compromise payment by any such Covered Person referred to in Section 8.4 hereof.
pursuant to a consent decree or otherwise, no such indemnification either for
said payment or for any other expenses shall be provided unless such
indemnification shall be approved (i) by a majority of a quorum of the
disinterested Trustees or (ii) by an independent legal counsel in a written
opinion. Approval by the Trustees pursuant to clause (i) or by independent legal
counsel pursuant to clause (ii) shall not prevent the recovery from any Covered
Person of any amount paid to such Covered Person in accordance with either of
such clauses as indemnification if such Covered Person is subsequently
adjudicated by a court of competent jurisdiction not to have acted in good faith
in the rea-
<PAGE>
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sonable belief that such Covered Person's action was in or not opposed to the
best interests of the Trust or to have been liable to the Trust or its
Shareholders by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of such Covered
Person's office.
SECTION 8.6 INDEMNIFICATION NOT EXCLUSIVE, ETC. The right of
indemnification provided by this Article 8 shall not be exclusive of or affect
any other rights to which any such Covered Person may be entitled. As used in
this Article 8, a 'DISINTERESTED" Person is one against whom none of the
actions, suits or other proceedings in question, and no other action, suit or
other proceeding on the same or similar grounds is then or has been pending or
threatened. Nothing contained in this Article 8 shall affect any rights to
indemnification to which personnel of the Trust, other than Trustees and
officers, and other Persons may be entitled by contract or otherwise under law,
nor the power of the Trust to purchase and maintain liability insurance on
behalf of any such Person.
SECTION 8.7 LIABILITY OF THIRD PERSONS DEALING WITH TRUSTEES. No person
dealing with the Trustees shall be bound to make any inquiry concerning the
validity of any transaction made or to be made by the Trustees or to see to the
application of any payments made or property transferred to the Trust or upon
its order.
ARTICLE 9
DURATION; REORGANIZATION; AMENDMENTS
SECTION 9.1 DURATION AND TERMINATION OF TRUST. Unless terminated as
provided herein, the Trust shall continue without limitation of time and,
without limiting the generality of the foregoing, no change, alteration or
modification with respect to any Portfolio or Series of Shares shall operate to
terminate the Trust. The Trust may be terminated at any time by a Majority of
the Trustees, subject to the favorable vote of the holders of not less than a
majority of the Shares outstanding and entitled to vote of each Portfolio of the
Trust, or by an instrument or instruments in writing without a meeting,
consented to by the holders of not less than a majority of such Shares, or by
such greater or different vote of Shareholders of any Series as may be
established by the Certificate of Designation by which such Series was
authorized. Upon termination, after paying or otherwise providing for all
charges, taxes, expenses and liabilities, whether due or accrued or anticipated
as may be determined by the Trustees, the Trust shall in accordance with such
procedures as the Trustees consider appropriate reduce the remaining assets to
distributable form in cash, Securities or other property, or any combination
thereof, and distribute the proceeds to the Shareholders, in conformity with the
provisions of Section 6.2(d) hereof.
SECTION 9.2 REORGANIZATION. The Trustees may sell, convey and transfer
all or substantially all of the assets of the Trust, or the assets belonging to
any one or more Portfolios, to another trust, partnership, association or
corporation organized under the laws of any state of the United States, or may
transfer such assets to another Portfolio of the Trust, in exchange for cash,
Shares or other Securities (including, in the case of a transfer to another
Portfolio of the Trust Shares of such other Portfolio), or to the extent
permitted by law then in effect may merge or consolidate the Trust or any
Portfolio with any other Trust or any corporation, partnership, or association
organized under the laws of any state of the United States, all upon such terms
and conditions and for such consideration when and as authorized by vote or
written consent of a Majority of the Trustees and approved by the affirmative
vote of the holders of not less than a majority of the Shares outstanding and
entitled to vote of each Portfolio whose assets are affected by such
transaction, or by an instrument or instruments in writing without a meeting,
consented to by the holders of not less than a majority of such Shares, and/or
by such other vote of any Series as may be established by the Certificate of
Designation with respect to such Series. Following such transfer, the Trustees
shall distribute the cash, Shares or other Securities or other consideration
received in such transaction (giving due effect to the assets belonging to and
indebtedness of, and any other differences among, the various Portfolios of
which the assets have
<PAGE>
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so been transferred) among the Shareholders of the Portfolio of which the assets
have been so transferred; and if all of the assets of the Trust have been so
transferred, the Trust shall be terminated Nothing in this Section 9.2 shall be
construed as requiring approval of Shareholders for the Trustees to organize or
assist in organizing one or more corporations, trusts, partnerships,
associations or other organizations, and to sell, convey or transfer less than
substantially all of the Trust Property or the assets belonging to any Portfolio
to such organizations or entities.
SECTION 9.3 AMENDMENTS; ETC. All rights granted to the Shareholders
under this Declaration of Trust are granted subject to the reservation of the
right to amend this Declaration of Trust as herein provided, except that no
amendment shall repeal the limitations on personal liability of any Shareholder
or Trustee or the prohibition of assessment upon the Shareholders (otherwise
than as permitted under Section 6.2(h)) without the express consent of each
Shareholder or Trustee involved. Subject to the foregoing, the provisions of
this Declaration of Trust (whether or not related to the rights of Shareholders)
may be amended at any time, so long as such amendment does not adversely affect
the rights of any Shareholder with respect to which such amendment is or
purports to be applicable and so long as such amendment is not in contravention
of applicable law, including the 1940 Act, by an instrument in writing signed by
a Majority of the Trustees (or by an officer of the Trust pursuant to the vote
of a Majority of the Trustees). Any amendment to this Declaration of Trust that
adversely affects the rights of all Shareholders may be adopted at any time by
an instrument in writing signed by a Majority of the Trustees (or by an officer
of the Trust pursuant to a vote of a Majority of the Trustees) when authorized
to do so by the vote in accordance with Section 7.1 hereof of Shareholders
holding a majority of all the Shares outstanding and entitled to vote, without
regard to Series, or if said amendment adversely affects the rights of the
Shareholders of less than all of the Series, or of less than all of the Classes
of Shares of any Series, by the vote of the holders of a majority of all the
Shares entitled to vote of each Series or Class so affected. Subject to the
foregoing, any such amendment shall be effective when the instrument containing
the terms thereof and a certificate (which may be a part of such instrument) to
the effect that such amendment has been duly adopted, and setting forth the
circumstances thereof, shall have been executed and acknowledged by a Trustee or
officer of the Trust. Such certificate shall be filed as provided in Section 9.4
hereof, but such filing shall not be a prerequisite to the effectiveness of such
amendment.
SECTION 9.4 FILING OF COPIES OF DECLARATION AND AMENDMENTS. The
original or a copy of this Declaration and of each amendment hereto (including
each Certificate of Designation and Certificate of Termination), shall be kept
at the office of the Trust where it may be inspected by any Shareholder, and one
copy of each such instrument shall be filed with the Secretary of The
Commonwealth of Massachusetts, as well as with any other governmental office
where such filing may from time to time be required by the laws of
Massachusetts, but such filing shall not be a prerequisite to the effectiveness
of this Declaration or any such amendment. A restated Declaration, integrating
into a single instrument all of the provisions of this Declaration which are
then in effect and operative, may be executed from time to time by a Majority of
the Trustees and shall, upon filing with the Secretary of The Commonwealth of
Massachusetts, be conclusive evidence of all amendments contained therein and
may thereafter be referred to in lieu of the original Declaration and the
various amendments thereto.
ARTICLE 10
MISCELLANEOUS
SECTION 10.1 GOVERNING LAW. This Declaration of Trust is executed and
delivered in The Commonwealth of Massachusetts and with reference to the laws
thereof, and the rights of all parties and the construction and effect of every
provision hereof shall be subject to and construed according to the laws of said
Commonwealth.
<PAGE>
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SECTION 10.2 COUNTERPARTS. This Declaration of Trust and any amendment
thereto may be simultaneously executed in several counterparts, each of which so
executed shall be deemed to be an original, and such counterparts, together,
shall constitute but one and the same instrument, which shall be sufficiently
evidenced by any such original counterpart.
SECTION 10.3 RELIANCE BY THIRD PARTIES. Any certificate executed by an
individual who, according to the records in the office of the Secretary of The
Commonwealth of Massachusetts appears to be a Trustee hereunder, certifying to:
(a) the number or identity of Trustees or Shareholders, (b) the due
authorization of the execution of any instrument or writing, (c) the form of any
vote passed as a meeting of Trustees or Shareholders, (d) the fact that the
number of Trustees or Shareholders present at any meeting or executing any
written instrument satisfies the requirements of this Declaration of Trust, (e)
the form of any Bylaw adopted, or the identity of any officers elected, by the
Trustees, or (I) the existence or non-existence of any fact or facts which in
any manner relate to the affairs of the Trust, shall be conclusive evidence as
to the matters so certified in favor of any Person dealing with the Trustees, or
any of them, and the successors of such Person.
SECTION 10.4 REFERENCES; HEADINGS. The masculine gender shall include
the feminine and neuter genders. Headings are placed herein for convenience of
reference only and shall not be taken as a part of this Declaration or control
or affect the meaning, construction or effect hereof.
SECTION 10.5 USE OF THE NAME "SPECTRA". Fred Alger Management Co., Inc.
("Alger") has consented to the use by the Trust of the identifying name
"Spectra," which is a property right of Alger. The Trust will only use the name
'Spectra" as a component of its name and for no other purpose, and will not
purport to grant to any third party the right to use the name "Spectra" for any
purpose. Alger or any corporate affiliate of Alger may use or grant to others
the right to use the name "Spectra," as all or a portion of a corporate or
business name or for any commercial purpose, including a grant of such right to
any other investment company. At the request of Alger, the Trust will take such
action as may be required to provide its consent to the use of such name by
Alger, or any corporate affiliate of Alger, or by any Person to whom Alger or an
affiliate of Alger shall have granted the right to the use of the name
"Spectra." Upon the termination of any investment advisory or management
agreement into which Alger and the Trust may enter, the Trust shall, upon
request by Alger, cease to use the name "Spectra" as a component of its name,
and shall not use such name or initials as a part of its name or for any other
commercial purpose. and shall cause its officers and Trustees to take any and
all actions which Alger may request to effect the foregoing and to reconvey to
Alger or such corporate affiliate any and all rights to such name.
IN WITNESS WHEREOF, the undersigned, constituting a Majority of the
Trustees, have hereunto set their hands and the seal of the Trust, all as of the
18 day of February, 1997.
/s/ DAVID D. ALGER
- ---------------------------------- ---------------------------
FRED M. ALGER DAVID D. ALGER
/s/ NATHAN E. SAINT-AMAND /s/ STEPHEN E. O'NEIL
- ---------------------------------- ---------------------------
NATHAN E. SAINT-AMAND STEPHEN E. O'NEIL
/s/ ARTHUR M. DUBOW /s/ JOHN T. SARGENT
- ---------------------------------- ---------------------------
ARTHUR M. DUBOW JOHN T. SARGENT
<PAGE>
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ACKNOWLEDGMENT
STATE OF New York )
:ss.
COUNTY OF New York)
2/18/1997
Then personally appeared the above-named Trustees and acknowledged the
foregoing instrument to be his/her free act and deed.
Before me,
/s/ Dolores M. Costa
---------------------------
Notary Public
My commission expires 8/15/98
[NOTARIAL SEAL] DOLORES M. COSTA
NOTARY PUBLIC, State of New York
No. 31-4941104
Qualified in New York County
Commission Expires 8/15/98
SPECTRA FUND
BYLAWS
These Articles are the Bylaws of Spectra Fund, a trust with
transferable shares established under the laws of The Commonwealth of
Massachusetts (the "Trust"), pursuant to an Agreement and Declaration of Trust
of the Trust (the "Declaration") made the fifth day of July, 1995, and filed in
the office of the Secretary of the Commonwealth. These Bylaws have been adopted
by the Trustees pursuant to the authority granted by Section 3.1 of the
Declaration.
All words and terms capitalized in these Bylaws, unless otherwise
defined herein, shall have the same meanings as they have in the Declaration.
ARTICLE 1
SHAREHOLDERS AND SHAREHOLDERS' MEETINGS
SECTION 1.1 MEETINGS. A meeting of the Shareholders of the Trust shall
be held whenever called by the Trustees and whenever election of a Trustee or
Trustees by Shareholders is required by the provisions of the 1940 A Meetings of
Shareholders shall also be called by the Trustees when requested in writing by
Shareholders holding at least ten percent (10%) of the Shares then outstanding
for the purpose of voting upon removal of any Trustee, or if the Trustees shall
fail to call or give notice of any such in of Shareholders for a period of
thirty (30) days after such application, then Shareholders holding at least ten
percent (10%) of the Shares then outstanding may call and give notice of such
meeting. Notice of Shareholders' meetings shall be given as provided in the
Declaration.
SECTION 1.2 PRESIDING OFFICER; SECRETARY. The President shall preside
at each Shareholders' meeting as chairman of the meeting, or in the absence of
the President, the Trustees present at the meeting shall elect one of their
number as chairman of the meeting. Unless otherwise provided for by the
Trustees, the Secretary of the Trust shall be the secretary of all meetings of
Shareholders and shall record the minutes thereof.
SECTION 1.3 AUTHORITY OF CHAIRMAN OF MEETING TO INTERPRET DECLARATION
AND BYLAWS. At any Shareholders' meeting the chairman of the meeting shall be
empowered to determine the construction or interpretation of the Declaration of
these Bylaws, or any part thereof or hereof, and his ruling shall be final.
SECTION 1.4 VOTING: QUORUM. At each meeting of Shareholders except as
otherwise provided by the Declaration, every holder of record of Shares entitled
to vote shall be entitled to a number of votes equal to the number of Shares
standing in his name on the Share register of the Trust. Shareholders may vote
by proxy and the form of any such proxy may be prescribed from time to time by
the Trustees. A quorum shall exist if the holders of a majority of the
outstanding Shares of the Trust entitled to vote without regard to Series are
present in person or by proxy, but any lesser number shall be sufficient for
adjournments. At all meetings of the Shareholders, votes shall be taken by
ballot for all matters which may be binding upon the Trustees pursuant to
Section 7.1 of the Dec1aration. On other matters, votes of Shareholders need not
be taken by ballot unless otherwise provided for by the Declaration or by vote
of the Trustees, or as required by the 1940 Act, but the chairman of the meeting
may in his discretion authorize any matter to be voted upon by ballot.
<PAGE>
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SECTION 1.5 INSPECTORS. At any meeting of Shareholders, the chairman of
the meeting may appoint one or more Inspectors of Election or Balloting to
supervise the voting at such meeting or any adjournment thereof. If Inspectors
are not so appointed, the chairman of the meeting may, and on the request of any
Shareholder present or represented and entitled to vote shall, appoint one or
more Inspectors for such purpose. Each Inspector, before entering upon the
discharge of his duties, shall take and sign an oath faithfully to execute the
duties of Inspector of Election or Balloting, as the ease may be, at such
meeting with strict impartiality and according to the best of his ability. if
appointed, inspectors shall take charge of the polls and, when the vote is
completed, shall make a certificate of the result of the vote taken and of such
other facts as may be required by law.
SECTION 1.6 SHAREHOLDERS' ACTION IN WRITING. Nothing in this Article 1
shall limit the power of the Shareholders to take any action by means of written
instruments without a meeting, as permitted by Section 7.6 of the Declaration.
ARTICLE 2
TRUSTEES AND TRUSTEES' MEETINGS
SECTION 2.1 NUMBER OF TRUSTEES. There shall initially be one (1)
Trustee, and the number of Trustees shall thereafter be such number as from time
to time shall be fixed by a vote adopted by a Majority of the Trustees.
SECTION 2.2 REGULAR MEETINGS OF TRUSTEES. Regular meetings of the
Trustees may be held with without call or notice at such places and at such
times as the Trustees may from time to time determine; provided, that notice of
such determination, and of the time, place and purposes of the first regular
meeting thereafter, shall be given to each absent Trustee in accordance with
Section 2.4 hereof.
SECTION 2.3 SPECIAL MEETINGS OF TRUSTEES. Special meetings of the
Trustees may be held at any time and at any place when called by the President
or the Treasurer or by two (2) or more Trustees, or if there shall be fewer than
three (3) Trustees, by any Trustee; provided, that notice of the time, place and
purposes thereof is given to each Trustee in accordance with Section 2.4 hereof
by the Secretary or an Assistant Secretary or by the officer or the Trustees
calling the meeting.
SECTION 2.4 NOTICE OF MEETINGS. Notice of any regular or special
meeting of the Trustees shall be sufficient if given in writing to each Trustee,
and if sent by mail at least five (5) days, or by telegram, Federal Express or
other similar delivery service at least twenty-four (24) hours before the
meeting, addressed to his usual or last known business or residence address, or
if delivered to him in person least twenty-four (24) hours before the meeting.
Notice of a special meeting need not be given to any Trustee who was present at
an earlier meeting, not more than thirty-one (31) days prior to the subsequent
meeting, at which the subsequent meeting was called. Notice of a meeting may be
waived by any Trustee by written waiver of notice, executed by him before or
after the meeting, and such waiver shall be filed with the records of the
meeting. Attendance by a Trustee at a meeting shall constitute a waiver of
notice, except where a Trustee attends a meeting for the purpose of protesting
prior thereto or at its commencement the lack of notice.
SECTION 2.5 QUORUM; PRESIDING OFFICER. At any meeting of the Trustees,
a Majority of the Trustees shall constitute a quorum. Any meeting may be
adjourned from time to time by a majority of the votes cast upon the question,
whether or not a quorum is present, and the meeting may be held as adjourned
without further notice. Unless the Trustees shall otherwise elect, generally or
in a particular case, the President shall preside at each meeting of the
Trustees as chairman of the meeting.
<PAGE>
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SECTION 2.6 PARTICIPATION BY TELEPHONE. One or more of the Trustees may
participate in a meeting thereof or of any Committee of the Trustees by means of
a conference telephone or similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time. Participation
by such means shall constitute presence in person at a meeting.
SECTION 2.7 LOCATION OF MEETINGS. Trustees' meetings may be held at any
place within or without Massachusetts.
SECTION 2.8 VOTES. Voting at Trustees' may be conducted orally, by show
of hands or, if requested by any Trustee, by written ball The results of all
voting shall be recorded by the Secretary in the minute book.
SECTION 2.9 RULINGS OF CHAIRMAN. All other rules of conduct adopted and
used at any Trustees' meeting shall be determined by the chairman of such
meeting, whose riding on all procedural matters shall be final.
SECTION 2.10 TRUSTEES' ACTION IN WRITING. Nothing in this Article 2
shall limit the power of the Trustees to take action by means of a written
instrument without a meeting, as provided in Section 4.2 of the Declaration.
SECTION 2.11 RESIGNATIONS. Any Trustee may resign at anytime by written
instrument signed by him and delivered to the President or the Secretary or to a
meeting of the Trustees. Such resignation shall be effective upon receipt unless
specified to be effective at some other time.
ARTICLE 3
OFFICERS
SECTION 3.1 OFFICERS OF THE TRUST. The officers of the Trust shall
consist of a President, a Treasurer and a Secretary, and may include one or more
Vice Presidents, Assistant Treasurers and Assistant Secretaries, and such other
officers as the Trustees may designate. Any person may hold more than one
office. Except for the President, no officer need be a Trustee.
SECTION 3.2 TIME AND TERMS OF ELECTION. The President, the Treasurer
and the Secretary shall be elected by the Trustees at their first meeting and
thereafter at the annual meeting of the Trustees, as provided in Section 4.2 of
the Declaration. Such officers shall hold office until the next annual meeting
of the Trustees and until their successors shall have been duly elected and
qualified, and may be removed at any meeting by the affirmative vote of a
Majority of the Trustees. All other officers of the Trust may be elected or
appointed at any meeting of the Trustees. Such officers shall hold office for
any term, or indefinitely, as determined by the Trustees, and shall be subject
to removal, with or without cause, at anytime by the Trustees.
SECTION 3.3 RESIGNATION AND REMOVAL. Any officer may resign at anytime
by giving written notice to the Trustees. Such resignation shall take effect at
the time. specified therein, and, unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective. if
the office of any officer or agent becomes vacant by reason of death,
resignation, retirements, disqualification, removal from office or otherwise,
the Trustees may chose a successor, who shall hold office for the unexpired term
in respect of which such vacancy occurred. Except to the extent expressly
provided in a written agreement with the Trust, no officer resigning or removed
shall have any right to any compensation for any period following such
resignation or removal, or any right to damage on account of such removal.
<PAGE>
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SECTION 3.4 FIDELITY BOND. The Trustees may, in their discretion,
direct any officer appointed by them to furnish at the expense of the Trust a
fidelity bond approved by the Trustees, in such amount as the Trustees may
prescribe.
SECTION 3.5 PRESIDENT. Unless the Trustees otherwise provide, the
President shall preside at all meetings of the Shareholders and of the Trusts.
The President, subject to the supervision of the Trustees, shall have general
charge and supervision of the business, affairs and personnel of the Trust and
such other powers and duties as the Trustees may prescribe.
SECTION 3.6 VICE PRESIDENTS. In the absence or disability of the
President, the Vice President or, if there shall be more than one, the Vice
Presidents in the order of their seniority or as otherwise designated by the
Trustees, shall exercise all of the powers and duties of the President. The Vice
Presidents shall have the power to execute bonds, notes, mortgages and other
contracts, agreements and instruments in the name of the Trust, and shall do and
perform such other duties as the Trustees or the President shall direct.
SECTION 3.7 TREASURER AND ASSISTANT TREASURERS. The Treasurer shall be
the chief financial officer of the Trust, and shall have the custody of the
Trust's funds and Securities, and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Trust and shall deposit all
moneys, and other valuable effects in the name and to the credit of the Trust,
in such depositories as may be designated by the Trustees, taking proper
vouchers for such disbursements, shall have such other duties and powers as may
be prescribed from time to time by the Trustees, and shall render to the
Trustees, whenever they may require it, an account of all his transactions as
Treasurer and of the financial condition of the Trust. If no Controller is
elected, the Treasurer shall also have the duties and powers of the Controller,
as provided in these Bylaws. Any Assistant Treasurer shall have such duties and
powers as shall be prescribed from time to time by the Trustees or the
Treasurer, and shall be responsible to and shall report to the Treasurer. In the
absence or disability of the Treasurer, the Assistant Treasurer or, if there
shall be more than one, the Assistant Treasurers in the order of their seniority
or as otherwise designated by the Trustees shall have the powers and duties of
the Treasurer.
SECTION 3.8 CONTROLLER AND ASSISTANT CONTROLLERS. If a Controller is
elected, he shall be the chief accounting officer of the Trust and shall be in
charge of its books of account and accounting records and of its accounting
procedures, and shall have such duties and powers as are commonly incident to
the office of a controller, and such other duties and powers as may be
prescribed from time to time by the Trustees. The Controller shall be
responsible to and shall report to the Trustees, but in the ordinary conduct of
the Trust's business, shall be under the supervision of the Treasurer. Any
Assistant Controller shall have such duties and powers as shall be prescribed
from time to time by the Trustees or the Controller, and shall be responsible to
and shall report to the Controller. In the absence or disability of the
Controller, the Assistant Controller or, if there shall be more than one, the
Assistant Controllers in the order of their seniority or as otherwise designated
by the Trustees shall have the powers and duties of the Controller.
SECTION 3.9 SECRETARY AND ASSISTANT SECRETARIES. The Secretary shall,
if and to the extent requested by the Trustees, attend all meetings of the
Trustees, any Committee of the Trustees and/or the Shareholders and record all
votes and the minutes of proceedings in a book to be kept for that purpose,
shall give or cause to be given notice of all meetings of the Trustees, any
Committee of the Trustees, and of the Shareholders and shall or in such other
duties as may be prescribed by the Trustees. The Secretary, or in his absence
any Assistant Secretary, shall affix the Trust's seal to any instrument
requiring it, and when so affixed, it shall be attested by the signature of the
Secretary or an Assistant Secretary. The Secretary shall be the custodian of the
Share records and all other books, records and papers of the Trust (other than
financial) and shall see that all books, reports, statements, certificates and
other documents and records required by law are properly kept and filed. In the
absence or disability of the Secretary, the Assistant
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Secretary or, if there shall be more than one, the Assistant Secretaries in the
order of their seniority or as otherwise designated by the Trustees shall have
the powers and duties of the Secretary.
SECTION 3.10 SUBSTITUTIONS. In case of the absence or disability of any
officer of the Trust, or for any other reason that the Trustees may deem
sufficient, the Trustees may delegate for the time being the powers or duties,
or any of them, of such officer to any other officer, or to any Trustee.
SECTION 3.11 EXECUTION OF DEEDS, ETC. Except as the Trustees may
generally or in particular cases otherwise authorize or direct all deeds,
leases, transfers contracts, proposals, bonds, notes, checks, drafts and other
obligations made, accepted or endorsed by the Trust shall be signed or endorsed
on behalf of the Trust by the President, one of the Vice Presidents or the
Treasurer.
SECTION 3.12 POWER TO VOTE SECURITIES. Unless otherwise ordered by the
Trustees, the Treasurer and the Secretary each shall have full power and
authority on behalf of the Trust to give proxies for and/or to attend and to act
and to vote at any meeting of stockholders of any corporation in which the Trust
may hold stock, and at any such meeting the Treasurer or the Secretary, as the
case may be, his proxy shall possess and may exercise any and all rights and
powers incident to the ownership of such stock which, as the owner thereof, the
Trust might have possessed and exercised if The Trustees, by resolution from
time to time, or, in the absence thereof, either the Treasurer or the Secretary,
may confer like powers upon any other person or persons as attorneys and proxies
of the Trust.
ARTICLE 4
COMMITTEES
SECTION 4.1 POWER OF TRUSTEES TO DESIGNATE COMMITTEES. The Trustees, by
vote of a Majority of the Trustees, may elect from their number an Executive
Committee and any other committees and may delegate thereto some or all of their
powers except these which by law, by the Declaration or by these Bylaws may not
be delegated; provided, that the Executive Committee shall not be empowered to
elect the President, the Treasurer or the Secretary, to amend the Bylaws, to
exercise the powers of the Trustees under this Section 4.1 or under Section 4.3
hereof, or to perform any act for which the action of a Majority of the Trustees
is required by law, by the Declaration or by these Bylaws. The members of any
such Committee shall serve at the pleasure of the Trustees.
SECTION 4.2 RULES FOR CONDUCT OF COMMITTEE AFFAIRS. Except as otherwise
provided by the Trustees, each Committee elected or appointed pursuant to this
Article 4 may adopt such standing rules and regulations for the conduct of its
affairs as it may deem desirable, subject to review and approval of such rules
and regulations by the Trustees at the next succeeding meeting of the Trustees,
but in the absence of any such action or any contrary provisions by the
Trustees, the business of each committee shall be conduct, so far as
practicable, in the same manner as provided herein and in the Declaration for
the Trustees.
SECTION 4.3 TRUSTEES MAY ALTER ABOLISH, ETC., COMMITTEES. The Trustees
may at anytime alter or abolish any Committee, change the membership of any
Committee, or revoke, rescind or modify any action of any Committee or the
authority of any Committee with respect to any matter or class of matters;
provided, that no such action shall impair the rights of any third parties.
SECTION 4.4 MINUTES: REVIEW BY TRUSTEES. Any Committee to which the
Trustees delegate any of their powers or duties shall records of its meetings
and shall report its actions to the Trustees.
<PAGE>
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ARTICLE 5
SEAL
The seal of the Trust shall consist of a flat-faced circular die with the word
"Massachusetts" ,together with the name of the Trust, the words "Trust Seal",
and the year of its organization cut or engraved thereon, but, unless otherwise
required by the Trustees, the seal shall not be necessary to be placed on, and
its absence shall not impair the validity of, any document, instrument or other
paper executed and delivered by or on behalf of the Trust.
ARTICLE 6
SHARES
SECTION 6.1 ISSUANCE OF SHARES. The Trustees may issue Shares of any or
all Series either in certificated or uncertificated form, they may issue
certificates to the holders of Shares of a Series which was originally issued in
uncertificated form, and if they have issued Shares of any Series in
certificated form, they may at anytime discontinue the issuance of Share
certificates for such Series and may, by written notice to such Shareholders of
such Series require the surrender of their Share certificates to the Trust for
cancellation, which surrender and cancellation shall not affect the ownership of
Shares for such Series.
SECTION 6.2 UNCERTIFICATED SHARES. For any Series of Shares for which
the Trustees issue Shares without certificates, the Trust or the Transfer Agent
may either issue receipts therefor or may keep accounts upon the books of the
Trust for the record holders of such Shares, who shall in either ease be deemed,
for all purposes hereunder, to be the holders of such Shares as if they had
received certificates therefor and shall be held to have expressly assented and
agreed to the terms hereof and of the Declaration.
SECTION 6.3 SHARE CERTIFICATES. For any Series of Shares for which the
Trustees shall issue Share certificates, each Shareholder of such Series shall
be entitled to a certificate stating the number of Shares owned by him in such
form as shall be prescribed from time to time by the Trustees. Such certificate
shall be signed by the President or a Vice-President, and by the Treasurer or an
Assistant Treasurer or the Secretary or an Assistant Secretary of the Trust.
Such signatures may be facsimiles if the certificate is countersigned by a
Transfer Agent, or by a Registrar, other than a Trustee, officer or employee of
the Trust. In case any officer who has signed or whose facsimile signature has
been placed on such certificate shall cease to be such officer before such
certificate is issued, it may be issued by the Trust with the same effect as if
he were such officer at the time of its issue.
SECTION 6.4 LOST, STOLEN, ETC., CERTIFICATES. If any certificated
Shares shall be lost, stolen, destroyed or mutilated, the Trustees may
authorized the issuance of a new certificate or the same tenor and for the same
number of Shares in lieu thereof. The Trustees shall require the surrender of
any mutilated certificate in respect of which a new certificate is issued, and
may, in their discretion, before the issuance of a new certificate, require the
owner of a lost, stolen or destroyed certificate, or the owner's legal
representative, to make an affidavit or affirmation setting forth such facts as
to the loss, theft or destruction as they deem necessary, and to give the Trust
a bond in such reasonable sum as the Trustees direct, in order to indemnify the
Trust.
SECTION 6.5 RECORD TRANSFER OF PLEDGED SHARES. A pledgee of Shares
pledged as collateral security shall be entitled to a new certificate in his
name as pledgee, in the case of certificated Shares, or to be registered as the
holder in pledge of such Shares in the case of uncertificated Shares; provided,
that the instrument of pledge substantially describes the debt or duty that is
intended to be secured thereby. Any such
<PAGE>
-7-
new certificate shall express on its face that it is held as collateral
security, and the name of the pledgor shall be stated thereon, and any such
registration of uncertificated Shares shall be in a form which indicates that
the registered holder holds such Shares in pledge. After such issue or
registration, and unless and until such pledge is released, such pledgee and his
successors and assigns shall alone be entitled to the rights of a Shareholder,
and entitled to vote such Shares.
ARTICLE 7
CUSTODIAN
The Trust shall at all times employ a bank or trust company having a
capital, surplus and undivided profits of at least Two Million Dollars
($2,000,000) as Custodian of the capital assets of the Trust. The Custodian
shall be compensated for its services by the Trust upon such basis as shall be
agreed upon from time to time between the Trust and the Custodian.
ARTICLE 8
AMENDMENTS
SECTION 8.1 BY-LAWS SUBJECT TO AMENDMENT. These Bylaws may be altered,
amended or repealed. in whole or in part, at any time by vote of the holders of
a majority of the Shares (or whenever there shall be more than one Series of
Shares, of the holders of a majority of the Shares of each Series) issued,
outstanding and entitled to vote. The Trustees, by vote of a Majority of the
Trustees, may alter, amend or repeal these Bylaws, in whole or in part,
including Bylaws adopted by the Shareholders, except with respect to any
provision hereof which by law, the Declaration or these Bylaws requires action
by the Shareholders. Bylaws adopted by the Trustees may be altered, amended or
repealed by the Shareholders.
SECTION 8.2 NOTICE OF PROPOSAL TO AMEND BYLAWS REQUIRED No proposal to
amend or repeal these Bylaws or to adopt new Bylaws shall be acted upon at a
meeting unless either (i) such proposal is stated in the notice or in the waiver
of notice, as the case may be, of the meeting of the Trustees or Shareholders at
which such action is taken, or (ii) all of the Trustees or Shareholders, as the
case may be, are present at such meeting and all agree to consider such proposal
without protesting the lack of notice.
----------------
EXHIBIT 5
MANAGEMENT AGREEMENT
Agreement, made as of February 12, 1996 by and between SPECTRA FUND, a
Massachusetts business trust (hereinafter sometimes called the "Trust"), and
FRED ALGER MANAGEMENT, INC., a New York corporation (hereinafter sometimes
called the "Manager").
WITNESSETH:
WHEREAS, the Trust and Manager wish to enter into an agreement setting
forth the terms on which the Manager will perform certain services for the
Trust;
NOW THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the Trust and the Manager agree as follows:
1. The Trust hereby employs the Manager to manage the
investment and reinvestment of the assets of the Trust in accordance
with the Trust's investment objectives and policies and to administer
its affairs, subject to the supervision of the Board of Trustees of the
Trust, for the period and on the terms in this Agreement set forth. The
Manager hereby accepts such employment and agrees during such period to
render the services and to assume the obligations herein set forth. The
Manager shall for all purposes herein be deemed to be an independent
contractor and shall, unless otherwise expressly provided for or
authorized, have no authority to act for or represent the Trust in any
way or otherwise be deemed an agent of the Trust.
2. The Manager shall furnish to the Trust such office space in
the offices of the Manager or in such other place as may be agreed upon
from time to time, and such necessary office facilities, equipment and
personnel for managing the investments of the Trust as the Board of
Trustees shall request. In addition to its management of the assets of
the Trust, the Manager shall supply office facilities (which may be in
Alger's own
<PAGE>
offices); statistical and research data; data processing services;
clerical, accounting and bookkeeping services; internal auditing
services; internal executive and administrative services; stationery
and office supplies; preparation of reports to shareholders of the
Trust; preparation of tax returns, reports to and filings with the
Securities and Exchange Commission (the "SEC") and state Blue Sky
authorities; daily calculation of the net asset value of shares of the
Trust to the extent required under the Investment Company Act of 1940;
maintenance of the Trust's financial accounts and records; and general
assistance in all aspects of the Trust's operations. In providing those
services, Alger will supervise the Trust's investments generally and
conduct a continual program of evaluation of the Trust's assets.
3. The Manager will bear all expenses in connection with the
performance of its services under this Agreement. The Trust assumes and
shall pay all expenses of the Trust, including, without limitation: (1)
the charges and expenses of any custodian or depository appointed by
the Trust for the safekeeping of its cash, securities and other
property, (2) the charges and expenses of bookkeeping and of auditors,
(3) the charges and expenses of any transfer agents and registrars
appointed by the Trust, (4) brokers' commissions and issue and transfer
taxes chargeable to the Trust in connection with securities
transactions to which the Trust is a party, (5) all taxes and corporate
fees payable by the Trust to federal, state and other governmental
agencies, (6) the cost of stock certificates representing shares of the
Trust, (7) fees and expenses involved in registering and maintaining
registrations of the Trust and of its shares with the SEC and
qualifying its shares under state or other securities laws, including
the preparation and printing of prospectuses for filing with said
Commission and other authorities, (8) all expenses of shareholders' and
directors' meetings and of preparing and printing reports to
shareholders, (9) fees of Trustees of the Trust who are not officers,
directors or employees of the Manager or any of its affiliates, (10)
charges of any independent pricing service retained to assist in
valuing the assets of the Trust, (11) the Trust's proportionate share
of insurance premiums, (12) costs attributable to shareholder services,
including, without limitation, telephone and personnel expenses, and
(13) charges and expenses of legal counsel for the Trust in connection
with legal matters relating to the Trust, including, without
limitation, legal services rendered in connection with the Trust's
corporate existence, corporate and financial structure and relations
with its shareholders, registrations and qualifications of securities
under federal, state and other laws, issues of securities and expenses
which the Trust has herein assumed.
4. If in any fiscal year the aggregate expenses of the Trust
(including fees pursuant to this Agreement, but excluding interest,
taxes, brokerage expenses, distribution
<PAGE>
fees, litigation expenses, and, if permitted by state securities
commissions, extraordinary expenses) exceed the expense limitation
imposed by any state having jurisdiction over the Trust, the Manager
will reimburse the Trust for such excess expense to the extent of its
fee. Such expense reimbursement, if any, will be estimated, reconciled
and paid on a monthly basis.
5. In consideration of the services rendered pursuant to this
Agreement, the Trust will pay the Manager on the first business day of
each month a fee for the previous month at the annual rate of 1.50% of
the Trust's average daily net assets. The fee for the period from the
date of this Agreement to the end of the month such date occurs shall
be prorated according to the proportion that such period bears to the
full monthly period. Upon any termination of this Agreement before the
end of a month, the fee for such part of that month shall be prorated
according to the proportion that such period bears to the full monthly
period and shall be payable upon the date of termination of this
Agreement. For the purpose of determining fees payable to the Manager,
the value of the net assets shall be computed at the times and in the
manner specified in the Trust's Prospectus and Statement of Additional
Information as from time to time in effect.
6. The services of the Manager to the Trust hereunder are not
to be deemed exclusive, and the Manager shall be free to render similar
services to others so long as its services hereunder are not impaired
thereby.
7. The Trust shall cause its book and accounts to be audited
at least once each year by a reputable, independent public accountant
or organization of public accountants who shall render a report to the
Trust.
8. Subject to and in accordance with the governing instruments
of the Trust and the Certificate of Incorporation of the Manager, it is
understood that trustees, officers, agents and shareholders of the
Trust are or may be interested in the Manager (or any successor
thereof) as directors, officers or stockholders, or otherwise, that
directors, officers, agents and stockholders of the Manager are or may
be interested in the Trust as trustees, officers, shareholders or
otherwise, that the Manager (or any successor) is or may be interested
in the Trust as shareholder or otherwise, and that the effect of any
such adverse interests shall be governed by said governing instruments
or Certificate of Incorporation.
<PAGE>
9. This Agreement shall remain in effect until two years from
the date hereof and shall continue in effect from year to year
thereafter if its continuance is specifically approved at least
annually by (i) the Board of Trustees of the Trust or (ii) the vote of
a majority of the outstanding voting securities of the Trust; provided,
however, that in either event the continuance of this contract must
also be approved by a vote of a majority of the trustees of the Trust
who are not party to this contract cast in person at a meeting called
for the purpose of voting upon such approval. This contract may at any
time be terminated without the payment of any penalty either by vote of
the Board of Trustees of the Trust or by vote of a majority of the
outstanding voting securities of the Trust on sixty days' notice to the
Manager. This contract may be terminated by the Manager on ninety days'
written notice to the Trust and shall immediately terminate in the
event of its assignment. Any notice under this contract shall be given
in writing, addressed and delivered, or mailed postpaid, to the other
party at any office of such party.
10. In consideration for the Manager's entering into this
Agreement, the Trust agrees that the Manager, subject to the overall
control and supervision of the Board of Trustees of the Trust, and
subject to the primary obligation of the Trust and the Manager to
obtain the best price and the best execution of all orders, may select
in its discretion the brokers or dealers, which may when appropriate
include Fred Alger & Company, Incorporated, that shall execute
portfolio transactions for the Trust and the brokers or dealers that
shall receive or share directly or indirectly in any commission or
similar fees.
11. This Agreement may be amended at any time by mutual
consent of the parties, provided that such consent on the part of the
Trust shall have been approved by vote of a majority of the outstanding
voting securities of the Trust. The terms "majority of the outstanding
voting securities of the Trust", "interested person" and "assignment"
shall have, for all purposes of this Agreement, the meaning provided
therefor in the federal Investment Company Act of 1940.
12. This Agreement has been executed on behalf of the Trust by
the undersigned officer of the Trust in his capacity as an officer of
the Trust. The obligations of this Agreement shall be binding on the
assets and property of the Trust only and shall not be binding on any
trustee, officer or shareholder of the Trust individually.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
SPECTRA FUND
By: /s/ Gregory S. Duch
--------------------------------
Gregory S. Duch
FRED ALGER MANAGEMENT, INC.
By: /s/ Gregory S. Duch
--------------------------------
Gregory S. Duch
EXHIBIT 6
DISTRIBUTION AGREEMENT
February 12, 1996
Fred Alger & Company, Incorporated
30 Montgomery Street
Jersey City, NJ 07302
Dear Sirs:
This is to confirm that, in consideration of the agreements hereinafter
contained, the undersigned, Spectra Fund (the "Fund"), an unincorporated
business trust organized under the laws of the Commonwealth of Massachusetts,
has agreed that Fred Alger & Company, Incorporated ("Alger") shall be, for the
period of this Agreement, the distributor of shares of beneficial interest of
the Fund.
1. SERVICES AS DISTRIBUTOR
1.1 Alger will act as agent for the distribution of each series of
shares of beneficial interest of the Fund (the "Shares") covered by the
registration statement, prospectus and statement of additional information then
in effect statement of additional information then in effect (the "Registration
Statement") under the Securities Act of 1933, as amended (the "1933 Act"), and
the Investment Company Act of 1940, as amended (the "1940 Act").
1.2 Alger agrees to use its best efforts to solicit orders for the sale
of the Shares at the public offering price, as determined in accordance with the
Registration Statement, and will undertake such advertising and promotion as it
believes is reasonable in connection with such solicitation. Alger agrees to
bear all selling expenses, including the cost of printing prospectuses and
statements of additional information and distributing them to prospective
shareholders.
1.3 All activities by Alger as distributor of the Shares shall comply
with all applicable laws, rules and regulations, including, without limitation,
all rules and regulations made or adopted by Securities Exchange Act of 1934.
<PAGE>
1.4 Alger will provide one or more persons during normal business hours
to respond to telephone inquiries concerning the Fund.
1.5 Alger acknowledges that, whenever in the judgment of the Fund's
officers such action is warranted for any reason, including, without limitation,
market, economic or political conditions, those officers may decline to accept
any orders for, or make any sales of, the Shares until such time as those
officers deem it advisable to accept such orders and to make such sales.
2. DUTIES OF THE FUND
2.1 The Fund agrees to execute at its own expense any and all
documents, to furnish any and all information and to take any other actions that
may be reasonably necessary in connection with the qualification of the Shares
for sale in those states that Alger may designate.
2.2 The Fund shall furnish from time to time, for use in connection
with the sale of the Shares, such information reports with respect to the Fund
and the Shares as Alger may reasonably request, all of which shall be signed by
one or more of the Fund's duly authorized officers; and the Fund warrants that
the statements contained in any such reports, when so signed by one or more of
the Fund's officers, shall be true and correct. The Fund shall also furnish
Alger upon request with: (a) annual audits of the Fund's books and accounts made
by independent public accountants regularly retained by the Fund, (b)
semi-annual unaudited financial statements pertaining to the Fund, (c) quarterly
earnings statements prepared by the Fund, (d) a monthly itemized list of the
securities in each Portfolio, (e) monthly balance sheets as soon as practicable
after the end of each month and (f) from time to time such additional
information regarding the Fund's financial condition as Alger may reasonably
request.
3. REPRESENTATIONS AND WARRANTIES
The Fund represents to Alger that all registration statements,
prospectuses and statements of additional information filed by the Fund with the
SEC under the 1933 Act and the 1940 Act with respect to the Shares have been
prepared in conformity
-2-
<PAGE>
with the requirements of the 1933 Act, the 1940 Act and the rules and
regulations of the SEC thereunder. As used in this Agreement the terms
"registration statement", "prospectus" and "statement of additional information"
shall mean any registration statement, prospectus and statement of additional
information filed by the Fund with the SEC and any amendments and supplements
thereto that at any time shall have been filed with the SEC. The Fund represents
and warrants to Alger that any registration statement, prospectus and statement
of additional information, when such registration statement becomes effective,
will include all statements required to be contained therein in conformity with
the 1933 Act, the 1940 Act and the rules and regulations of the SEC; that all
statements of fact contained in any registration statement, prospectus or
statement of additional information will be true and correct when such
registration statement becomes effective; and that neither any registration
statement nor any prospectus or statement of additional information when such
registration statement becomes effective will include an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading to a purchaser of the
Shares. Alger may, but shall not be obligated to, propose from time to time such
amendment or amendments to any registration statement and such supplement or
supplements to any prospectus or statement of additional information as, in the
light of future developments, may, in the opinion of Alger's counsel, be
necessary or advisable. If the Fund shall not propose such amendment or
amendments and/or supplement or supplements within fifteen days after receipt by
the Fund of a written request from Alger to do so, Alger may, at its option,
terminate this Agreement. The Fund shall not file any amendment to any
registration statement or supplement to any prospectus or statement of
additional information without giving Alger reasonable notice thereof in
advance; provided, however, that nothing contained in this Agreement shall in
any way limit the Fund's right to file at any time such amendments to any
registration statement and/or supplements to any prospectus or statement of
additional information, of whatever character, as the Fund may deem advisable,
such right being in all respects absolute and unconditional.
4. INDEMNIFICATION
4.1 The Fund authorizes Alger to use any prospectus or statement of
additional information furnished by the Fund from time to time, in connection
with the sale of the Fund's shares. The Fund agrees to indemnify, defend and
hold Alger, its several officers and trustees, and any person who controls Alger
within the meaning of Section 15 of the 1933 Act, free and harmless from and
against any and all claims, demands, liabilities and expenses
-3-
<PAGE>
(including the cost of investigating or defending such claims, demands or
liabilities and any counsel fees incurred in connection therewith) that Alger,
its officers and trustees, or any such controlling person, may incur under the
1933 Act, the 1940 Act or common law or otherwise, arising out of or based upon
any untrue statement or alleged untrue statement of a material fact contained in
any registration statement, any prospectus or any statement of additional
information, or arising out of or based upon any omission or alleged omission to
state a material fact required to be stated in any registration statement, any
prospectus or any statement of additional information, or necessary to make the
statements in any of them not misleading; provided, however, that the Fund's
agreement to indemnify Alger, its officers or trustees, and any such controlling
person shall not be deemed to cover any claims, demands, liabilities or expenses
arising out of or based upon any statements or representations made by Alger or
its representatives or agents other than such statements and representations as
are contained in any registration statement, prospectus or statement of
additional information and in such financial and other statements as are
furnished to Alger pursuant to paragraph 2.2 hereof; and further provided that
the Fund's agreement to indemnify Alger and the Fund's representations and
warranties hereinbefore set forth in paragraph 3 shall not be deemed to cover
any liability to the Fund or its shareholders to which Alger would otherwise be
subject by reason of willful misfeasance, bad faith or gross negligence in the
performance of its duties, or by reason of Alger's reckless disregard of its
obligations and duties under this Agreement. The Fund's agreement to indemnify
Alger, its officers and trustees, and any such controlling person, as aforesaid,
is expressly conditioned upon the Fund's being notified of any action brought
against Alger, its officers or trustees, or any such controlling person, such
notification to be given by letter or by telegram addressed to the Fund at its
principal office in New York, New York and sent to the Fund by the person
against whom such action is brought, within ten days after the summons or other
first legal process shall have been served. The failure so to notify the Fund of
any such action shall not relieve the Fund from any liability that the Fund may
have to the person against whom such action is brought by reason of any such
untrue or alleged untrue statement or omission or alleged omission otherwise
than on account of the Fund's indemnity agreement contained in this paragraph
4.1. The Fund will be entitled to assume the defense of any suit brought to
enforce any such claim, demand or liability, but, in such case, such defense
shall be conducted by counsel of good standing chosen by the Fund and approved
by Alger. In the event the Fund elects to assume the defense of any such suit
and retain counsel of good standing approved by Alger, the defendant or
defendants in such suit shall bear the fees and expenses of any additional
counsel retained by any of them; but in case the Fund does not
-4-
<PAGE>
elect to assume the defense of any such suit, or in case Alger does not approve
of counsel chosen by the Fund, the Fund will reimburse Alger, its officers and
trustees, or the controlling person or persons named as defendant or defendants
in such suit, for the fees and expenses of any counsel retained by Alger or
them. The Fund's indemnification agreement contained in this paragraph 4.1 and
the Fund's representations and warranties in this Agreement shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of Alger, its officers and trustees, or any controlling person, and
shall survive the delivery of any of the Fund's shares. This agreement of
indemnity will inure exclusively to Alger's benefit, to the benefit of its
several officers and trustees, and their respective estates, and to the benefit
of the controlling persons and their successors. The Fund agrees to notify Alger
promptly of the commencement of any litigation or proceedings against the Fund
or any of its officers or trustees in connection with the issuance and sale of
any of the Shares.
4.2 Alger agrees to indemnify, defend and hold the Fund, its several
officers and trustees, and any person who controls the Fund within the meaning
of Section 15 of the 1933 Act, free and harmless from and against any and all
claims, demands, liabilities and expenses (including the costs of investigating
or defending such claims, demands or liabilities and any counsel fees incurred
in connection therewith) that the Fund, its officers or trustees or any such
controlling person may incur under the 1933 Act, the 1940 Act or common law or
otherwise, but only to the extent that such liability or expense incurred by the
Fund, its officers or trustees or such controlling person resulting from such
claims or demands shall arise out of or be based upon (a) any unauthorized sales
literature, advertisements, information, statements or representations or (b)
any untrue or alleged untrue statement of a material fact contained in
information furnished in writing by Alger to the Fund and used in the answers to
any of the items of the registration statement or in the corresponding
statements made in the prospectus or statement of additional information, or
shall arise out of or be based upon any omission or alleged omission to state a
material fact in connection with such information furnished in writing by Alger
to the Fund and required to be stated in such answers or necessary to make such
information not misleading. Alger's agreement to indemnify the Fund, its
officers and trustees, and any such controlling person, as aforesaid, is
expressly conditioned upon Alger's being notified of any action brought against
the Fund, its officers or trustees, or any such controlling person, such
notification to be given by letter or telegram addressed to Alger at its
executive office in New York, New York and sent to Alger by the person against
whom such action is brought, within ten days after the summons or other first
legal process shall have
-5-
<PAGE>
been served. Alger shall have the right of first control of the defense of such
action, with counsel of its own choosing, satisfactory to the Fund, if such
action is based solely upon such alleged misstatement or omission on Alger's
part, and in any other event the Fund, its officers or trustees or such
controlling person shall each have the right to participate in the defense or
preparation of the defense of any such action. The failure so to notify Alger of
any such action shall not relieve Alger from any liability that Alger may have
to the Fund, its officers or trustees, or to such controlling person by reason
of any such untrue or alleged untrue statement or omission or alleged omission
otherwise than on account of Alger's indemnity agreement contained in this
paragraph 4.2. Alger agrees to notify the Fund promptly of the commencement of
any litigation or proceedings against Alger or any of its officers or trustees
in connection with the issuance and sale of any of the Shares.
5. EFFECTIVENESS OF REGISTRATION
None of the Shares shall be offered by either Alger or the Fund under
any of the provisions of this Agreement and no orders for the purchase or sale
of the Shares hereunder shall be accepted by the Fund if and so long as the
effectiveness of the registration statement then in effect or any necessary
amendments thereto shall be suspended under any of the provisions of the 1933
Act or if and so long as a current prospectus as required by Section 5(b)(2) of
the 1933 Act is not on file with the SEC; provided, however, that nothing
contained in this paragraph 5 shall in any way restrict or have an application
to or bearing upon the Fund's obligation to redeem its shares from any
shareholder in accordance with the provisions of the Fund's prospectus,
statement of additional information or articles of incorporation.
6. NOTICE TO ALGER
The Fund agrees to advise Alger immediately in writing:
(a) of any request by the SEC for amendments to the
registration statement, prospectus or statement of additional
information then in effect or for additional information;
(b) in the event of the issuance by the SEC of any stop order
suspending the effectiveness of the registration statement, prospectus
or statement of additional information then in effect or the initiation
of any proceeding for that purpose;
-6-
<PAGE>
(c) of the happening of any event that makes untrue any
statement of a material fact made in the registration statement,
prospectus or statement of additional information then in effect or
that requires the making of a change in such registration statement,
prospectus or statement of additional information in order to make the
statements therein not misleading; and
(d) of all actions of the SEC with respect to any amendment to
any registration statement, prospectus or statement of additional
information which may from time to time be filed with the SEC.
7. TERM OF AGREEMENT
This Agreement shall continue until October 31, 1997 and thereafter
shall continue automatically for successive annual persons ending on October 31
of each year, provided such continuance is specifically approved at least
annually by (a) the Fund's Board of Trustees or (b) a vote of a majority (as
defined in the 1940 Act) of the Fund's outstanding voting securities, provided
that in either event the continuance is also approved by a majority of the
Trustees of the Fund who are not interested persons (as defined in the 1940 Act)
of any party to this Agreement, by vote cast in person at a meeting called for
the purpose of voting on such approval. This Agreement is terminable, without
penalty, on sixty days' written notice, by the Fund's Board of Trustees or by
vote of the holders of a majority of the Fund's shares, or on ninety days'
written notice, by Alger. This Agreement will also terminate automatically in
the event of its assignment (as defined in the 1940 Act and the rules
thereunder).
8. REPRESENTATION BY THE FUND
The Fund represents that a copy of its Agreement and Declaration of
Trust, dated July 5, 1995, together with all amendments thereto, is on file in
the office of the Secretary of the Commonwealth of Massachusetts.
9. LIMITATION OF LIABILITY
This Agreement has been executed on behalf of the Fund by the
undersigned officer of the Fund in his capacity as an officer of the Fund. The
obligations of this Agreement shall be binding upon the assets and property of
he Fund only and shall not be binding upon any trustee, officer or shareholder
of the Fund individually.
-7-
<PAGE>
10. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with
the laws (except the conflict of law rules) of the State of New York.
If the foregoing is in accordance with your understanding, kindly
indicate your acceptance by signing and returning the enclosed copy hereof.
Very truly yours,
SPECTRA FUND
By: /s/ Gregory S. Duch
---------------------------------
GREGORY S. DUCH
AUTHORIZED OFFICER
Accepted and Agreed:
FRED ALGER & COMPANY, INCORPORATED
By: /s/ Gregory S. Duch
- -------------------------------------
GREGORY S. DUCH
AUTHORIZED OFFICER
-8-
EXHIBIT 9
SHAREHOLDER SERVICING AGREEMENT
Fred Alger & Company, Incorporated
75 Maiden Lane
New York, NY 10038
Dear Sirs:
Spectra Fund (the "Fund") confirms its agreement with Fred Alger &
Company, Incorporated ("Alger Inc.") with respect to the servicing of
shareholder accounts in the Fund.
Section 1. COMPENSATION AND SERVICES TO BE RENDERED.
(a) The Fund will pay Alger Inc. an annual fee in compensation for its
services in connection with the servicing of shareholder accounts. The annual
fee paid to Alger Inc. under this Agreement will be calculated daily and paid
monthly by the Fund at the annual rate of .25% of the Fund's average daily net
assets.
(b) The annual fee will be used by Alger Inc. to provide compensation
for ongoing servicing and/or maintenance of shareholder accounts and to cover an
allocable portion of overhead and other Alger Inc. and selected dealer office
expenses related to the servicing and/or maintenance of shareholder accounts.
Compensation will be paid by Alger Inc. to persons, including Alger Inc.
employees, who respond to inquiries of shareholders of the Fund regarding their
ownership of shares or their accounts with the Fund or who provide other similar
services not otherwise required to be provided by the Fund's investment manager,
transfer agent or other agent of the Fund.
Section 2. APPROVAL OF TRUSTEES.
This Agreement will not take effect until approved by a majority vote
of both (a) the full Board of Trustees of the Fund and (b) those Trustees who
are not interested persons of the Fund and who have no direct or indirect
financial interest in the operation of this Agreement (the "Independent
Trustees"), cast in person at a meeting called for the purpose of voting on this
Agreement.
<PAGE>
Section 3. CONTINUANCE OF AGREEMENT.
This Agreement will continue in effect from year to year so long as its
continuance is specifically approved annually by vote of the Fund's Board of
Trustees in the manner described in Section 2 above.
Section 4. TERMINATION.
(a) This Agreement may be terminated at any time, without the payment
of penalty, by vote of a majority of the Independent Trustees or by vote of a
majority of the outstanding voting securities of the Fund on not more than 60
days' written notice to Alger Inc.
(b) This Agreement will terminate automatically in the event of its
assignment.
Section 5. AMENDMENTS.
No material amendment to the Plan may be made unless approved by the
Fund's Board of Trustees in the manner described in Section 2 above.
Section 6. PRESERVATION OF MATERIALS.
The Fund will preserve copies of this Agreement for a period of not
less than six years (the first two years in an easily accessible place) from the
date of this Agreement.
Section 7. MEANING OF CERTAIN TERMS.
As used in this Agreement, the terms "interested person" and "Majority
of the outstanding voting securities" will be deemed to have the same meaning
that those terms have under the Investment Company Act of 1940, as amended (the
"Act") and the rules and regulations under the Act, subject to any exemption
that may be granted to the Fund under the Act by the Securities and Exchange
Commission.
Section 8. FILING OF DECLARATION OF TRUST.
The Fund represents that a copy of its Declaration of Trust dated as of
July 5, 1995, as amended from time to time (the "Declaration of Trust"), is on
file with the Secretary of the Commonwealth of Massachusetts and with the Boston
City Clerk.
<PAGE>
Section 9. LIMITATION OF LIABILITY.
The obligations of the Fund under this Agreement will not be binding
upon any of the Trustees, shareholders, nominees, officers, employees or agents,
whether past, present or future, of the Fund, individually, but are binding only
upon the assets and property of the Fund, as provided in the Declaration of
Trust. The execution and delivery of this Agreement have been authorized by the
Trustees of the Fund, and signed by an authorized officer of the Fund, acting as
such, and neither the authorization by the Trustees nor the execution and
delivery by the officer will be deemed to have been made by any of them
individually or to impose any liability on any of them personally, but will bind
only the trust property of the Fund as provided in the Declaration of Trust.
Section 10. DATES.
This Agreement has been executed by the Fund as of February 12, 1996
and will become effective as of that date.
If the terms and conditions described above are in accordance with your
understanding, kindly indicate your acceptance of this Agreement by signing and
returning to us the enclosed copy of this Agreement.
Very truly yours,
SPECTRA FUND
By: /s/ Gregory S. Duch
--------------------------------
Gregory S. Duch
TREASURER
Accepted:
FRED ALGER & COMPANY, INCORPORATED
By: /s/ Gregory S. Duch
---------------------------------------
GREGORY S. DUCH
Executive Vice President
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our report dated December 12, 1997 on the financial statements of
Spectra Fund for the period 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. 16), Investment Company Act File No. 811-1743
with the Securities and Exchange Commission.
/s/ Arthur Andersen LLP
------------------------
ARTHUR ANDERSEN LLP
New York, New York
February 27, 1998
AVERAGE ANNUAL RETURN COMPUTATION
The Average Annual Return for the Fund was computed according to the
following formula:
n
FORMULA: P(1+T) =ERV
Where: P = a hypothetical investment 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 (or other) periods
at the end of the 1, 5, or 10 year (or
other) periods (or fractional portion
thereof)
ENDING AVERAGE
PERIOD REDEEMABLE ANNUAL RATE
COVERED VALUE OF RETURN FORMULA *
------- ------- ------- ------------
10 YEARS ENDED 10/31/97 7,615.48 22.5 @RATE(7615.48,1000,10)
5 YEARS ENDED 10/31/97 3,416.84 27.86 @RATE(3416.84,1000,5)
YEAR ENDED 10/31/97 1,264.50 26.45 @RATE(1264.50,1000,1)
Average annual rates of returns reflect dividends and distributions
reinvested at market value.
* LOTUS 123 @RATE FUNCTION:
@RATE(FV,PV,TERM) The periodic interest rate necessary for
present value "pv", to grow to future
value "fv", over the number of compounding periods in "term".
