SPECTRA FUND INC
497, 1998-03-06
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PROSPECTUS
- ----------

 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 
                                                ----- 

   
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................................     8
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.


- -------------------------------------------------------------------------------
    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>

- --------------------------------------------------------------------------------
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%
                                                                    ----
   
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

<PAGE>
<TABLE>
<CAPTION>

                                                                     Year Ended June 30,
                                     ------------------------------------------------------------------------------------------
                                       1988        1987      1986       1985       1984        1983        1982          1981     
                                      -----       -----      ----       ----       ----        ----        ----          ----     
<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. You will be charged a fee for any check returned by your bank.

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.

                                       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 fifteenth of every month (or next  business day if the fifteenth  falls on a
weekend or New York Stock Exchange  holiday),  on the last business day of every
month,  or both.  Your bank must be a member of the  Automated  Clearing  House.

TELEPURCHASE AND TELEREDEMPTION PRIVILEGES

   The  TELEPURCHASE  Privilege  allows you to purchase Fund shares by telephone
(minimum $500,  maximum  $50,000) by filling out the appropriate  section of the
New Account  Application  or sending a Telephone  Services  Form to the Transfer
Agent.  Your funds will be transferred from your designated bank account to your
Fund account normally within one business day.

   The  TELEREDEMPTION  Privilege  allows you to transfer  funds  (minimum $500,
maximum  $50,000)  between your Fund account and your  designated  bank account.
Redemption  proceeds will be transferred to your bank account,  generally within
two business days after your redemption  request is received.  Although the Fund
is  authorized  to  charge a fee of $17.00  for each  Automated  Clearing  House
redemption, it does not currently intend to do so.

   To use these privileges, your bank must be a member of the Automated Clearing
House.  Shares  held  in any  Spectra  retirement  plan  and  shares  issued  in
certificate form are not eligible for this service.

GOVERNMENT DIRECT DEPOSIT AND PAYROLL SAVINGS PLAN

   The Fund offers both  Government  Direct Deposit and a Payroll  Savings Plan.
The Government  Direct  Deposit  service allows you to arrange direct deposit of
U.S.  federal  government  payments into your Fund account.  The Payroll Savings
Plan allows you to  designate an amount to be withheld  from your payroll  check
every pay period and  deposited  to your Fund  account.  The minimum  investment
amount for each plan is $25. Both Government  Direct Deposit and Payroll Savings
Plan are not available for Spectra sponsored retirement accounts such as IRAs.

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,  Telepurchase
order, or Automatic  Investment  Plan transfer  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,  the proceeds are to be sent to
an address other than the address of record,  or made within 60 days of changing
your address, 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.

    

                                       5
<PAGE>

   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.  You must indicate on your New Account  Application your desire to
have the  ability  to make  telephone  wire  redemptions.  This  service  is not
available within 60 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.

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.

                                       6
<PAGE>

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 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.

                                       7
<PAGE>

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.

                               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.  Accounts whose  dividend/distribution
checks   have   been   returned   as    undeliverable    shall   reinvest   that
dividend/distribution  at the net asset value next determined after the transfer
agent receives the undelivered  check. All future  dividend/distribution  checks
shall be reinvested  automatically  until the  shareholder(s)  provide a written
request for  reinstatement  of cash  distributions  and a valid mailing address.
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, 

                                       8
<PAGE>

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.


                                       9
<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


                                      -3-
<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


                                      -4-
<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-


                                      -5-
<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.


                                      -6-
<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-



                                      -7-
<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 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.


                                      -8-
<PAGE>


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.



                                      -9-
<PAGE>

<TABLE>
<CAPTION>
   
NAME, AGE, 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 of 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>



                                      -10-
<PAGE>
                               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>
   

APPENDIX

CORPORATE BOND RATINGS

    Bonds rated Aa by Moody's Investors Service,  Inc. ("Moody's") are judged by
Moody's to be of high quality by all  standards.  Together  with bonds rated Aaa
(Moody's  highest  rating) they comprise what are generally  known as high-grade
bonds. Aa bonds are rated lower than Aaa bonds because margins of protection may
not be as large as those of Aaa bonds, or fluctuation of protective elements may
be of greater  amplitude,  or there may be other elements  present that make the
long-term risks appear somewhat larger than those  applicable to Aaa securities.
Bonds that are rated A by Moody's possess many favorable  investment  attributes
and are to be  considered  as upper  medium-grade  obligations.  Factors  giving
security to principal and interest are considered adequate,  but elements may be
present that suggest a susceptibility to impairment in the future.

    Moody's Baa rated bonds are considered as  medium-grade  obligations,  i.e.,
they are neither  highly  protected nor poorly  secured.  Interest  payments and
principal  security  appear  adequate  for the present,  but certain  protective
elements may be lacking or may be  characteristically  unreliable over any great
length of time. Such bonds lack outstanding  investment  characteristics and, in
fact, have speculative characteristics as well.

    Bonds rated Ba by Moody's  are judged to have  speculative  elements;  their
future cannot be considered  as well assured.  Often the  protection of interest
and  principal  payments may be very  moderate and thereby not well  safeguarded
during  both  good  and bad  times  over the  future.  Uncertainty  of  position
characterizes  bonds in this class. Bonds which are rated B by Moody's generally
lack  characteristics  of a desirable  investment.  Assurance  of  interest  and
principal  payments or of  maintenance  of other terms of the contract  over any
long period of time may be small.

    Moody's  applies the numerical  modifiers 1, 2 and 3 to each generic  rating
classification  from Aa through B. The  modifier 1 indicates  that the  security
ranks in the higher end of its generic rating category; the modifier 2 indicates
a mid-range  ranking;  and the modifier 3 indicates  that the issue ranks in the
lower end of its generic rating category.

    Bonds rated AA by Standard & Poor's Corporation ("S&P") are judged by S&P to
be high-grade  obligations and in the majority of instances differ only in small
degree  from  issues  rated AAA  (S&P's  highest  rating).  Bonds  rated AAA are
considered by S&P to be the highest grade  obligations  and possess the ultimate
degree of protection as to principal  and interest.  With AA bonds,  as with AAA
bonds, prices move with the long-term money market.  Bonds rated A by S&P have a
strong  capacity to pay principal and interest,  although they are somewhat more
susceptible  to the adverse  effects of changes in  circumstances  and  economic
conditions.

    S&P's BBB rated  bonds,  or  medium-grade  category  bonds,  are  borderline
between  definitely sound  obligations and those where the speculative  elements
begin to predominate.  These bonds have adequate asset coverage and normally are
protected by satisfactory earnings. Their susceptibility to changing conditions,
particularly  to  depressions,   necessitates  constant  watching.  These  bonds
generally are more responsive to business and trade  conditions than to interest
rates. This group is the lowest that qualifies for commercial bank investment.

    Bonds  rated BB and B by S&P are  regarded,  on  balance,  as  predominantly
speculative  with  respect to capacity to pay  interest  and repay  principal in
accordance  with the terms of the  obligation.  These ratings may be modified by
the addition of a plus or minus sign to show relative  standing within the major
rating  categories.  Debt rated BB has less near-term  vulnerability  to default
than other speculative issues.  However, it faces major ongoing uncertainties or
exposure to adverse business,  financial or economic  conditions that could lead
to inadequate  capacity to meet timely interest and principal  payments.  The BB
rating  category  is also  used for debt  subordinated  to  senior  debt that is
assigned  an  actual  or  implied  BBB-  rating.  Debt  rated  B has  a  greater
vulnerability  to  default  but  currently  has the  capacity  to meet  interest
payments  and  principal  repayments.  Adverse  business,  financial or economic
conditions  will likely impair capacity or willingness to pay interest and repay
principal.  The B rating  category is also used for debt  subordinated to senior
debt that is assigned an actual or implied BB or BB- rating.


                                      A-1
<PAGE>
APPENDIX
(continued)

    Bonds rated AAA by Fitch  Investors  Service,  Inc.  ("Fitch") are judged by
Fitch to be strictly high grade, broadly marketable,  suitable for investment by
trustees and fiduciary  institutions and liable to but slight market fluctuation
other than through changes in the money rate. The prime feature of an AA bond is
a showing of earnings  several times or many times interest  requirements,  with
such stability of applicable  earnings that safety is beyond reasonable question
whatever  changes  occur in  conditions.  Bonds  rated AA by Fitch are judged by
Fitch to be of safety virtually  beyond question and are readily salable,  whose
merits are not unlike those of the AAA class, but whose margin of safety is less
strikingly  broad. The issue may be the obligation of a small company,  strongly
secured  but  influenced  as to  rating  by the  lesser  financial  power of the
enterprise and more local type of market.

    Bonds rated Duff-1 are judged by Duff and Phelps, Inc. ("Duff") to be of the
highest credit quality with negligible risk factors;  only slightly more than U.
S. Treasury debt.  Bonds rated Duff-2,  3 and 4 are judged by Duff to be of high
credit  quality  with  strong  protection  factors.  Risk is modest but may vary
slightly from time to time because of economic conditions.

COMMERCIAL PAPER RATINGS

    Moody's  Commercial  Paper ratings are opinions of the ability of issuers to
repay  punctually  promissory  obligations  not having an  original  maturity in
excess of nine months. The rating Prime-1 is the highest commercial paper rating
assigned by Moody's.  Issuers rated Prime-1, or related supporting institutions,
are  considered  to  have  a  superior  capacity  for  repayment  of  short-term
promissory   obligations.   Issuers  rated   Prime-2,   or  related   supporting
institutions,  are  considered  to  have a  strong  capacity  for  repayment  of
short-term  promissory  obligations.  This will normally be evidenced by many of
the characteristics of issuers rated Prime-l,  but to a lesser degree.  Earnings
trends and  coverage  ratios,  while sound,  will be more subject to  variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample liquidity is maintained.

    Commercial paper ratings of S&P are current assessments of the likelihood of
timely  payment of debts having  original  maturities  of no more than 365 days.
Commercial  paper rated A-1 by S&P indicates that the degree of safety regarding
timely payment is either  overwhelming or very strong.  Those issues deter mined
to possess  overwhelming  safety  characteristics are denoted A-1+. Capacity for
timely payment on commercial paper rated A-2 is strong,  but the relative degree
of  safety is not as high as for  issues  designated  A-1.  The  rating  Fitch-1
(Highest Grade) is the highest  commercial paper rating assigned by Fitch. Paper
rated Fitch-1 is regarded as having the strongest degree of assurance for timely
payment.  The rating Fitch-2 (Very Good Grade) is the second highest  commercial
paper rating  assigned by Fitch which  reflects an  assurance of timely  payment
only slightly less in degree than the strongest issues.

    The rating Duff-1 is the highest  commercial  paper rating assigned by Duff.
Paper rated Duff-1 is regarded as having very high  certainty of timely  payment
with excellent  liquidity factors which are supported by ample asset protection.
Risk factors are minor.  Paper rated Duff-2 is regarded as having good certainty
of timely payment,  good access to capital  markets and sound liquidity  factors
and company fundamentals. Risk factors are small.
    


                                       A-2
<PAGE>

INVESTMENT MANAGER:
Fred Alger Management, Inc.
75 Maiden Lane
New York, New York 10038
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DISTRIBUTOR:
Fred Alger & Company, Incorporated
30 Montgomery Street
Jersey City, New Jersey 07302
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TRANSFER AGENT:
Alger Shareholder Services, Inc.
30 Montgomery Street
Box 2001
Jersey City, New Jersey 07302
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INDEPENDENT PUBLIC ACCOUNTANTS:
Arthur Andersen LLP
1345 Avenue of the Americas
New York, New York 10105
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COUNSEL:
Hollyer Brady Smith Troxell
  Barrett Rockett Hines & Mone LLP
551 Fifth Avenue
New York, New York 10176
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SPECTRA|Meeeting the challenge
   FUND|of investing
       |



    STATEMENT|
OF ADDITIONAL|February 27, 1998
  INFORMATION|




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