SPECTRA | 30 Montgomery Street
FUND | Jersey City, New Jersey 07302
| (800) 711-6141
(212) 806-8800
August 8, 2000
VIA EDGAR
Securities and Exchange Commission
450 Fifth St., N.W.
Washington, DC 20549
RE: SPECTRA FUND (the "Fund")
FILE NO. 33-98102
FILE NO. 811-1743
Dear Sir or Madam:
On behalf of the above-referenced Fund, we hereby transmit for filing
pursuant to Rule 497(j) of the Securities Act of 1933, changes to the Statement
of Additional Information for the above referenced Fund. there are no changes in
definitive materials (prospectuses) for the above referenced Fund.
If you require additional information, please do not hesitate to call
me at (201) 395-5292.
Very truly yours,
/s/ FELIX MAZER
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Felix Mazer
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STATEMENT OF June 30, 2000
ADDITIONAL INFORMATION
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|
SPECTRA |One World Trade Center-Suite 9333
FUND |New York, New York 10048
|(800) 711-6141
|
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Spectra Fund (the "Fund") is a registered investment company-a mutual
fund-that presently offers two classes of shares: Class A shares, which are
generally subject to a front-end sales charge, and Class N shares, which have no
sales charge.
This Statement of Additional Information is not a Prospectus. This document
contains additional information about the Fund and supplements information in
the Prospectuses. It should be read together with a Prospectus for Class A
shares, Class N shares, or both classes of shares, which may be obtained free of
charge by writing or calling the Fund at the address or toll-free number shown
above.
The Fund's financial statements for the year ended October 31, 1999 and for
the six months ended April 30, 2000 are contained in its annual and semi-annual
reports to shareholders and are incorporated by reference into this Statement of
Additional Information.
CONTENTS
Investment Strategies and Policies ........................................ 2
Portfolio Transactions .................................................... 8
Net Asset Value ........................................................... 9
Classes of Shares ......................................................... 9
Purchases and Redemptions ................................................. 9
Management ................................................................ 13
Taxes ..................................................................... 16
Custodian and Transfer Agent .............................................. 16
Diversification ........................................................... 16
Certain Shareholders ...................................................... 16
Organization .............................................................. 17
Determination of Performance .............................................. 17
Financial Statements ...................................................... 18
Appendix .................................................................. A-1
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INVESTMENT STRATEGIES AND
POLICIES
The Prospectus discusses the investment objective of the Fund and the principal
strategies 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 on those
investments, policies and strategies.
CASH POSITION
In order to afford the Fund the flexibility to take advantage of new
opportunities for investments in accordance with its investment objective or to
meet redemptions, it may, under normal circumstances, hold up to 15% of its
total assets in money market instruments including, but not limited to,
certificates of deposit, time deposits and bankers' acceptances issued by
domestic bank and thrift institutions, U.S. Government securities, commercial
paper and repurchase agreements. When management's analysis of economic and
technical market factors suggests that common stock prices will decline
sufficiently that a temporary defensive position is deemed advisable, the Fund
may invest in high-grade senior securities or U.S. Government securities or
retain cash or cash equivalents, all without limitation.
SMALL CAPITALIZATION INVESTMENTS
Certain companies in which the Fund will invest may still be in the
developmental stage, may be older companies that appear to be entering a new
stage of growth owing to factors such as management changes or development of
new technology, products or markets or may be companies providing products or
services with a high unit volume growth rate. Investing in smaller, newer
issuers generally involves greater risk than investing in larger, more
established issuers. Such companies may have limited product lines, markets or
financial resources and may lack management depth. Their securities may have
limited marketability and may be subject to more abrupt or erratic market
movements than securities of larger, more established companies or the market
averages in general.
U.S. GOVERNMENT OBLIGATIONS
Bills, notes, bonds, and other debt securities issued by the U.S. Treasury are
direct obligations of the U.S. Government and differ mainly in the length of
their maturities.
SHORT-TERM CORPORATE DEBT SECURITIES
These are outstanding nonconvertible corporate debt securities (e.g., bonds and
debentures) which have one year or less remaining to maturity. Corporate notes
may have fixed, variable, or floating rates.
COMMERCIAL PAPER
These are short-term promissory notes issued by corporations primarily to
finance short-term credit needs.
REPURCHASE AGREEMENTS
Under the terms of a repurchase agreement, the Fund would acquire a high quality
money market instrument for a relatively short period (usually not more than one
week) subject to an obligation of the seller to repurchase, and the Fund to
resell, the instrument at an agreed price (including accrued interest) and time,
thereby determining the yield during the Fund's holding period. Repurchase
agreements may be seen to be loans by the Fund collateralized by the underlying
instrument. This arrangement results in a fixed rate of return that is not
subject to market fluctuations during the Fund's holding period and not
necessarily related to the rate of return on the underlying instrument. The
value of the underlying securities, including accrued interest, will be at least
equal at all times to the total amount of the repurchase obligation, including
interest. The Fund bears a risk of loss in the event that the other party to a
repurchase agreement declares bankruptcy or defaults on its obligations and the
Fund is delayed in or prevented from exercising its rights to dispose of the
collateral securities, including the risk of a possible decline in the value of
the underlying securities during the period in which the Fund seeks to assert
these rights, the risk of incurring expenses associated with asserting these
rights and the risk of losing all or part of the income from the agreement. Fred
Alger Management, Inc. ("Alger Management"), reviews the credit worthiness of
those banks and dealers with which the Fund enters into repurchase agreements to
evaluate these risks and monitors on an ongoing basis the value of the
securities subject to repurchase agreements to ensure that the value is
maintained at the required level.
WARRANTS AND RIGHTS
The Fund may invest in securities convertible into or exchangeable for equity
securities including warrants and rights. A warrant is a type of security that
entitles the holder to buy a proportionate amount of common stock at a specified
price, usually higher than the market price at the time of issuance, for a
period of years or to perpetuity. In contrast, rights, which also represent the
right to buy common shares, normally have a subscription price lower than the
current market value of the common stock and a life of two to four weeks.
Warrants are freely transferable and are traded on the major securities
exchanges.
PORTFOLIO DEPOSITARY RECEIPTS
To the extent otherwise consistent with its investment policies and applicable
law, the Fund may invest up to 5% of its total assets in Portfolio Depositary
Receipts, exchange-traded shares issued by investment compa-
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nies, typically unit investment trusts, holding portfolios of common stocks
designed to replicate and, therefore, track the performance of various broad
securities indexes or sectors of such indexes. For example, the Fund may invest
in Standard &Poor's Depositary Receipts(r) (SPDRs), issued by a unit investment
trust whose portfolio tracks the S&P 500 Composite Stock Price Index, or
Standard &Poor's MidCap 400 Depositary Receipts(r) (MidCap SPDRs), similarly
linked to the S&P MidCap 400 Index.
ILLIQUID AND RESTRICTED SECURITIES
The Fund will not invest more than 15% of its net assets in "illiquid"
securities, which include restricted securities, securities for which there is
no readily available market and repurchase agreements with maturities of greater
than 7 days; however, restricted securities that are determined by the Board of
Trustees to be liquid are not subject to this limitation.
The Fund may invest in restricted securities governed by Rule 144A under the
Securities Act of 1933. In adopting Rule 144A, the Securities and Exchange
Commission specifically stated that restricted securities traded under Rule 144A
may be treated as liquid for purposes of investment limitations if the board of
trustees (or the fund's adviser acting subject to the board's supervision)
determines that the securities are in fact liquid. The Board has delegated its
responsibility to Alger Management to determine the liquidity of each restricted
security purchased pursuant to the Rule, subject to the Board's oversight and
review. Examples of factors that will be taken into account in evaluating the
liquidity of a Rule 144A security, both with respect to the initial purchase and
on an ongoing basis, will include, among others: (1) the frequency of trades and
quotes for the security; (2) the number of dealers willing to purchase or sell
the security and the number of other potential purchasers; (3) dealer
undertakings to make a market in the security; and (4) the nature of the
security and the nature of the marketplace trades (e.g., the time needed to
dispose of the security, the method of soliciting offers, and the mechanics of
transfer). If institutional trading in restricted securities were to decline to
limited levels, the liquidity of the Fund's portfolio could be adversely
affected.
SHORT SALES
The Fund may sell securities "short against the box." While a short sale is the
sale of a security the Fund does not own, it is "against the box" if at all
times when the short position is open the Fund owns an equal amount of the
securities or securities convertible into, or exchangeable without further
consideration for, securities of the same issue as the securities sold short.
LENDING OF PORTFOLIO SECURITIES
In order to generate income and to offset expenses, the Fund may lend portfolio
securities with a value up to 331/3% of the Fund's total assets, including all
collateral for such loans less liabilities exclusive of the obligation to return
such collateral, to brokers, dealers and other financial organizations. The Fund
will not lend securities to Alger Management or its affiliates. By lending its
securities, the Fund can increase its income by continuing to receive interest
or dividends on the loaned securities as well as by either investing the cash
collateral in short-term securities or by earning income in the form of interest
paid by the borrower when U.S. Government securities are used as collateral. The
Fund will adhere to the following conditions whenever its securities are loaned:
(a) the Fund must receive at least 100% cash collateral or equivalent securities
from the borrower; (b) the borrower must increase this collateral whenever the
market value of the loaned securities including accrued interest exceeds the
value of the collateral; (c) the Fund must be able to terminate the loan at any
time; (d) the Fund must receive reasonable interest on the loan, as well as any
dividends, interest or other distributions on the loaned securities and any
increase in market value; (e) the Fund may pay only reasonable custodian fees in
connection with the loan; and (f) voting rights on the loaned securities may
pass to the borrower; provided, however, that if a material event adversely
affecting the investment occurs, the Fund's Board of Trustees must terminate the
loan and regain the right to vote the securities. The Fund bears a risk of loss
in the event that the other party to a stock loan transaction defaults on its
obligations and the Fund is delayed in or prevented from exercising its rights
to dispose of the collateral, including the risk of a possible decline in the
value of the collateral securities during the period in which the Fund seeks to
assert these rights, the risk of incurring expenses associated with asserting
these rights and the risk of losing all or a part of the income from the
transaction.
FOREIGN SECURITIES
The Fund may invest up to 20% of the value of its total assets in foreign
securities (not including American Depositary Receipts, American Depositary
Shares or U.S. dollar-denominated securities of foreign issuers). Foreign
securities investments may be affected by changes in currency rates or exchange
control regulations, changes in governmental administration or economic or
monetary policy (in the United States and abroad) or changed circumstances in
dealing between nations. Dividends paid by foreign issuers may be subject to
withholding and other foreign taxes that may decrease the net return on these
investments as compared to dividends paid to the Fund by domestic corporations.
There may be less publicly available information about foreign issuers than
about domestic issuers, and foreign issuers are not subject to uniform
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 do-
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mestic issuers and foreign brokerage commissions are generally higher than in
the United States. Foreign securities markets may also be less liquid, more
volatile and subject to less government supervision than those in the United
States. Investments in foreign countries could be affected by other factors not
present in the United States, including expropriation, confiscatory taxation and
potential difficulties in enforcing contractual obligations. Securities
purchased on foreign exchanges may be held in custody by a foreign bank or a
foreign branch of a domestic bank.
The Fund may purchase American Depositary Receipts ("ADRs"), American Depositary
Shares ("ADSs") or U.S. dollar-denominated securities of foreign issuers, which
are not subject to the 20% foreign securities limitation. ADRs and ADSs are
traded in U.S. securities markets and represent the securities of foreign
issuers. While ADRs and ADSs may not necessarily be denominated in the same
currency as the foreign securities they represent, many of the risks associated
with foreign securities may also apply to ADRs and ADSs.
OPTIONS
The Fund may purchase put and call options and sell (write) covered put and
covered call options on securities and securities indexes to increase gain or to
hedge against the risk of unfavorable price movements although, as in the past,
it does not currently intend to rely on these strategies extensively, if at all.
A call option on a security is a contract that gives the holder of the option
the right to buy from the writer (seller) of the call option, in return for a
premium paid, the security underlying the option at a specified exercise price
at any time during the term of the option. The writer of the call option has the
obligation upon exercise of the option to deliver the underlying security upon
payment of the exercise price during the option period. A put option on a
security is a contract that, in return for the premium, gives the holder of the
option the right to sell to the writer (seller) the underlying security at a
specified price during the term of the option. The writer of the put, who
receives the premium, has the obligation to buy the underlying security upon
exercise at the exercise price during the option period.
The Fund will not sell options that are not covered. A call option written by
the Fund on a security is "covered" if the Fund owns the underlying security
covered by the call or has an absolute and immediate right to acquire that
security without additional cash consideration (or for additional cash
consideration held in a segregated account) upon conversion or exchange of other
securities held in its portfolio. A call option is also covered if the Fund
holds a call on the same security as the call written where the exercise price
of the call held is (1) equal to or less than the exercise price of the call
written or (2) greater than the exercise price of the call written if the
difference is maintained by the Fund in cash, U.S. Government securities or
other high grade short-term obligations in a segregated account. 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 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 not purchase or write options that appear to lack an active secondary
market, there is no assurance that a liquid secondary market on an exchange will
exist for any particular option. In such event it might not be possible to
effect closing transactions in particular options, so that
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the Fund would have to exercise its option in order to realize any profit and
would incur brokerage commissions upon the exercise of the options. If the Fund,
as a covered call option writer, is unable to effect a closing purchase
transaction in a secondary market, it will not be able to sell the underlying
security until the option expires or it delivers the underlying security upon
exercise or otherwise covers the position.
In addition to options on securities, the Fund may also purchase and sell call
and put options on securities indexes. A stock index reflects in a single number
the market value of many different stocks. Relative values are assigned to the
stocks included in an index and the index fluctuates with changes in the market
values of the stocks. The options give the holder the right to receive a cash
settlement during the term of the option based on the difference between the
exercise price and the value of the index. By writing a put or call option on a
securities index, the Fund is obligated, in return for the premium received, to
make delivery of this amount. The Fund may offset its position in stock index
options prior to expiration by entering into a closing transaction on an
exchange or it may let the option expire unexercised.
Use of options on securities indexes entails the risk that trading in the
options may be interrupted if trading in certain securities included in the
index is interrupted. The Fund will not purchase these options unless Alger
Management is satisfied with the development, depth and liquidity of the market
and Alger Management believes the options can be closed out.
Price movements in the Fund's securities may not correlate precisely with
movements in the level of an index and, therefore, the use of options on indexes
cannot serve as a complete hedge and will depend, in part, on the ability of
Alger Management to predict correctly movements in the direction of the stock
market generally or of a particular industry. Because options on securities
indexes require settlement in cash, Alger Management may be forced to liquidate
portfolio securities to meet settlement obligations.
Although Alger Management will attempt to take appropriate measures to minimize
the risks relating to any trading by the Fund in put and call options, there can
be no assurance that the Fund will succeed in any option trading program it
undertakes.
The Fund will not purchase options if, as a result, the aggregate cost of all
outstanding options exceeds 10% of the Fund's total assets, although no more
than 5% will be committed to transactions entered into for non-hedging
(speculative) purposes.
STOCK INDEX FUTURES AND OPTIONS ON STOCK
INDEX FUTURES
Futures are generally bought and sold on the commodities exchanges where they
are listed with payment of initial and variation margin as described below. The
sale of a futures contract creates a firm obligation by the Fund, as seller, to
deliver to the buyer the net cash amount called for in the contract at a
specific future time. Put options on futures might be purchased to protect
against declines in the market values of securities occasioned by a decline in
stock prices, and securities index futures might be sold to protect against a
general decline in the value of securities of the type that comprise the index.
Options on futures contracts are similar to options on securities except that an
option on a futures contract gives the purchaser the right, in return for the
premium paid, to assume a position in a futures contract and obligates the
seller to deliver such position.
A stock index future obligates the seller to deliver (and the purchaser to take)
an amount of cash equal to a specific dollar amount times the difference between
the value of a specific stock index at the close of the last trading day of the
contract and the price at which the agreement is made. No physical delivery of
the underlying stocks in the index is made. While incidental to its securities
activities, the Fund may use index futures as a substitute for a comparable
market position in the underlying securities.
If the Fund uses futures, or options thereon, for hedging, the risk of imperfect
correlation increases as the composition of the Fund varies from the composition
of the stock index. In an effort to compensate for the imperfect correlation of
movements in the price of the securities being hedged and movements in the price
of the stock index futures, the Fund may, if it uses a hedging strategy, buy or
sell stock index futures contracts in a greater or lesser dollar amount than the
dollar amount of the securities being hedged if the historical volatility of the
stock index futures has been less or greater than that of the securities. Such
"over hedging" or "under hedging" may adversely affect the Fund's net investment
results if market movements are not as anticipated when the hedge is
established.
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
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transactions can be effected or that there will be correlation between price
movements in the options on stock index futures and price movements in the
Fund's securities which are the subject of the hedge. In addition, the Fund's
purchase of such options will be based upon predictions as to anticipated market
trends, which could prove to be inaccurate.
The Fund's use, if any, of stock index futures and options thereon will in all
cases be consistent with applicable regulatory requirements and in particular
the rules and regulations of the Commodity Futures Trading Commission and will
be entered into only, if at all, for bona fide hedging, risk management or other
portfolio management purposes. Typically, maintaining a futures contract or
selling an option thereon will require the Fund to deposit with a financial
intermediary as security for its obligations an amount of cash or other
specified assets (initial margin) which initially is typically 1% to 10% of the
face amount of the contract (but may be higher in some circumstances).
Additional cash or assets (variation margin) may be required to be deposited
thereafter on a daily basis as the mark to market value of the contract
fluctuates. The purchase of an option on stock index futures involves payment of
a premium for the option without any further obligation on the part of the Fund.
If the Fund exercises an option on a futures contract it will be obligated to
post initial margin (and potential subsequent variation margin) for the
resulting futures position just as it would for any position. Futures contracts
and options thereon are generally settled by entering into an offsetting
transaction but there can be no assurance either that the position can be offset
prior to settlement at an advantageous price, or that delivery will occur. In
order to cover its potential obligations if the Fund enters into futures
contracts or options thereon, the Fund will maintain a segregated account which
will contain only liquid assets in an amount equal to the total market value of
such futures contracts less the amount of initial margin on deposit for such
contracts.
The Fund will not enter into a futures contract or related option (except for
closing transactions) if, immediately thereafter, the sum of the amount of its
initial margin and premiums on open futures contracts and options thereon would
exceed 5% of the Fund's total assets (taken at current value); however, in the
case of an option that is in-the-money at the time of the purchase, the
in-the-money amount may be excluded in calculating the 5% limitation.
BORROWING
The Fund may borrow money from banks and use it to purchase additional
securities. This borrowing is known as leveraging. Leveraging increases both
investment opportunity and investment risk. If the investment gains on
securities purchased with borrowed money exceed the cost of borrowing, including
interest paid on the borrowing, the net asset value of the Fund's shares will
rise faster than would otherwise be the case. On the other hand, if the
investment gains fail to cover the cost (including interest) of borrowings, or
if there are losses, the net asset value of the Fund's shares will decrease
faster than would otherwise be the case. The Fund may also borrow from banks for
temporary or emergency purposes. The Fund is required to maintain continuous
asset coverage (that is, total assets including borrowings, less liabilities
exclusive of borrowings) of 300% of the amount borrowed. If such asset coverage
should decline below 300% as a result of market fluctuations or other reasons,
the Fund may be required to sell some of its portfolio holdings within three
days to reduce the debt and restore the 300% asset coverage, even though it may
be disadvantageous from an investment standpoint to sell securities at that
time.
INVESTMENT RESTRICTIONS
Under the Investment Company Act of 1940, as amended (the "Act"), a
"fundamental" policy may not be changed without the vote of a "majority of the
outstanding voting securities" of the Fund, which is defined in the Act as the
lesser of (a) 67% or more of the shares present at a Fund meeting if the holders
of more than 50% of the outstanding shares of the Fund are present or
represented by proxy or (b) more than 50% of the outstanding shares. The Fund's
investment objective is a fundamental policy. A "nonfundamental policy" may be
changed by vote of a majority of the Fund's Board of Trustees at any time.
AS A MATTER OF FUNDAMENTAL POLICY, THE FUND MAY NOT:
1. Issue senior securities, except in connection with borrowings permitted in
restriction 4 and except that the writing of covered options on securities and
stock indexes, and transactions in stock index futures and options thereon,
shall not be deemed to be the issuance of a senior security.
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.
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3. Make short sales of securities or maintain a short position unless, at all
times when a short position is open, it owns an equal amount of such securities
or owns securities convertible into or exchangeable for, without payment of any
further consideration, securities of the same issuer at least equal in amount to
the securities sold short.
4. Borrow money, except that the Fund may borrow from banks if, immediately
after such borrowing, the value of the total assets of the Fund (including the
amount borrowed) less its liabilities (not including any borrowing) is at least
300% of the amount of the borrowings.
5. Pledge, mortgage, hypothecate or otherwise encumber its assets except in
connection with permissible borrowings or investments.
6. Act as a securities underwriter, or act as a distributor of securities issued
by it except through an underwriter, acting as principal or agent, who may not
be obligated to sell or take up any specific amount of securities, except that
the Fund might be deemed an underwriter within the meaning of Section 2(11) of
the Securities Act of 1933 in making sales of securities not registered under
federal securities law.
7. Participate on a joint or joint and several basis in any securities trading
account.
8. Make any investment in a particular industry if, immediately after the making
of such investment, 25% or more of the Fund's total assets would be invested in
such industry.
9. Purchase or sell real estate or interests therein or real estate mortgages,
provided that the Fund may purchase marketable securities of real estate
investment trusts.
10. Purchase or sell commodities or commodity contracts, nor invest in oil, gas
or other mineral exploration development programs, including mineral leases,
except that the Fund may purchase or sell stock index futures contracts and
related options thereon if, thereafter, no more than 5% of its total assets are
invested in margin and premiums.
11. Make loans to others, except through purchasing qualified debt obligations,
lending its securities or entering into repurchase agreements.
12. Make any investment in warrants or rights if, immediately after the making
of such investment, more than 5% of the Fund's net assets would be so invested
or more than 2% of the Fund's net assets would be invested in warrants not
listed on a recognized domestic stock exchange, provided, however, that warrants
or rights which are attached to other securities shall be deemed to have no
value for purposes hereof.
13. Purchase or retain the securities of any issuer if, to the knowledge of the
Treasurer of the Fund, those officers and directors of the Fund or the Adviser
owning individually more than 1/2 of 1% of the securities of such issuer
together own more than 5% of the securities of such issuer.
14. Purchase any security if, as a result, the Fund would then have more than 5%
of its total assets invested in securities of issuers (including predecessors)
that have been in continuous operation for less than three years. This
limitation shall not apply to investments in obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities.
15. Purchase the securities of any other investment company, except that it may
make such a purchase in the open market involving no commission or profit to a
sponsor or dealer (other than the customary broker's commission), provided that
not more than 5% of the Fund's total assets (taken at market or other current
value) would be invested in such securities immediately after the making of any
such investment, or the Fund may make such a purchase as part of a merger,
consolidation or acquisition of assets.
16. The Fund may purchase and sell (write) put and call options on securities
and stock indexes, but only if such options are exchange-traded or traded on an
automated quotation system of a national securities association; provided,
however, that options on securities written by the Fund must be covered.
THE FOLLOWING RESTRICTION IS NONFUNDAMENTAL:
17. The Fund may not invest more than 15% of its net assets in repurchase
agreements which have a maturity of longer than seven days or in other illiquid
securities, including securities that are illiquid by virtue of the absence of a
readily available market or legal or contractual restrictions on resale.
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
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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 might 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, 1999, October 31, 1998, and October 31, 1997, the
Fund paid an aggregate of approximately $505,953, $569,102, and $128,857 in
brokerage commissions, of which approximately $504,630, $562,849, and $127,576,
respectively, was paid to Alger Inc. The commissions paid to Alger Inc. during
the fiscal year ended October 31, 1999 constituted 99% of the aggregate
brokerage commissions paid by the Fund; during that year, 99% of the aggregate
dollar amount of transactions by the Fund involving the payment of brokerage
commissions was effected through Alger Inc. Alger Inc. does not engage in
principal transactions with the Fund and, accordingly, received no compensation
in connection with securities purchased or sold in that manner, which include
securities traded in the
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over-the-counter markets, money market investments and most debt securities.
NET ASSET VALUE
The New York Stock Exchange ("NYSE") is generally open on each Monday through
Friday, except New Year's Day, Dr. Martin Luther King, Jr. Day, Presidents' Day
(the third Monday in February), Good Friday, Memorial Day (the last Monday in
May), Independence Day, Labor Day (the first Monday in September), Thanksgiving
Day (the fourth Thursday in November) and Christmas Day.
The assets of the Fund are generally valued on the basis of market quotations.
Securities whose principal market is on an exchange or in the over-the-counter
market are valued at the last reported sales price or, in the absence of
reported sales, at the mean between the bid and asked price or, in the absence
of a recent bid or asked price, the equivalent as obtained from one or more of
the major market makers for the securities to be valued. Bonds and other fixed
income securities may be valued on the basis of prices provided by a pricing
service when the Fund's Board of Trustees believes that these prices reflect the
fair market value of the securities. Other investments and other assets,
including restricted securities and securities for which market quotations are
not readily available, are valued at fair value under procedures approved by the
Fund's Board of Trustees. Short-term securities with maturities of 60 days or
less are valued at amortized cost, which constitutes fair value as determined by
the Fund's Board of Trustees.
CLASSES OF SHARES
As described in the Prospectus, the Fund has two classes of shares: Class A
shares, which are generally subject to a front-end load, and Class N shares,
which are not subject to a load. Exchanges cannot be made between Class A and
Class N shares. From time to time, Alger Inc. may reallow to brokers or
financial intermediaries all or substantially all of the initial sales charge on
a purchase of Class A shares. To the extent that it does so, such persons may be
deemed to be underwriters of the Fund as defined in the Securities Act of 1933,
as amended.
PURCHASES AND REDEMPTIONS
Shares of the Fund are offered continuously by the Fund and are distributed on a
best efforts basis by Alger Inc. as principal underwriter for the Fund pursuant
to a distribution agreement (the "Distribution Agreement"). Under the
Distribution Agreement, Alger Inc. bears all selling expenses, including the
costs of advertising and of printing prospectuses and distributing them to
prospective shareholders. Each of the officers of the Fund and Messrs. David D.
Alger and Fred M. Alger III, Trustees of the Fund, are "affiliated persons," as
defined in the Act, of the Fund and of Alger Inc.
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.
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.
PURCHASES THROUGH PROCESSING ORGANIZATIONS
You can buy shares through a "Processing Organization," which is a
broker-dealer, bank or other financial institution that purchases shares for its
customers. When shares are purchased this way, the Processing Organization,
rather than its customer, may be the shareholder of record of the shares.
Processing Organizations may impose charges and restrictions in addition to or
different from those applicable if you invest with the Fund directly. Therefore,
you should read the materials provided by the Processing Organization in
conjunction with the Prospectus. Certain Processing Organizations may receive
compensation from the Fund, Alger Inc., or any of its affiliates.
AUTOMATIC INVESTMENT PLAN (CLASS N SHARES)
Purchases into your account will be made on the fifteenth and/or last business
day of each month. If the fifteenth falls on a weekend or a NYSE holiday, the
purchase shall be made on the next business day. In order to participate, your
account must be held by a bank which is a member of the Automated Clearing
House. Please note that transfers from your bank account to a fund sponsored
retirement account will be considered current year contributions.
While there is no charge to shareholders for this service, a fee will be
deducted from a shareholder's Fund
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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. Class A Share purchases will remain
subject to the initial sales charge.
TELEPURCHASE AND TELEREDEMPTION
(CLASS N SHARES)
You can apply for TelePurchase or TeleRedemption by completing a Telephone
Services Form and returning it to the Transfer Agent. Although the Fund is
authorized to charge a fee of $17 for each automated Clearing House redemption,
it does not currently intend to do so. To use these privileges, your bank must
be a member of the automated Clearing House. Shares held in any Spectra
retirement plan and shares issued in certificate form are not eligible for this
service.
RIGHT OF ACCUMULATION (CLASS A SHARES)
Class A Shares of the Fund may be purchased by "any person" (which includes an
individual, his or her spouse and children, or a trustee or other fiduciary of a
single trust, estate or single fiduciary account) at a reduced sales charge as
determined by aggregating the dollar amount of the new purchase and the current
value (at offering price) of all Class A Shares of the Fund then held by such
person and applying the sales charge applicable to such aggregate. In order to
obtain such discount, the purchaser must provide sufficient information at the
time of purchase to permit verification that the purchase qualifies for the
reduced sales charge. The right of accumulation is subject to modification or
discontinuance at any time with respect to all shares purchased thereafter.
LETTER OF INTENT (CLASS A SHARES)
A Letter of Intent ("LOI") contemplating aggregate purchases of $100,000 or more
provides an opportunity for an investor to obtain a reduced sales charge by
aggregating investments over a 13-month period, provided that the investor
refers to such LOIwhen placing orders. For purposes of a LOI, the "Purchase
Amount" as referred to in the preceding sales charge table includes purchases by
"any person" (as defined above) of all Class A Shares of the Fund offered with a
sales charge over the following 13 months. An alternative is to compute the
13-month period starting up to 90 days before the date of execution of the LOI.
The minimum initial investment under the LOI is 5% of the total LOI amount. Each
investment made during the period receives the reduced sales charge applicable
to the total amount of the investment goal. Shares purchased with the first 5%
of the total LOIamount will be held in escrow by the Transfer Agent to assure
any necessary payment of a higher applicable sales charge if the investment goal
is not met. If the goal is not achieved within the period, the investor must pay
the difference between the sales charges applicable to the purchases made and
the charges previously paid, or an appropriate number of escrowed shares will be
redeemed.
SIGNATURE GUARANTEES
The Transfer Agent will accept a signature guarantee by the following financial
institutions: a U.S. bank, trust company, broker, dealer, municipal securities
broker or dealer, government securities broker or dealer, credit union which is
authorized to provide signature guarantees, national securities exchange,
registered securities association or clearing agency.
SELLING SHARES BY TELEPHONE (CLASS N SHARES)
The Fund, the Transfer Agent and their affiliates are not liable for acting in
good faith on telephone instructions relating to your account, so long as they
follow reasonable procedures to determine that the telephone instructions are
genuine. Such procedures may include recording the telephone calls and requiring
some form of personal identification. You should verify the accuracy of
telephone transactions immediately upon receipt of your confirmation statement.
Redemption requests generally will be paid on the next business day. This
service is not available within 60 days of changing your address or bank account
of record.
EXCHANGE PRIVILEGE
Shareholders may exchange shares of the Fund for shares of Alger Money Market
Portfolio of The Alger Fund (the "Portfolio"), another mutual fund managed by
Alger Management, and conversely may also exchange shares of the Portfolio for
Fund shares. 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, but only for Fund shares of the same class
as those originally exchanged for Portfolio shares. 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. A 1% contingent deferred sales charge ("CDSC") will be
assessed on redemptions of Class A Shares of the Fund purchased in an amount of
$1 million or more which have not been subject to the Class's initial sales
charge and which have not been held for a full year (see
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<PAGE>
"Contingent Deferred Sales Charge," below), and on redemptions of Portfolio
shares acquired in exchange for such shares, based solely on the period of time
the shares are retained in the Fund. Thus, the period of time shares are held in
the Portfolio will not be counted towards the one-year holding period in
determining whether the shares are subject to a CDSC.
Shares of the Portfolio received in an exchange will earn dividends beginning on
the next business day after the exchange. Before exchanging Fund shares for
Portfolio shares, an investor should carefully read a Prospectus describing the
Portfolio. To obtain a Prospectus for The Alger Fund and more information about
such exchanges, please call (800) 711-6141. The Fund reserves the right to
terminate or modify this exchange privilege or to charge a per-exchange fee upon
notice to shareholders.
For tax purposes, an exchange of shares is treated as a sale of the shares
exchanged and therefore you may realize a taxable gain or loss when you exchange
shares.
SYSTEMATIC WITHDRAWAL PLAN (CLASS N SHARES)
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 1% 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.
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.
CONTINGENT DEFERRED SALES CHARGE
Certain Class A Shares of the Fund are subject to a CDSC. Those Class A Shares
purchased in an amount of $1 million or more which have not been subject to the
Class's initial sales charge and which have not been held for a full year are
subject to a CDSC of 1% at the time of redemption.
Redemptions of Fund shares are deemed to be made first from amounts, if any, to
which a CDSC does not apply. There is no CDSC on redemptions of (i) shares that
represent appreciation on your original investment, or (ii) shares purchased
through reinvestment of dividends and capital gains.
WAIVERS OF SALES CHARGES
No initial sales charge or CDSC is imposed on Class A share purchases or
redemptions (1) by (i) employees of Alger Inc. and its affiliates, (ii) IRAs,
Keogh Plans and employee benefit plans for those employees and (iii) spouses,
children, siblings and parents of those employees and trusts of which those
individuals are beneficiaries, as long as orders for the shares on behalf of
those individuals and trusts were placed by the employees; (2) by (i) accounts
managed by investment advisory affiliates of Alger Inc. that are registered
under the Investment Advisers Act of 1940, as amended, (ii) employees,
participants and beneficiaries of those accounts, (iii) IRAs, Keogh Plans and
employee benefit plans for those employees, participants and beneficiaries and
(iv) spouses and minor children of those employees, participants and
beneficiaries as long as orders for the shares were placed by the employees,
participants and beneficiaries; (3) by directors or trustees of any invest-
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ment company for which Alger Inc. or any of its affiliates serves as investment
adviser or distributor; (4) of shares held through defined contribution plans as
defined by ERISA; (5) by an investment company registered under the 1940 Act in
connection with the combination of the investment company with the Fund by
merger, acquisition of assets or by any other transaction; (6) by registered
investment advisers for their own accounts; (7) on behalf of their clients by
registered investment advisers, banks, trust companies and other financial
institutions, including broker-dealers with which either the Fund or Alger Inc.
has entered into agreements contemplating the waiver of such charges; (8) by a
Processing Organization, as shareholder of record on behalf of (i) investment
advisers or financial planners trading for their own accounts or the accounts of
their clients and who charge a management, consulting or other fee for their
services and clients of such investment advisers or financial planners trading
for their own accounts if the accounts are linked to the master account of such
investment adviser or financial planner on the books and records of the
Processing Organization; and (ii) retirement and deferred compensation plans and
trusts used to fund those plans; (9) by registered representatives or
broker-dealers which have entered into Selected Dealer Agreements with Alger
Inc., and their spouses, children, siblings and parents; and (10) of shares
purchased with the proceeds of a redemption of shares of a mutual fund not
managed by Alger Management, if an initial or deferred sales charge was paid in
connection with the investment in the other fund and the redemption from the
other fund occurred within 90 days of the purchase of Fund shares.
In addition, no initial sales charge will be imposed on purchases of Class A
Shares by members of a "qualified group". A qualified group is one which: (i)
has been in existence for more than six months; (ii) was not organized for the
purpose of buying shares of the Fund or making similar investments; and (iii)
satisfies uniform criteria established by Alger Inc. that result in economy of
sales effort or expense, such as a criterion that purchases be made through a
central administration or through a single dealer. A qualified group does not
include a group whose sole organizational connection is participation as credit
card holders of a company, policyholders of an insurance company, customers of
either a bank or broker-dealer, clients of an investment adviser or a similar
connection. Class A Shares purchased by members of a qualified group will be
subject to a CDSCof 1% if redeemed within one year of purchase.
Investors purchasing Class A Shares subject to one of the foregoing waivers are
required to claim and substantiate their eligibility for the waiver at the time
of purchase. It is also the responsibility of shareholders redeeming shares
otherwise subject to a CDSC but qualifying for a waiver of the charge to assert
this status at the time of redemption. Information regarding these procedures is
available by contacting the Fund at (800) 992-3863.
CERTAIN WAIVERS OF THE CONTINGENT DEFERRED
SALES CHARGE
Any CDSC which otherwise would be imposed on redemptions of Class A Shares will
be waived in certain instances, including (a) redemptions of shares held at the
time a shareholder becomes disabled or dies, including the shares of a
shareholder who owns the shares with his or her spouse as joint tenants with
right of survivorship, provided that the redemption is requested within one year
after the death or initial determination of disability; (b) redemptions in
connection with the following retirement plan distributions: (i) lump-sum or
other distributions from a qualified corporate or Keogh retirement plan
following retirement, termination of employment, death or disability (or in the
case of a 5% owner of the employer maintaining the plan, following attainment of
age 70 1/2); (ii) required distributions from an Individual Retirement Account
("IRA") following the attainment of age 70 1/2 or from a custodial account under
Section 403(b)(7) of the Internal Revenue Code of 1986, following the later of
retirement or attainment of age 70 1/2; and (iii) a tax-free return of an excess
contribution to an IRA, and (c) systematic withdrawal payments. For purposes of
the waiver described in (a) above, a person will be deemed "disabled" if the
person is unable to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment that can be expected to
result in death or to be of long-continued and indefinite duration.
Shareholders claiming a waiver must assert their status at the time of
redemption.
REINSTATEMENT PRIVILEGE
A shareholder who has redeemed shares in the Fund may reinvest all or part of
the redemption proceeds in the Fund without an initial sales charge and receive
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a credit for any CDSC paid on the redemption, provided the reinvestment is made
within 30 days after the redemption. Reinvestment will be at the net asset value
of the Portfolio next determined upon receipt of the proceeds and a letter
requesting this privilege be exercised, subject to confirmation of the
shareholder's status or holdings, as the case may be. You will also receive a
pro rata credit for any CDSC imposed. This reinstatement privilege may be
exercised only once by a shareholder. Reinstatement will not alter any capital
gains tax payable on the redemption and a loss may not be allowed for tax
purposes.
MANAGEMENT
TRUSTEES AND OFFICERS OF THE FUND
The Fund is governed by a Board of Trustees which is responsible for protecting
the interests of shareholders under Massachusetts law. The names of the Trustees
and officers of the Fund, together with information concerning their principal
business occupations, and compensation during the fiscal year ended October 31,
1999 are set forth below. Each of the officers of the Fund is also an officer of
Castle Convertible Fund, Inc., a registered closed-end investment company, and
of 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. Each of the Trustees of the Fund is
also a director or trustee, as the case may be, of certain of these funds as
indicated in the Trustees' biographies. Fred M. Alger III and David D. Alger are
"interested persons" of the Fund, as defined in the Act. Fred M. Alger III and
David D. Alger are brothers. Unless otherwise noted, the address of each person
named below is One World Trade Center, Suite 9333, New York, New York 10048.
NAME, AGE, POSITION WITH
THE FUND AND ADDRESS PRINCIPAL OCCUPATIONS
Fred M. Alger III (65) Chairman of the Boards of Alger Associates,
Chairman of the Board Inc. ("Associates"), Alger Inc., Alger
Management, Alger Properties, Inc.
("Properties"), Alger Shareholder Services,
Inc. ("Services"), Alger Life Insurance
Agency, Inc. ("Agency"), The Alger American
Fund ("American"), The Alger Retirement Fund
("Retirement"), Castle Convertible Fund, Inc.
("Castle"), The Alger Fund ("Alger"), The
Alger American Asset Growth Fund ("Asset
Growth"), Fred Alger International Advisory
S.A. ("International"), and Analysts
Resources, Inc. ("ARI").
David D. Alger (56) President and Director of Associates, Alger
President and Trustee Management, Alger Inc., Properties, Services,
International, ARI, Agency and Castle;
President and Trustee of American, Retirement
and Alger; Director of Asset Growth.
Gregory S. Duch (48) Executive Vice President, Treasurer and
Treasurer Director of Alger Management, Associates and
Properties; Executive Vice President and
Treasurer of Alger Inc., ARI, Services and
Agency; Treasurer and Director of
International.
Frederick A. Blum (46) Senior Vice President of Alger Inc.
Assistant Secretary
and Assistant Treasurer
Charles F. Baird, Jr. (46) Managing Partner, North Castle Trustee
60 Arch Street Partners, a private equity securities group,
Greenwich, CT 06832 since 1997; Trustee of American, Retirement
and Alger; Formerly Managing Director, AEA
Investors Inc.
Roger P. Cheever (54) Associate Dean for Development, Harvard
Trustee University since 1997; Trustee of American,
124 Mount Auburn Street Retirement and Alger. Formerly Deputy
Cambridge, MA 02138 Director of the Harvard University Fund.
Lester L. Colbert, Jr. (65) Private investor since 1988; Director of
Trustee Castle; Trustee of American, Retirement and
551 Fifth Avenue Alger. Formerly Chairman of the Board,
New York, NY 10176 President and Chief Executive Officer of
Xidex Corporation.
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NAME, AGE, POSITION WITH
THE FUND AND ADDRESS PRINCIPAL OCCUPATIONS
Stephen E. O'Neil (67) Attorney; private investor since 1981;
Trustee Director of NovaCare, Inc., Brown-Forman
460 Park Avenue Corporation and Castle; Trustee of American,
New York, NY 10022 Retirement and Alger. Formerly President and
Vice Chairman of City Investing Company and
Director of Centerre Bancorporation and
Syntro Corporation.
Nathan E. Saint-Amand, M.D. (62) Medical doctor in private practice; Director
Trustee of Castle; Trustee of American, Retirement
2 East 88th Street and Alger.
New York, NY 10128
B. Joseph White (54) Dean, University of Michigan Business School;
Trustee President, William Davidson Institute at the
University of Michigan University of Michigan BusinessSchool;
Business School Professor of Business Administration,
701 Tappan Street University of Michigan Business School;
Ann Arbor, MI 48109 Director, Gordon Food Service and Castle;
Trustee and Chair, Audit Committee,Equity
Residential Properties Trust; Director and
Chair, Compensation Committee, Kelly
Services, Inc.; Trustee of American,
Retirement.
No director, officer or employee of Alger Management or its affiliates receives
any compensation from the Fund for serving as an officer or Trustee of the Fund.
The Fund pays each independent trustee $2,000 for each meeting he attends, to a
maximum of $8,000, plus travel expenses incurred for attending the meeting.
The Fund did not offer its Trustees any pension or retirement benefits during or
prior to the fiscal year ended October 31, 1999. The following table provides
compensation amounts paid to current independent Trustees of the Fund for the
fiscal year ended October 31, 1999.
COMPENSATION TABLE
TOTAL COMPENSATION PAID
TO TRUSTEES FROM
THE ALGER RETIREMENT FUND,
AGGREGATE THE ALGER FUND,
COMPENSATION THE ALGER AMERICAN FUND,
FROM CASTLE CONVERTIBLE FUND, INC.
NAME OF PERSON, POSITION SPECTRA FUND AND SPECTRA FUND
------------------------ ------------ -----------------------------
Stephen E. O'Neil, Trustee $6,250 $34,250
Nathan E. Saint-Amand, Trustee $6,250 $34,250
B. Joseph White, Trustee $6,000 $27,000
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INVESTMENT MANAGER
Alger Management serves as investment manager to the Fund pursuant to a written
agreement (the "Management Agreement"), subject to the supervision of the Board
of Trustees. The services provided by Alger Management under the Management
Agreement include: providing administrative services, making investment
decisions for the Fund, placing orders to purchase and sell securities on behalf
of the Fund, and selecting broker-dealers that, in its judgment, provide prompt
and reliable execution at favorable prices and reasonable commission rates. It
is anticipated that Alger Inc. will serve as the Fund's broker in effecting
substantially all of the Fund's transactions on securities exchanges and will
retain commissions in accordance with certain regulations of the Securities and
Exchange Commission. Alger Management employs professional securities analysts
who provide research services exclusively to the Fund and other accounts for
which Alger Management or its affiliates serve as investment adviser or
subadviser.
Alger Management is owned by Alger Inc. which in turn is owned by Alger
Associates, Inc. ("Associates"), a financial services holding company. Fred M.
Alger III and his brother, David D. Alger, are the majority shareholders of
Associates and may be deemed to control that company and its subsidiaries. Fred
Alger holds his shares through a limited liability company, of which he is the
president and majority shareholder.
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.
For the fiscal years ended October 31, 1999, October 31, 1998, and October 31,
1997, Alger Management received $5,716,197, $2,172,536 and $573,068,
respectively, from the Fund under these arrangements.
SHAREHOLDER SERVICING AGREEMENT
Under a Shareholder Servicing Agreement, the Fund pays Alger Inc. a shareholder
servicing fee of .25% of the value of the Fund's average daily net assets for
service and maintenance of shareholder accounts. Alger Inc. may pay some of this
fee to other organizations that also provide shareholder services and
maintenance of shareholder accounts. Payments under the Shareholder Servicing
Agreement are not tied exclusively to the shareholder servicing expenses
actually incurred by Alger Inc. and the payments may exceed expenses actually
incurred by Alger Inc. The Fund's Board of Trustees evaluates the
appropriateness of the Shareholder Servicing Agreement and its payment terms on
a periodic basis and in doing so considers all relevant factors, including
expenses borne by Alger Inc. and the amounts it receives under the Shareholder
Servicing Agreement. During the fiscal year ended October 31, 1999, the Fund
paid Alger Inc. $952,698 under the Shareholder Servicing Agreement.
CODE OF ETHICS
Alger Management personnel ("Access Persons") are permitted to engage in
personal securities transactions, including transactions in securities that may
be purchased or held by the Fund, subject to the restrictions and procedures of
the Fund's Code of Ethics. Pursuant to the Code of Ethics, Access Persons
generally must preclear all personal securities transactions prior to trading
and are subject to certain prohibitions on personal trading. You can get a copy
of the Fund's Code of Ethics by calling the Fund toll-free at (800) 711-6141.
EXPENSES OF THE FUND
Operating expenses for the Fund generally consist of all costs not specifically
borne by Alger Management, including custodian fees, Trustees' fees, transfer
agency fees, legal fees, auditing costs, investment management fees, fees for
necessary professional and brokerage services, costs of regulatory compliance
and costs associated with maintaining legal existence and shareholder relations.
In addition, the Fund may compensate Alger Inc. for servicing shareholder
accounts. From time to time, Alger Management, in its sole discretion and as it
deems appropriate, may assume certain expenses of the Fund while retaining the
ability to be reimbursed by the Fund for such amounts prior to the end of the
fiscal year. This will have the effect of lowering the Fund's overall expense
ratio and of increasing return to investors, or the converse, at the time such
amounts are assumed or reimbursed, as the case may be.
-15-
<PAGE>
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP serves as independent public accountants for the Fund.
TAXES
The following is a summary of selected federal income tax considerations that
may affect the Fund and its shareholders. The summary is not intended to
substitute for individual tax advice and investors are urged to consult their
own tax advisers as to the federal, state and local tax consequences of
investing in the Fund.
The Fund intends to qualify as a "regulated investment company" under Subchapter
M of the Internal Revenue Code of 1986, as amended (the "Code"). If qualified as
a regulated investment company, the Fund will pay no federal income taxes on its
investment company taxable income (that is, taxable income other than net
realized long-term capital gains) and its net realized long-term capital gains
that are distributed to shareholders. To qualify under Subchapter M, the Fund
must, among other things, distribute to its shareholders at least 90% of its
taxable net investment income and net realized short-term capital gains. In so
qualifying, the Fund may be restricted in the utilization of certain of the
investment techniques described above and in the Fund's prospectus. As a
regulated investment company, the Fund is subject to a non-deductible excise tax
of 4% with respect to certain undistributed amounts of income and capital gains
during the calendar year. The Fund expects to make additional distributions or
change the timing of its distributions so as to avoid the application of this
tax.
In general, any gain or loss on the redemption or exchange of Fund shares will
be long-term capital gain or loss if held by the shareholder for more than one
year, and will be short-term capital gain or loss if held for one year or less.
However, if a shareholder receives a distribution taxable as long-term capital
gain with respect to Fund shares, and redeems or exchanges the shares before
holding them for more than six months, any loss on the redemption or exchange up
to the amount of the distribution will be treated as a long-term capital loss.
Dividends of the Fund's net 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%
"backup withholding tax" with respect to (i) any taxable dividends and
distributions and (ii) any proceeds of any redemption of Fund shares.
CUSTODIAN AND TRANSFER AGENT
State Street Bank & Trust Company, 225 Franklin Street, Boston, Massachusetts
02110, serves as custodian of the Fund's assets pursuant to a custodian
agreement. Alger Shareholder Services, Inc. ("Services"), 30 Montgomery Street,
Jersey City, New Jersey 07302, serves as transfer agent for the Fund pursuant to
a transfer agency agreement. Under the transfer agency agreement Services
processes purchases and redemptions of shares of the Fund, maintains the
shareholder account records for the Fund, handles certain communications between
shareholders and the Fund and distributes any dividends and distributions
payable by the Fund.
Under the transfer agency agreement, Services is compensated on a per-account
and, for certain transactions, a per-transaction basis.
DIVERSIFICATION
The Fund is classified as a "diversified" investment company under the
Investment Company Act of 1940. A "diversified" investment company is required,
with respect to 75% of its assets, to limit its investment in any one issuer
(other than the U.S. government) to no more than 5% of the investment company's
total assets. The Fund intends to continue to qualify as a "regulated investment
company" under the Internal Revenue Code; one of the requirements for such
qualification is a quarterly diversification test, applicable to 50% (rather
than 75%) of the Fund's assets, similar to the requirement stated above.
CERTAIN SHAREHOLDERS
Set forth below is certain information regarding significant shareholders of
Class N shares. During the periods shown, shares of the Fund now designated
Class N shares were the only shares outstanding. Charles Schwab & Co.,
Inc.-Special Custody Acct. owned beneficially or of record 41.19% of the shares
of the Fund at June 8, 2000, 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.
-16-
<PAGE>
The following table contains information regarding persons who are known by the
Fund to own beneficially or of record 5% or more of Class N shares. Unless
otherwise noted, the address of each owner is One World Trade Center, Suite
9333, New York, New York 10048. All holdings are expressed as a percentage of
the Fund's outstanding shares as of June 8, 2000.
RECORD/BENEFICIAL
OWNERSHIP
-----------------
Charles Schwab & Co., Inc.
Special Custody Acct.
101 Montgomery Street
San Francisco, CA 94104 ....... 41.19%/--%
RECORD/BENEFICIAL
OWNERSHIP
-----------------
National Financial Services
200 Liberty Street
New York, NY 10281 ............ 13.83%/--%
The Fund's Trustees and officers as a group hold directly less than 1% of the
Fund's outstanding shares. Alger Associates, Inc., of which Fred M.Alger III and
David D. Alger are the majority shareholders, owns 2.2% of the Fund's shares.
ORGANIZATION
The Fund is a diversified, open-end management investment company. From its
inception in 1968 until February 12, 1996, the Fund was organized as a
Massachusetts business corporation, and it had operated as a registered
closed-end investment company since 1978. Shares of closed-end investment
companies, unlike those of open-end companies, are ordinarily not redeemable and
are not continuously offered for sale to the public. On February 12, 1996, the
Fund reorganized as a Massachusetts business trust and also converted to an
open-end investment company, or "mutual fund." In connection with the
reorganization, the name of the Fund was changed from "Spectra Fund, Inc." to
"Spectra Fund." The Fund is authorized to offer an unlimited number of shares.
Although, as a Massachusetts business trust, the Fund is not required by law to
hold annual shareholder meetings, it may hold meetings from time to time on
important matters, and shareholders have the right to call a meeting to remove a
Trustee or to take other action described in the Trust's Declaration of Trust.
Meetings of shareholders normally will not be held for the purpose of electing
Trustees unless and until such time as less than a majority of the Trustees
holding office have been elected by shareholders, at which time the Trustees
then in office will call a shareholders' meeting for the election of Trustees.
Under the Act, shareholders of record of no less than two-thirds of the
outstanding shares of the Fund may remove a Trustee through a declaration in
writing or by vote cast in person or by proxy at a meeting called for that
purpose. Under the Trust Agreement, the Trustees are required to call a meeting
of shareholders for the purpose of voting on the question of removal of any such
Trustee when requested in writing to do so by the shareholders of record of not
less than 10% of the Fund's outstanding shares.
Shares do not have cumulative voting rights, which means that holders of more
than 50% of the shares voting for the election of Trustees can elect all
Trustees. Shares have equal voting rights, which cannot be adversely modified
other than by majority vote. Shares are transferable but have no preemptive,
conversion or subscription rights. In the interest of economy and convenience,
certificates representing shares of the Fund are physically issued only upon
specific written request of a shareholder.
Massachusetts law provides that shareholders could, under certain circumstances,
be held personally liable for the obligations of the Fund. However, the Trust
Agreement disclaims shareholder liability for acts or obligations of the Fund
and requires that notice of such disclaimer be given in each agreement,
obligation or instrument entered into or executed by the Fund or a Trustee. The
Trust Agreement provides for indemnification from the Fund's property for all
losses and expenses of any shareholder held personally liable for the
obligations of the Fund. Thus, the risk of a shareholder's incurring financial
loss on account of shareholder liability is limited to circumstances in which
the Fund itself would be unable to meet its obligations, a possibility that the
Fund believes is remote. Upon payment of any liability incurred by the Fund, the
shareholder paying the liability will be entitled to reimbursement from the
general assets of the Fund. The Trustees intend to conduct the operations of the
Fund in a manner so as to avoid, as far as possible, ultimate liability of the
shareholders for liabilities of the Fund.
DETERMINATION OF
PERFORMANCE
The Fund may include quotations of "total return" in advertisements or reports
to shareholders or prospective investors. Total return figures show the
aggregate or average percentage change in value of an investment in the Fund
from the beginning date of the measuring period to the end of the measuring
period. These figures reflect changes in the price of the Fund's shares and
assume that any income dividends and/or capital gains distributions made by the
Fund during the period were reinvested in shares of the Fund. Figures will be
given
-17-
<PAGE>
for recent short-, mid-, and long-term periods (ordinarily for 1, 5 and 10
years), including periods during which the Fund operated as a closed-end
investment company, and may be given for other periods as well (such as from
commencement of the Fund's operations, or on a year-by-year basis) and may
utilize dollar cost averaging. The Fund may also use "aggregate"total return
figures for various periods, representing the cumulative change in value of an
investment in the Fund for the specific period (again reflecting changes in
share net asset value and assuming reinvestment of dividends and distributions)
as well as "actual annual" and "annualized" total return figures. Total returns
may be shown by means of schedules, charts or graphs, and may indicate subtotals
of the various components of total return (i.e., change in value of initial
investment, income dividends and capital gains distributions). Total return will
vary based on changes in market conditions. In addition, since the deduction of
expenses is reflected in the total return figures, total return will also vary
based on the level of the Fund's expenses. Current total return quotations may
be obtained by contacting the Fund. Further information about the Fund's
performance is contained in its Annual Report to Shareholders, which may be
obtained without charge by contacting the Fund.
The average annual "total return" is computed according to formulas prescribed
by the SEC. These performance figures are calculated in the following manner:
A. Total Return-The Fund's average annual total return described in the
Prospectus is computed according to the following formula:
P (1+T)n=ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made at
the beginning of the 1-, 5-, or 10-year periods at the end of the
1-, 5-, or 10-year periods (or fractional portion thereof);
The average annual total returns for Class N shares for the periods indicated
below were as follows:
FIVE YEARS TEN YEARS
YEAR ENDED ENDED ENDED
4/30/00 4/30/00 4/30/00
------- ------- -------
Class N 40.83% 35.57% 29.11%
B. Yield-the Fund's yield is computed according to the following formula:
6
YIELD = 2[(a-b/cd + 1) - 1]
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = The average daily number of shares outstanding during the period that
were entitled to receive dividends.
d = the maximum offering price per share on the last day of the period.
During the periods shown, shares of the Fund now designated Class N shares were
the only shares outstanding.
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(r). 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, 1999, and the six
months ended April 30, 2000, are contained in the Annual and Semi-Annual Reports
to shareholders and are hereby incorporated by reference. Copies of the Fund's
Annual and Semi-Annual Reports may be obtained free of charge by telephoning
(800) 711-6141.
-18-
<PAGE>
APPENDIX
CORPORATE BOND RATINGS
Bonds rated Aa by Moody's Investors Service, Inc. ("Moody's") are judged by
Moody's to be of high quality by all standards. Together with bonds rated Aaa
(Moody's highest rating) they comprise what are generally known as high-grade
bonds. Aa bonds are rated lower than Aaa bonds because margins of protection may
not be as large as those of Aaa bonds, or fluctuation of protective elements may
be of greater amplitude, or there may be other elements present that make the
long-term risks appear somewhat larger than those applicable to Aaa securities.
Bonds that are rated A by Moody's possess many favorable investment attributes
and are to be considered as upper medium-grade obligations. Factors giving
security to principal and interest are considered adequate, but elements may be
present that suggest a susceptibility to impairment in the future.
Moody's Baa rated bonds are considered as medium-grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present, but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and, in
fact, have speculative characteristics as well.
Bonds rated Ba by Moody's are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class. Bonds which are rated B by Moody's generally
lack characteristics of a desirable investment. Assurance of interest and
principal payments or of maintenance of other terms of the contract over any
long period of time may be small.
Moody's applies the numerical modifiers 1, 2 and 3 to each generic rating
classification from Aa through B. The modifier 1 indicates that the security
ranks in the higher end of its generic rating category; the modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates that the issue ranks in the
lower end of its generic rating category.
Bonds rated AA by Standard & Poor's Corporation ("S&P") are judged by S&P
to be high-grade obligations and in the majority of instances differ only in
small degree from issues rated AAA (S&P's highest rating). Bonds rated AAA are
considered by S&P to be the highest grade obligations and possess the ultimate
degree of protection as to principal and interest. With AA bonds, as with AAA
bonds, prices move with the long-term money market. Bonds rated A by S&P have a
strong capacity to pay principal and interest, although they are somewhat more
susceptible to the adverse effects of changes in circumstances and economic
conditions.
S&P's BBB rated bonds, or medium-grade category bonds, are borderline
between definitely sound obligations and those where the speculative elements
begin to predominate. These bonds have adequate asset coverage and normally are
protected by satisfactory earnings. Their susceptibility to changing conditions,
particularly to depressions, necessitates constant watching. These bonds
generally are more responsive to business and trade conditions than to interest
rates. This group is the lowest that qualifies for commercial bank investment.
Bonds rated BB and B by S&P are regarded, on balance, as predominantly
speculative with respect to capacity to pay interest and repay principal in
accordance with the terms of the obligation. These ratings may be modified by
the addition of a plus or minus sign to show relative standing within the major
rating categories. Debt rated BB has less near-term vulnerability to default
than other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions that could lead
to inadequate capacity to meet timely interest and principal payments. The BB
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied BBB- rating. Debt rated B has a greater
vulnerability to default but currently has the capacity to meet interest
payments and principal repayments. Adverse business, financial or economic
conditions will likely impair capacity or willingness to pay interest and repay
principal. The B rating category is also used for debt subordinated to senior
debt that is assigned an actual or implied BB or BB- rating.
Bonds rated AAA by Fitch Investors Service, Inc. ("Fitch") are judged by
Fitch to be strictly high grade, broadly marketable, suitable for investment by
trustees and fiduciary institutions and liable to but slight market fluctuation
other than through changes in the money rate. The prime feature of an AA bond is
a showing of earnings several times or many times interest requirements, with
such stability of applicable earnings that safety is beyond reasonable question,
A-1
<PAGE>
APPENDIX
(continued)
whatever changes occur in conditions. Bonds rated AA by Fitch are judged by
Fitch to be of safety virtually beyond question and are readily salable, whose
merits are not unlike those of the AAA class, but whose margin of safety is less
strikingly broad. The issue may be the obligation of a small company, strongly
secured but influenced as to rating by the lesser financial power of the
enterprise and more local type of market.
Bonds rated Duff-1 are judged by Duff and Phelps, Inc. ("Duff") to be of
the highest credit quality with negligible risk factors; only slightly more than
U. S. Treasury debt. Bonds rated Duff-2, 3 and 4 are judged by Duff to be of
high credit quality with strong protection factors. Risk is modest but may vary
slightly from time to time because of economic conditions.
COMMERCIAL PAPER RATINGS
Moody's Commercial Paper ratings are opinions of the ability of issuers to
repay punctually promissory obligations not having an original maturity in
excess of nine months. The rating Prime-1 is the highest commercial paper rating
assigned by Moody's. Issuers rated Prime-1, or related supporting institutions,
are considered to have a superior capacity for repayment of short-term
promissory obligations. Issuers rated Prime-2, or related supporting
institutions, are considered to have a strong capacity for repayment of
short-term promissory obligations. This will normally be evidenced by many of
the characteristics of issuers rated Prime-l, but to a lesser degree. Earnings
trends and coverage ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample liquidity is maintained.
Commercial paper ratings of S&P are current assessments of the likelihood
of timely payment of debts having original maturities of no more than 365 days.
Commercial paper rated A-1 by S&P indicates that the degree of safety regarding
timely payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted A-1+. Capacity for
timely payment on commercial paper rated A-2 is strong, but the relative degree
of safety is not as high as for issues designated A-1. The rating Fitch-1
(Highest Grade) is the highest commercial paper rating assigned by Fitch. Paper
rated Fitch-1 is regarded as having the strongest degree of assurance for timely
payment. The rating Fitch-2 (Very Good Grade) is the second highest commercial
paper rating assigned by Fitch which reflects an assurance of timely payment
only slightly less in degree than the strongest issues.
The rating Duff-1 is the highest commercial paper rating assigned by Duff.
Paper rated Duff-1 is regarded as having very high certainty of timely payment
with excellent liquidity factors which are supported by ample asset protection.
Risk factors are minor. Paper rated Duff-2 is regarded as having good certainty
of timely payment, good access to capital markets and sound liquidity factors
and company fundamentals. Risk factors are small.
A-2
<PAGE>
INVESTMENT MANAGER:
Fred Alger Management, Inc.
One World Trade Center
Suite 9333
New York, New York 10048
---------------------------------------------
DISTRIBUTOR:
Fred Alger & Company, Incorporated
30 Montgomery Street
Jersey City, New Jersey 07302
---------------------------------------------
TRANSFER AGENT:
Alger Shareholder Services, Inc.
30 Montgomery Street
Box 2001
Jersey City, New Jersey 07302
---------------------------------------------
INDEPENDENT PUBLIC ACCOUNTANTS:
Arthur Andersen LLP
1345 Avenue of the Americas
New York, New York 10105
---------------------------------------------
COUNSEL:
Hollyer Brady Smith Troxell
Barrett Rockett Hines & Mone LLP
551 Fifth Avenue
New York, New York 10176
---------------------------------------------
No person has been authorized to give any
information or to make any representations
other than those contained in the Prospectus,
the Statement of Additional Information or
the Fund's official sales literature in
connection with the offering of the Fund's
shares, and if given or made, such other
information or representations must not be
relied on as having been authorized by the
Fund. The Prospectus does not constitute an
offer in any state in which, or to any person
to whom, such offer may not lawfully be made.
|
SPECTRA | One World Trade Center Suite 9333
FUND | New York, New York 10048
| (800) 711-6141
|
|
STATEMENT |
OF ADDITIONAL | JUNE 30, 2000
INFORMATION |
|
