As filed with the Securities and Exchange Commission
on July 31 1995
Securities Act File No. 33-21722
Investment Company Act File No. 811-5550
SECURITIES AND EXCHANGE COMMISSION
Washington D. C. 20549
_____
Registration Statement Under The Securities Act of 1933 _____
_____
Pre-Effective Amendment No. _____
Post-Effective Amendment No. l1 __X__
and/or
_____
Registration Statement Under The Investment Company Act of 1940 _____
_____
Amendment No. 13 __X__
(Check appropriate box or boxes)
THE ALGER AMERICAN FUND
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
75 Maiden Lane
New York, New York 10038
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: 212-806-8800
Mr. Gregory S. Duch
Fred Alger Management, Inc.
75 Maiden Lane
New York, NY 10038
- --------------------------------------------------------------------------------
(Name and Address of Agent for Service)
Page 1 of _____ Pages
Exhibit Index at Page _____
<PAGE>
It is proposed that this filing will become effective (check appropriate box):
_____
__X__ immediately upon filing pursuant to paragraph (b), or
_____
_____ on [date] pursuant to paragraph (b), or
_____
_____ 60 days after filing pursuant to paragraph (a), or
_____
_____ on [date] pursuant to paragraph (a) of Rule 485
----------
DECLARATION PURSUANT TO RULE 24f-2
Registrant has registered an indefinite number or amount of securities
under the Securities Act of 1933, as amended, pursuant to Securities (a)(l) of
Rule 24f-2 under the Investment Company Act of 1940, as amended. The Rule 24f-2
Notice for Registrant's fiscal year ended December 31, 1994 was filed on
February 27, 1995.
<PAGE>
THE ALGER AMERICA FUND
FORM N-1A
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
Part A
Item No. Prospectus Heading
- -------- ------------------
<S> <C>
1. Cover Page ................................... Front Cover Page
2. Synopsis ..................................... Portfolio Expenses
3. Condensed Financial Information .............. Financial Highlights
4. General Description of Registrant ............ Front Cover Page; The Alger
American Fund; Investment
Objectives and Policies; Investment
Practices; Management of the Fund
5. Management of the Fund ....................... Management of the Fund
6. Capital Stock and Other Securities ........... Front Cover Page; Management of the
Fund; Dividends and Distributions;
Taxes; Investor and Shareholder
Information
7. Purchase of Securities Being Offered ......... Management of the Fund; Net Asset
Value; Purchases and Redemptions
8. Redemption or Repurchase ..................... Purchases and Redemptions
9. Pending Legal Proceedings .................... Not Applicable
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Part B Heading in Statement of
Item No. Additional Information
- -------- ----------------------
<S> <C>
l0. Cover Page ................................... Front Cover Page
11. Table of Contents ............................ Contents
12. General Information and History .............. Not Applicable
13. Investment Objectives and Policies ........... Investment Objectives and
Policies; Appendix
14. Management of the Fund ....................... Management
15. Control Persons and Principal Holders of
Securities ................................. Certain Shareholders
l6. Investment Advisory and Other Services ....... Management; Custodian and Transfer
Agent; Purchases; See in the
Prospectus "Management of the Fund"
17. Brokerage Allocation and Other Practices ..... Investment Objectives and Policies
18. Capital Stock and Other Securities ........... Organization; See in the
Prospectus "Dividends and
Distributions" and "Management of
the Fund"
l9. Purchase, Redemption and Pricing of
Securities Being Offered ..................... Net Asset Value; Purchases;
Redemptions
20. Tax Status ................................... Taxes; See in the Prospectus "Taxes"
21. Underwriters ................................. Purchases
22. Calculation of Performance Data .............. Determination of Performance; See
in the Prospectus "Performance"
23. Financial Statements. ........................ Financial Statements
</TABLE>
<PAGE>
Part C
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Registration Statement.
<PAGE>
PROSPECTUS
- ----------
THE
ALGER 75 Maiden Lane
AMERICAN New York, New York 10038
FUND (800) 992-FUND (992-3863)
The Alger American Fund is a registered investment company -- a mutual fund
- -- that presently offers interests in six Portfolios. Each Portfolio has
distinct investment objectives and policies and a shareholder's interest is
limited to the Portfolio in which he or she owns shares. The six Portfolios are:
o Alger American Balanced Portfolio
o Alger American Income and Growth Portfolio
o Alger American Small Capitalization Portfolio
o Alger American Growth Portfolio
o Alger American MidCap Growth Portfolio
o Alger American Leveraged AllCap Portfolio
Shares of the Portfolios are offered as a pooled funding vehicle for
insurance companies writing all types of variable annuity contracts ("VA
contracts") and variable life insurance policies ("VLI policies") and may also
be offered directly to qualified pension and retirement plans (the "Plans"). See
"The Alger American Fund."
Shares of the Fund are not deposits or obligations of, or guaranteed or
endorsed by any bank, and the shares are not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other agency.
This Prospectus, which should be retained for future reference, contains
important information that you should know before investing. Please read it
along with the prospectuses issued by the insurance companies with respect to
the VA contracts and VLI policies or with the Plan documents. A "Statement of
Additional Information" dated July 31, 1995 containing further information about
The Alger American Fund has been filed with the Securities and Exchange
Commission and is incorporated by reference into this Prospectus. It is
available at no charge by contacting The Alger American Fund at the address or
phone number above.
FRED ALGER FRED ALGER
MANAGEMENT, Investment Manager & COMPANY, Distributor
INC. INCORPORATED
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRE-
SENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
July 31, 1995
<PAGE>
- --------------------------------------------------------------------------------
CONTENTS
Page
----
Portfolio Expenses ........................................................ iii
Financial Highlights ...................................................... iv
The Portfolios ............................................................ 1
Participating Insurance Companies and Plans ............................... 1
Investment Objectives and Policies ........................................ 1
Alger American Balanced Portfolio ....................................... 1
Alger American Income and Growth
Portfolio ............................................................. 1
Alger American Small Capitalization
Portfolio ............................................................. 2
Alger American Growth Portfolio ......................................... 2
Alger American MidCap Growth
Portfolio ............................................................. 2
Alger American Leveraged AllCap
Portfolio ............................................................. 2
Investment Practices ...................................................... 3
Management of the Fund .................................................... 4
Net Asset Value ........................................................... 6
Purchases and Redemptions ................................................. 6
Dividends and Distributions ............................................... 7
Taxes ..................................................................... 7
Performance ............................................................... 7
Investor and Shareholder Information ...................................... 8
- --------------------------------------------------------------------------------
ii
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO EXPENSES
The Table below is designed to assist you in understanding the various costs
and expenses that you will bear as a shareholder. The amounts listed under
"Other Expenses" and "Interest Expense" in the Table for the Alger American
Leveraged AllCap Portfolio are based on estimated amounts for the Fund's fiscal
year ending December 31, 1995. The Table does not reflect charges and deductions
which are, or may be, imposed under the VA contracts, VLI policies or Plans;
such charges and deductions are described in the prospectus for the VA contract
or VLI policy accompanying this Prospectus or in the Plan documents.
The Example below shows the amount of expenses you would pay on a $1,000
investment in the Portfolios. These amounts assume the reinvestment of all
dividends and distributions and payment by the Portfolios of operating expenses
as shown in the Table under Annual Fund Operating Expenses. The Example is an
illustration only and actual expenses may be greater or less than those shown.
<TABLE>
<CAPTION>
Alger Alger Alger Alger
Alger American American Alger American American
American Income and Small American MidCap Leveraged
Balanced Growth Capitalization Growth Growth AllCap
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on
Purchases.................................. None None None None None None
Maximum Sales Load Imposed
on Reinvested Dividends..................... None None None None None None
Deferred Sales Load........................... None None None None None None
Redemption Fees............................... None None None None None None
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees............................... .75% .625% .85% .75% .80% .85%
12b-1 Fees.................................... -- -- -- -- -- --
Other Expenses (excluding interest)........... .33% .125% .11% .11% .17% .19%
---- ---- --- --- --- ----
Total Fund Operating Expenses
(before interest).......................... 1.08% .750% .96% .86% .97% 1.04%
Interest Expense.............................. -- -- -- -- -- .75%
---- ---- --- --- --- ----
Total Fund Expenses........................... 1.08% .750% .96% .86% .97% 1.79%
==== ==== === === === ====
Example
You would pay the following expenses on a
$1,000 investment, assuming (1) 5% annual
return and (2) redemption at the end of
each time period:
<S> <C> <C> <C> <C> <C> <C>
One Year...................................... $ 11 $ 8 $ 10 $ 9 $ 10 $ 18
Three Years................................... 34 24 31 27 31 56
Five Years.................................... 60 42 53 48 54 97
Ten Years..................................... 132 93 118 106 119 211
</TABLE>
- --------------------------------------------------------------------------------
iii
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The Financial Highlights for the years ended December 31, 1990 through 1994
have been audited by Arthur Andersen LLP, the Fund's independent public
accountants, as indicated in their report dated February 2, 1995 on the Fund's
financial statements as of December 31, 1994 which are included in the Fund's
Statement of Additional Information. The Financial Highlights should be read in
conjunction with the Fund's financial statements and notes thereto. The
Financial Highlights, with the exception of the total return information, for
the periods ended December 31, 1989 and 1988 have been audited by other
independent accountants, who have expressed an unqualified opinion thereon. The
Statement of Additional Information may be obtained from the Fund without
charge.
THE ALGER AMERICAN FUND
GROWTH PORTFOLIO
Financial Highlights
For a share outstanding throughout the period
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989(ii)
-------- ------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year... $ 24.67 $ 20.17 $ 18.00 $ 12.86 $12.41 $10.00
-------- ------- ------- ------- ------ ------
Net investment income................ 0.07 0.03 0.03 0.08(i) 0.07 0.09
Net realized and unrealized gain
on investments..................... 0.15 4.50 2.19 5.11 0.44 2.32
-------- ------- ------- ------- ------ ------
Total from investment
operations...................... 0.22 4.53 2.22 5.19 0.51 2.41
-------- ------- ------- ------- ------ ------
Dividends from net investment
income............................. (0.03) (0.03) (0.03) (0.05) (0.06) --
Distributions from net realized
gains.............................. (1.73) -- (0.02) -- -- --
-------- ------- ------- ------- ------ ------
Total Distributions................ (1.76) (0.03) (0.05) (0.05) (0.06) --
-------- ------- ------- ------- ------ ------
Net asset value, end of year......... $ 23.13 $ 24.67 $ 20.17 $ 18.00 $12.86 $12.41
======== ======= ======= ======= ====== ======
Total Return......................... 1.45% 22.47% 12.38% 40.39% 4.14% 24.10%(iii)
======== ======= ======= ======= ====== ======
Ratios and Supplemental Data:
Net assets, end of year
(000's omitted).................. $150,390 $74,878 $30,316 $10,094 $1,228 $ 171
======== ======= ======= ======= ====== ======
Ratio of expenses to average
net assets....................... 0.86% 0.97% 0.99% 1.29% 1.50% 1.50%
======== ======= ======= ======= ====== ======
Decrease reflected in above
expense ratios due to
expense reimbursements........... -- -- -- -- 2.31% 7.32%
======== ======= ======= ======= ====== ======
Ratio of net investment income
to average net assets............ 0.48% 0.25% 0.33% 0.52% 1.69% 1.30%
======== ======= ======= ======= ====== ======
Portfolio Turnover Rate............ 111.76% 112.64% 63.91% 58.95% 86.77% 79.59%
======== ======= ======= ======= ====== ======
</TABLE>
(i) Amount was computed based on average shares outstanding during the period.
(ii) For the period January 9, 1989 (commencement of operations) to December
31, 1989. Ratios have been annualized; total return has not been
annualized.
(iii) Unaudited.
- --------------------------------------------------------------------------------
iv
<PAGE>
- --------------------------------------------------------------------------------
THE ALGER AMERICAN FUND
SMALL CAPITALIZATION PORTFOLIO
Financial Highlights
For a share outstanding throughout the period
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988(iii)
-------- -------- -------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year........... $ 30.88 $ 27.26 $ 26.79 $ 17.02 $ 15.79 $ 9.60 $10.00
-------- -------- -------- ------- ------- ------ ------
Net investment
income (loss)............... (0.03)(i) (0.05) (0.06) (0.03) 0.02 0.04 0.06
Net realized and
unrealized gain
(loss) on investments....... (1.45) 3.67 0.91 9.82 1.35 6.15 (0.40)
-------- -------- -------- ------- ------- ------ ------
Total from investment
operations................ (1.48) 3.62 0.85 9.79 1.37 6.19 (0.34)
-------- -------- -------- ------- ------- ------ ------
Dividends from net
investment income........... -- -- -- (0.02) (0.01) -- (0.06)
Distributions from net
realized gains............. (2.09) -- (0.38) -- (0.13) -- --
-------- -------- -------- ------- ------- ------ ------
Total Distributions......... (2.09) -- (0.38) (0.02) (0.14) -- (0.06)
-------- -------- -------- ------- ------- ------ ------
Net asset value, end
of year..................... $ 27.31 $ 30.88 $ 27.26 $ 26.79 $ 17.02 $15.79 $ 9.60
======== ======== ======== ======= ======= ====== ======
Total Return.................. (4.38%) 13.28% 3.55% 57.54% 8.71% 64.48%(ii) 3.35%(ii)
======== ======== ======== ======= ======= ====== ======
Ratios and
Supplemental Data:
Net assets, end of year
(000's omitted)........... $397,037 $238,850 $135,718 $56,798 $ 7,149 $ 569 $ 39
======== ======== ======== ======= ======= ====== ======
Ratio of expenses to
average net assets....... 0.96% 1.03% 0.98% 1.06% 1.50% 1.50% 1.50%
======== ======== ======== ======= ======= ====== ======
Decrease reflected in
above expense ratios
due to expense
reimbursements............ -- -- -- -- 0.33% 9.15% 12.31%
======== ======== ======== ======= ======= ====== ======
Ratio of net investment
income (loss) to
average net assets........ (0.10%) (0.35%) (0.37%) (0.12%) 0.50% 1.11% 2.27%
======== ======== ======== ======= ======= ====== ======
Portfolio Turnover
Rate...................... 117.61% 148.07% 108.06% 125.90% 132.46% 133.61% 20.86%
======== ======== ======== ======= ======= ====== ======
(i) Amount was computed based on average shares outstanding during the period.
(ii) Unaudited.
(iii)For the period September 21, 1988 (commencement of operations) to December
31, 1988. Ratios have been annualized; total return has not been
annualized.
</TABLE>
- --------------------------------------------------------------------------------
v
<PAGE>
- --------------------------------------------------------------------------------
THE ALGER AMERICAN FUND
INCOME AND GROWTH PORTFOLIO
Financial Highlights
For a share outstanding throughout the period
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988(ii)
------- ------- ------- ------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year.......... $ 15.31 $ 13.93 $ 13.08 $ 10.67 $10.74 $10.00 $10.00
------- ------- ------- ------- ------ ------ ------
Net investment income......... 0.17 0.07 0.08 0.09 0.11 0.18 0.10
Net realized and
unrealized gain (loss)
on investments............. (1.47) 1.37 1.02 2.41 (0.08) 0.56 --
------- ------- ------- ------- ------ ------ ------
Total from investment
operations................. (1.30) 1.44 1.10 2.50 0.03 0.74 0.10
------- ------- ------- ------- ------ ------ ------
Dividends from net
investment income.......... (0.15) (0.06) (0.12) (0.09) (0.10) -- (0.10)
Distributions from net
realized gains............. (0.56) -- (0.13) -- -- -- --
------- ------- ------- ------- ------ ------ ------
Total Distributions......... (0.71) (0.06) (0.25) (0.09) (0.10) -- (0.10)
------- ------- ------- ------- ------ ------ ------
Net asset value, end of year.. $ 13.30 $ 15.31 $ 13.93 $ 13.08 $10.67 $10.74 $10.00
======= ======= ======= ======= ====== ====== ======
Total Return.................. (8.28%) 10.34% 8.64% 23.51% 0.28% 7.40%(i) 0.95%(i)
======= ======= ======= ======= ====== ====== ======
Ratios and
Supplemental Data:
Net assets, end of year
(000's omitted).......... $29,135 $31,895 $ 8,671 $ 2,663 $ 436 $ 98 $ 28
======= ======= ======= ======= ====== ====== ======
Ratio of expenses to
average net assets....... 0.75% 0.97% 1.25% 1.25% 1.25% 1.25% 1.25%
======= ======= ======= ======= ====== ====== ======
Decrease reflected in
above expense ratios
due to expense
reimbursements........... -- -- 0.01% 0.66% 5.41% 23.72% 20.26%
======= ======= ======= ======= ====== ====== ======
Ratio of net investment
income to average
net assets............... 1.22% 1.51% 1.62% 2.54% 3.61% 7.36% 7.30%
======= ======= ======= ======= ====== ====== ======
Portfolio Turnover Rate..... 177.97% 105.80% 100.62% 61.11% 56.90% -- --
======= ======= ======= ======= ====== ====== ======
(i) Unaudited.
(ii) For the period November 15, 1988 (commencement of operations) to December
31, 1988. Ratios have been annualized; total return has not been
annualized.
</TABLE>
- --------------------------------------------------------------------------------
vi
<PAGE>
- --------------------------------------------------------------------------------
THE ALGER AMERICAN FUND
BALANCED PORTFOLIO (i)
Financial Highlights
For a share outstanding throughout the period
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989(ii)
------- ------- ------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year.......... $ 11.58 $ 10.77 $ 10.02 $10.01 $10.04 $10.00
------- ------- ------- ------ ------ ------
Net investment income....................... 0.20 0.15 0.22 0.45 0.66 0.22
Net realized and unrealized gain (loss)
on investments........................... (0.70) 0.69 0.72 0.01 (0.03) 0.04
------- ------- ------- ------ ------ ------
Total from investment operations.......... (0.50) 0.84 0.94 0.46 0.63 0.26
------- ------- ------- ------ ------ ------
Dividends from net investment
income................................... (0.13) (0.03) (0.19) (0.45) (0.66) (0.22)
Distributions from net realized gains....... (0.15) -- -- -- -- --
------- ------- ------- ------ ------ ------
Total Distributions....................... (0.28) (0.03) (0.19) (0.45) (0.66) (0.22)
------- ------- ------- ------ ------ ------
Net asset value, end of year................ $ 10.80 $ 11.58 $ 10.77 $10.02 $10.01 $10.04
======= ======= ======= ====== ====== ======
Total Return................................ (4.27%) 7.79% 9.48% 4.70% 6.53% 2.65%(iii)
======= ======= ======= ====== ====== ======
Ratios and Supplemental Data:
Net assets, end of year
(000's omitted)........................ $10,394 $ 7,848 $ 4,009 $1,487 $ 365 $ 131
======= ======= ======= ====== ====== ======
Ratio of expenses to average net
assets................................. 1.08% 1.25% 1.25% 1.25% 1.25% 1.25%
======= ======= ======= ====== ====== ======
Decrease reflected in above expense
ratios due to expense
reimbursements......................... -- 0.19% 0.42% 1.37% 4.81% 5.89%
======= ======= ======= ====== ====== ======
Ratio of net investment income to
average net assets..................... 2.30% 2.05% 1.99% 4.22% 6.60% 6.92%
======= ======= ======= ====== ====== ======
Portfolio Turnover Rate................... 78.80% 85.46% 15.27% -- 132.55% --
======= ======= ======= ====== ====== ======
(i) Prior to October 1, 1992, the Alger American Balanced Portfolio was the
Alger American Fixed Income Portfolio.
(ii) For the period September 5, 1989 (commencement of operations) to December
31, 1989. Ratios have been annualized; total return has not been
annualized.
(iii) Unaudited.
</TABLE>
- --------------------------------------------------------------------------------
vii
<PAGE>
- --------------------------------------------------------------------------------
THE ALGER AMERICAN FUND
MIDCAP GROWTH PORTFOLIO
Financial Highlights
For a share outstanding throughout the period
<TABLE>
<CAPTION>
From May 3, 1993
Year Ended (commencement of
December 31, operations)
1994 to December 31, 1993(i)
----------- -----------------------
<S> <C> <C>
Net asset value, beginning of year.................................. $ 13.72 $ 10.00
------- -------
Net investment income (loss)........................................ 0.00(ii) (0.02)
Net realized and unrealized gain (loss) on investments.............. (0.21) 3.88
------- -------
Total from investment operations.................................. (0.21) 3.86
Distributions from net realized gains............................... (0.05) (0.14)
------- -------
Net asset value, end of year........................................ $ 13.46 $ 13.72
======= =======
Total Return........................................................ (1.54%) 38.67%
======= =======
Ratios and Supplemental Data:
Net assets, end of year (000's omitted)........................... $62,178 $21,301
======= =======
Ratio of expenses to average net assets........................... 0.97% 1.50%
======= =======
Decrease reflected in above expense ratios due to expense
reimbursements.................................................. -- 0.03%
======= =======
Ratio of net investment income (loss) to average net assets....... 0.03% (0.58%)
======= =======
Portfolio Turnover Rate........................................... 83.96% 67.22%
======= =======
(i) Ratios have been annualized; total return has not been annualized.
(ii) Amount was computed based on average shares outstanding during the period.
</TABLE>
- --------------------------------------------------------------------------------
viii
<PAGE>
- --------------------------------------------------------------------------------
THE ALGER AMERICAN FUND
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
Financial Highlights
For a share outstanding throughout the period
From January 25, 1995
(commencement of
operations)
to June 30, 1995(i)
-------------------
Net asset value, beginning of period ......................... $ 10.00
-------
Net investment (loss) ........................................ (0.04)
Net realized and unrealized gain (loss) on investments ...... 4.55
-------
Total from investment operations ......................... 4.51
-------
Net asset value, end of period ............................... $ 14.51
=======
Total Return ................................................. 45.10%
=======
Ratios and Supplemental Data:
Net assets, end of period (000's omitted) .................. $ 386
=======
Ratio of expenses excluding interest to average net assets . 1.50%
=======
Ratio of expenses including interest to average net assets . 1.94%
=======
Decrease reflected in above expense ratios
due to expense reimbursements ............................ 6.83%
=======
Ratio of net investment (loss) to average net assets ....... (0.91%)
=======
Portfolio Turnover Rate .................................... 123.0%
=======
Debt outstanding at end of period ............................ $ 0
=======
Average amount of debt outstanding during the period ......... $13,748
=======
Average daily number of shares outstanding during the period . 24,688
=======
Average amount of debt per share during the period ........... $ 0.56
=======
(i)Unaudited. Ratios have been annualized; total return has not been
annualized.
- --------------------------------------------------------------------------------
ix
<PAGE>
THE ALGER AMERICAN FUND
The Alger American Fund (the "Fund") is designed to permit insurance
companies that issue variable annuity contracts ("VA contracts") and variable
life insurance policies ("VLI policies") to offer contract and policy holders
the opportunity to participate in the performance of one or more of the
Portfolios of the Fund. Upon receipt by the Fund of an exemptive order (the
"Order") for which an application is currently pending with the Securities and
Exchange Commission, the Fund may also be a funding vehicle for qualified
pension and retirement plans (the "Plans") which elect to make the Fund an
investment option for Plan participants. If the Order is issued, the Fund will,
without notice to shareholders, accept orders from Plans to purchase shares of
the Portfolios.
The Fund is a diversified, open-end management investment company that offers
a selection of six Portfolios, each having distinct investment objectives and
policies. The Fund's Board of Trustees may establish additional Portfolios at
any time.
PARTICIPATING INSURANCE COMPANIES AND PLANS
The Fund is intended to be a funding vehicle for VA contracts and VLI
policies to be offered by the separate accounts of certain life insurance
companies ("Participating Insurance Companies") and, if the Order is issued,
Plans. Individuals cannot invest in a Portfolio directly but may do so only
through a VA contract or VLI policy or, if the Order is issued, a Plan. The Fund
currently does not foresee any disadvantages to the holders of VA contracts and
VLI policies arising from the fact that the interests of the holders of VA
contracts and VLI policies may differ, that the Participating Insurance
Companies may not be affiliated with each other or that the Fund may offer its
shares to Plans. Nevertheless, the Fund's Trustees intend to monitor events in
order to identify any material irreconcilable conflicts which may possibly arise
due to differences of tax treatment or other considerations, and to determine
what action, if any, should be taken in response to such conflicts. If such a
conflict were to occur, one or more Participating Insurance Company separate
accounts or Plans might withdraw its investment in a Portfolio, which may cause
the Portfolio to sell portfolio securities at disadvantageous prices. The VA
contracts and VLI policies are described in the separate prospectuses issued by
the Participating Insurance Companies, and the Plans are described in the Plan
documents made available by the Plan sponsors. The Fund assumes no
responsibility for such prospectuses or plan documents.
INVESTMENT OBJECTIVES
AND POLICIES
The investment objectives and restrictions summarized below are fundamental
which means that they may not be changed without shareholder approval. All
investment policies and practices described elsewhere in this Prospectus are not
fundamental, so the Fund's Board of Trustees may change them without shareholder
approval. There is no guarantee that any Portfolio's objectives will be
achieved.
As a matter of fundamental policy, no Portfolio will: (1) with respect to 75%
of its total assets, invest more than 5% of its total assets in any one issuer,
except for obligations issued or guaranteed by the U.S. Government, its agencies
or instrumentalities ("U.S. Government securities"); (2) own more than 10% of
the outstanding voting securities of any company; (3) invest more than 10% (15%
for the Alger American Leveraged AllCap Portfolio) of its net assets in
securities that are not readily marketable and in repurchase agreements with
maturities of more than seven days; (4) invest more than 25% of its total assets
in any one industry, except for U.S. Government securities; (5) borrow money or
pledge its assets, except for temporary or emergency purposes, in an amount
exceeding 10% of its total assets; except that the Alger American Leveraged
AllCap Portfolio may borrow for investment purposes. The Statement of Additional
Information contains additional investment restrictions as well as information
on the Portfolios' investment practices.
Alger American Balanced Portfolio
The investment objective of the Portfolio is current income and long-term
capital appreciation. The Portfolio intends to invest based on combined
considerations of risk, income, capital appreciation and protection of capital
value. Normally, it will invest in common stocks and investment grade fixed
income securities (preferred stock and debt securities), as well as securities
convertible into common stocks. Except during temporary defensive periods, the
Portfolio will maintain at least 25% of its net assets in fixed income senior
securities. With respect to debt securities, the Portfolio will invest only in
instruments which are rated in one of the four highest rating categories by any
established rating agency, or if not rated, which are determined by Alger
Management to be of comparable quality to instruments so rated.
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The Portfolio may invest up to 35% of its total assets in money market
instruments and repurchase agreements, and in excess of that amount (up to 100%
of its assets) during temporary defensive periods.
Alger American Income and Growth Portfolio
The primary investment objective of the Portfolio is to provide a high level
of dividend income. Capital appreciation is a secondary objective of the
Portfolio. Except during temporary defensive periods, the Portfolio attempts to
invest 100%, and it is a fundamental policy of the Portfolio to invest at least
65% of its total assets in dividend paying equity securities. In selecting among
dividend paying equity securities, Alger Management will favor securities it
believes also offer opportunities for capital appreciation. The Portfolio may
invest up to 35% of its total assets in money market instruments and repurchase
agreements and in excess of that amount (up to 100% of its assets) during
temporary defensive periods.
Alger American Small Capitalization Portfolio
The investment objective of the Portfolio is long-term capital appreciation.
Except during temporary defensive periods, the Portfolio invests at least 65% of
its total assets in equity securities of companies that, at the time of
purchase, have "total market capitalization" -- present market value per share
multiplied by the total number of shares outstanding -- of less than $1 billion.
The Portfolio may invest up to 35% of its total assets in equity securities
of companies that, at the time of purchase, have total market capitalization of
$1 billion or greater and in excess of that amount (up to 100% of its assets)
during temporary defensive periods.
Alger American Growth Portfolio
The investment objective of the Portfolio is long-term capital appreciation.
Except during temporary defensive periods, the Portfolio invests at least 65% of
its total assets in equity securities of companies that, at the time of purchase
of the securities, have total market capitalization of $1 billion or greater.
The Portfolio may invest up to 35% of its total assets in equity securities
of companies that, at the time of purchase, have total market capitalization of
less than $1 billion and in excess of that amount (up to 100% of its assets)
during temporary defensive periods.
Alger American MidCap Growth Portfolio
The investment objective of the Portfolio is long-term capital appreciation.
Except during temporary defensive periods, the Portfolio invests at least 65% of
its total assets in equity securities of companies that, at the time of purchase
of the securities, have total market capitalization between $750 million and
$3.5 billion.
Alger American Leveraged AllCap Portfolio
The investment objective of the Portfolio is long-term capital appreciation.
Except during temporary defensive periods, the Portfolio invests at least 85% of
its net assets in equity securities of companies of any size.
The Portfolio may purchase put and call options and sell (write) covered call
and put options on securities and securities indexes to increase gain and to
hedge against the risk of unfavorable price movements, and may enter into
futures contracts on securities indexes and purchase and sell call and put
options on these futures contracts. The Portfolio may also borrow money for the
purchase of additional securities. The Portfolio may borrow only from banks and
may not borrow in excess of one third of the market value of its assets, less
liabilities other than such borrowing. These practices are deemed to be
speculative and may cause the Portfolio's net asset value to be more volatile
than the net asset value of a fund that does not engage in these activities. See
"Investment Practices."
In General
The Alger American Small Capitalization Portfolio, Alger American MidCap
Growth Portfolio, Alger American Growth Portfolio, Alger American Leveraged
AllCap Portfolio, Alger American Income and Growth Portfolio and the equity
portion of Alger American Balanced Portfolio seek to achieve their objectives by
investing in equity securities, such as common or preferred stocks, or
securities convertible into or exchangeable for equity securities, including
warrants and rights. The Portfolios will invest primarily in companies whose
securities are traded on domestic stock exchanges or in the over-the-counter
market. These companies may still be in the developmental stage, may be older
companies that appear to be entering a new stage of growth progress owing to
factors such as management changes or development of new technology, products or
markets or may be companies providing products or services with a high unit
volume growth rate. In order to afford the Portfolios the flexibility to take
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advantage of new opportunities for investments in accordance with their
investment objectives, they may hold up to 15% of their net assets in money
market instruments and repurchase agreements and in excess of that amount (up to
100% of their assets) during temporary defensive periods. This amount may be
higher than that maintained by other funds with similar investment objectives.
Investing in smaller, newer issuers generally involves greater risk than
investing in larger, more established issuers. Companies in which the Alger
American Small Capitalization Portfolio is likely to invest may have limited
product lines, markets or financial resources and may lack management depth. The
securities in such companies 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. Accordingly, an
investment in the Portfolio may not be appropriate for all investors. These
risks may also apply to investments in developmental stage companies by the
Alger American MidCap Growth Portfolio, the Alger American Growth Portfolio and
the Alger American Leveraged AllCap Portfolio.
INVESTMENT PRACTICES
The Portfolios may use the investment strategies and invest in the types of
securities described below, which may involve certain risks. The Statement of
Additional Information contains more detailed information about these practices
and information about other investment practices of the Portfolios.
Repurchase Agreements
In a repurchase agreement, a Portfolio buys a security at one price and
simultaneously agrees to sell it back at a higher price. In the event of a
bankruptcy or default of the other party to the repurchase agreement, the
Portfolio could experience costs and delays in liquidating the underlying
security, which is held as collateral, and the Portfolio might incur a loss if
the value of the collateral held declines during this period.
Illiquid and Restricted Securities
Under the policies and procedures established by the Fund's Board of
Trustees, Fred Alger Management, Inc., the Fund's investment manager ("Alger
Management"), determines the liquidity of the Portfolios' investments.
Investments may be illiquid because of the absence of an active trading market,
making it difficult to sell promptly at an acceptable price. Each Portfolio may
purchase securities eligible for resale under Rule 144A of the Securities Act of
1933. This rule permits otherwise restricted securities to be sold to certain
institutional buyers. The Fund will limit its purchases of these securities to
those which Alger Management, under the supervision of the Fund's Board of
Trustees, determines to be liquid. A restricted security is one that has a
contractual restriction on its resale or which cannot be sold publicly until it
is registered under the Securities Act of 1933.
Lending of Portfolio Securities
In order to generate income and to offset expenses, each Portfolio may lend
portfolio securities with a value up to 331/3% of the Portfolio's total assets
to brokers, dealers and other financial organizations. Any such loan will be
continuously secured by collateral at least equal to the value of the securities
loaned. Such lending could result in delays in receiving additional collateral
or in the recovery of the securities or possible loss of rights in the
collateral should the borrower fail financially.
Foreign Securities
Each Portfolio may invest up to 20% of its total assets in foreign
securities. Investing in securities of foreign companies and foreign
governments, which generally are denominated in foreign currencies, may involve
certain risk and opportunity considerations not typically associated with
investing in domestic companies and could cause the Portfolio to be affected
favorably or unfavorably by changes in currency exchange rates and revaluations
of currencies.
Each Portfolio may purchase American Depositary Receipts ("ADRs") or U.S.
dollar-denominated securities of foreign issuers that are not included in the
20% foreign securities limitation. ADRs are receipts issued by U.S. banks or
trust companies in respect of securities of foreign issuers held on deposit for
use in the U.S. securities markets. While ADRs may not necessarily be
denominated in the same currency as the securities into which they may be
converted, many of the risks associated with foreign securities may also apply
to ADRs.
Leverage Through Borrowing
The Alger American Leveraged AllCap Portfolio may borrow money from banks and
use it to purchase additional securities. This borrowing is known as leveraging.
Leverage increases both investment opportunity and investment risk. If the
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investment gains on securities purchased with borrowed money exceed the interest
paid on the borrowing, the net asset value of the Portfolio'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 Portfolio's shares will decrease faster than
would otherwise be the case. The Portfolio 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 Portfolio 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.
Options
The Alger American Leveraged AllCap Portfolio may buy and sell (write)
exchange listed options in order to obtain additional return or to hedge the
value of its portfolio. The Portfolio may write covered call options only if the
Portfolio owns the securities on which the call is written or owns securities
which are exchangeable or convertible into such securities. Although the
Portfolio will generally purchase or write only those options for which there
appears to be an active secondary market, there is no assurance that a liquid
secondary market on an exchange will exist for any particular option. The
Portfolio will not purchase options if, as a result, the aggregate cost of all
outstanding options exceeds 10% of the Portfolio's total assets, although no
more than 5% will be committed to transactions entered into for non-hedging
purposes. The Portfolio may purchase and sell put and call options on stock
indexes in order to increase its gross income or to hedge its portfolio against
price fluctuations.
The writing and purchase of options is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. Additional discussion of these risks
and techniques is included in the Statement of Additional Information.
Stock Index Futures and Options on
Stock Index Futures
The Alger American Leveraged AllCap Portfolio may purchase and sell stock
index futures contracts and options on stock index futures contracts. These
investments may be made only for hedging, not speculative, purposes. Hedging
transactions are made to reduce the risk of price fluctuations.
There can be no assurance of the Portfolio's successful use of stock index
futures as a hedging device. If Alger Management uses a hedging instrument at
the wrong time or judges market conditions incorrectly, hedging strategies may
reduce the Portfolio's return. The Portfolio could also experience losses if the
prices of its futures and options positions were not correlated with its other
investments or if it could not close out a position because of an illiquid
market for the future or option.
Portfolio Turnover
Portfolio changes will generally be made without regard to the length of time
a security has been held or whether a sale would result in a profit or loss.
While it is not possible to predict future market conditions or turnover rates
with certainty, Alger Management anticipates that under normal market conditions
the annual turnover rate for the Alger American Leveraged AllCap Portfolio
should not exceed 120%. Increased portfolio turnover will have the effect of
increasing the Portfolios' brokerage and custodial expenses.
Other Investments
In addition to the securities and investment techniques listed above, each
Portfolio may invest in bank and thrift obligations, obligations issued or
guaranteed by the U.S. Government or by its agencies or instrumentalities,
foreign bank obligations and obligations of foreign branches of domestic banks,
and variable rate master demand notes; and the Alger American Balanced Portfolio
may engage in reverse repurchase agreements, firm commitment agreements and
"when-issued" purchases. See "Investment Objectives and Policies" in the
Statement of Additional Information.
MANAGEMENT OF THE FUND
Organization
The Fund was organized on April 6, 1988 as a multi-series Massachusetts
business trust. The Fund offers an unlimited number of shares of six series,
representing the shares of the Portfolios.
Although 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. Shareholders of one Portfolio may
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vote only on matters that affect that Portfolio.
Under normal circumstances, other than the shares issued to Alger Inc. in
connection with its creation and initial capitalization, the Fund intends to
distribute its shares of the Portfolios to Participating Insurance Companies
and, if the Order is issued, Plans, so that only Participating Insurance
Companies and their separate accounts and Plans will be considered shareholders
of the Portfolios. Although the Participating Insurance Companies and their
separate accounts and the Plans are the shareholders or investors, the
Participating Insurance Companies will pass through voting rights to their VA
contract and VLI policy holders. Plan sponsors may or may not pass through
voting rights to Plan participants, depending on the terms of the Plan's
governing documents. For a discussion of voting rights please refer to the
Participating Insurance Companies' prospectuses or the Plan documents.
When matters are submitted for shareholder vote, shareholders of each
Portfolio will have one vote for each full share held and proportionate,
fractional votes for fractional shares held. A separate vote of a Portfolio is
required on any matter affecting the Portfolio on which shareholders are
entitled to vote, such as approval of a Portfolio's agreement with Alger
Management. Shareholders of one Portfolio are not entitled to vote on a matter
that does not affect that Portfolio but that does require a separate vote of the
other Portfolios. There normally will be no annual meetings of shareholders for
the purpose of electing Trustees unless and until such time as less than a
majority of 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. Any Trustee may be removed from office on the vote of
shareholders holding at least two thirds of the Fund's outstanding shares at a
meeting called for that purpose. The Trustees are required to call such a
meeting on the written request of shareholders holding at least 10% of the
Fund's outstanding shares.
Board of Trustees
The Fund is governed by a Board of Trustees which is responsible for
protecting the interests of shareholders under Massachusetts law. The Statement
of Additional Information contains general background information about each
Trustee and officer of the Fund.
Investment Manager
Alger Management is the Fund's investment manager and is responsible for the
overall administration of the Fund, subject to the supervision of the Board of
Trustees. Alger Management makes investment decisions for the Portfolios, places
orders to purchase and sell securities on behalf of the Portfolios and selects
broker-dealers that, in its judgment, provide prompt and reliable execution at
favorable prices and reasonable commission rates. It is anticipated that the
Fund's distributor, Fred Alger & Company, Incorporated ("Alger Inc."), an
affiliate of Alger Management, will serve as the Fund's broker in effecting
substantially all of the Portfolios' transactions on securities exchanges and
will retain commissions in accordance with certain regulations of the Securities
and Exchange Commission. In addition, Alger Management employs professional
securities analysts who provide research services exclusively to the Portfolios
and other accounts for which Alger Management or its affiliates serve as
investment adviser or subadviser.
Alger Management has been in the business of providing investment advisory
services since 1964 and, as of December 31, 1994, had approximately $2.9 billion
under management, $1.4 billion in mutual fund accounts and $1.5 billion in other
advisory accounts. Alger Management is owned by Alger Inc. which in turn is
owned by Alger Associates, Inc., a financial services holding company. Fred M.
Alger, III and his brother, David D. Alger, are the majority shareholders of
Alger Associates, Inc. and may be deemed to control that company and its
subsidiaries. As of April 14, 1995, those persons and companies may also be
deemed to control the Alger American Leveraged AllCap Portfolio.
Portfolio Managers
David D. Alger, President of Alger Management, is primarily responsible for
the day-to-day management of the Portfolios of the Fund. He has been employed by
Alger Management as Executive Vice President and Director of Research since 1971
and as President since 1995 and he serves as portfolio manager for other mutual
funds and investment accounts managed by Alger Management. Shelton Y. Swei
serves as co-manager of the Alger American Leveraged AllCap Portfolio. He has
been employed by Alger Management since 1984 and he serves as a senior research
analyst, providing research for other mutual funds and investment accounts
managed by Alger Management. Steven R. Thumm serves as co-manager of the Alger
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American Balanced Portfolio. He has been employed by Alger Management as fixed
income analyst since 1991 and prior to that he was employed by Marine Midland
Bank as Assistant Vice President. Also participating in the management of the
Fund's Portfolios are Ronald Tartaro and Seilai Khoo. Mr. Tartaro has been
employed by Alger Management since 1990 and he serves as a senior research
analyst. Prior to 1990, he was a member of the technical staff at AT&T Bell
Laboratories. Ms. Khoo has been employed by Alger Management since 1989 and she
serves as a senior research analyst.
Fund personnel ("Access Persons") are permitted to engage in personal
securities transactions subject to the restrictions and procedures of the Fund's
Code of Ethics. Pursuant to the Code of Ethics, Access Persons generally must
preclear all personal securities transactions prior to trading and are subject
to certain prohibitions on personal trading. You can get a copy of the Fund's
Code of Ethics by calling the Fund toll-free at (800) 992-3863.
Fees
Each Portfolio pays Alger Management a management fee computed daily and paid
monthly at annual rates based on a percentage of the value of the relevant
Portfolio's average daily net assets, as follows: Alger American Income and
Growth Portfolio-.625%; Alger American Small Capitalization Portfolio and Alger
American Leveraged AllCap Portfolio-.85%; Alger American MidCap Growth
Portfolio-.80%; Alger American Growth Portfolio and Alger American Balanced
Portfolio-.75%. The management fees paid by the Alger American Small
Capitalization Portfolio, the Alger American MidCap Growth Portfolio, the Alger
American Growth Portfolio, the Alger American Balanced Portfolio and the Alger
American Leveraged AllCap Portfolio are higher than those paid by most other
investment companies; however, such fees do not exceed those paid by funds with
similar investment objectives.
From time to time Alger Management or its affiliates may compensate insurance
companies or their affiliates whose customers hold shares of the Portfolios for
providing a variety of record-keeping, administrative, marketing and/or
shareholder support services. This compensation, which may be paid at a rate of
up to .30% of the net asset value of shares held by those customers depending on
the nature, extent and quality of the services provided, will be paid from Alger
Management's own resources and not from the assets of the Fund.
Expenses
Each Portfolio pays expenses related to its daily operations, such as
management fees, brokerage fees, custodian fees, Trustees' fees, transfer agency
fees and legal and auditing costs. Alger Management has agreed to reimburse the
Portfolios to the extent that the annual operating expenses (excluding interest,
taxes, fees for brokerage services and extraordinary expenses) of the Alger
American Balanced Portfolio exceed 1.25%; the Alger American Income and Growth
Portfolio exceed 1.25%; Alger American Small Capitalization Portfolio exceed
1.50%; the Alger American Growth Portfolio exceed 1.50%; the Alger American
MidCap Growth Portfolio exceed 1.50%; and the Alger American Leveraged AllCap
Portfolio exceed 1.50% of the average daily net assets of the applicable
Portfolio for any fiscal year. In addition, from time to time, Alger Management,
in its sole discretion and as it deems appropriate, may assume certain expenses
of one or more of the Portfolios while retaining the ability to be reimbursed by
the applicable Portfolio for such amounts prior to the end of the fiscal year.
This will have the effect of lowering the applicable Portfolio's overall expense
ratio and of increasing yield to investors, or the converse, at the time such
amounts are assumed or reimbursed, as the case may be. More information about
each Portfolio's investment management agreement and other expenses paid by the
Portfolios is included in the Statement of Additional Information.
The Statement of Additional Information contains information about the Fund's
brokerage policies and practices.
Distributor
Alger Inc. serves as the Fund's distributor and also distributes the shares
of other mutual funds managed by Alger Management.
Transfer Agent
Alger Shareholder Services, Inc., an affiliate of Alger Management, serves as
transfer agent for the Fund.
NET ASSET VALUE
The price of one share of a Portfolio is its "net asset value." The net asset
value is computed by adding the value of the Portfolio's investments plus cash
and other assets, deducting liabilities and then dividing the result by the
number of its shares outstanding. The net asset value of each Portfolio is
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calculated on each day the New York Stock Exchange is open as of the close of
business (normally 4:00 p.m. Eastern time).
PURCHASES AND REDEMPTIONS
Contract or policy holders or Plan participants would not deal directly with
the Fund regarding the purchase or redemption of a Portfolio's shares. The
separate accounts of the Participating Insurance Companies place orders to
purchase and redeem shares of each Portfolio based on, among other things, the
amount of premium payments to be invested and the amount of surrender and
transfer requests (as defined in the prospectuses describing the VA contracts
and VLI policies issued by the Participating Insurance Companies) to be effected
on that day pursuant to VA contracts and VLI policies. Plan trustees purchase
Portfolio shares. Plan participants cannot contact the Fund directly to purchase
shares of the Portfolios but may invest in shares of the Portfolios only through
their Plan. Participants should contact their Plan sponsor for information
concerning the appropriate procedure for investing in the Fund.
Orders received by the Fund or the Fund's transfer agent are effected on days
on which the NYSE is open for trading. For orders received before the close of
regular trading on the NYSE, purchases and redemptions of the shares of each
Portfolio are effected at the respective net asset values per share determined
as of the close of regular trading on the NYSE on that same day. Orders received
after the close of regular trading on the NYSE are effected at the next
calculated net asset value. See "Net Asset Value." All orders for the purchase
of shares are subject to acceptance or rejection by the Fund. Payment for
redemptions will be made by the Fund's transfer agent on behalf of the Fund and
the relevant Portfolios within seven days after the request is received. The
Fund does not assess any fees, either when it sells or when it redeems its
shares. Surrender charges, mortality and expense risk fees and other charges may
be assessed by Participating Insurance Companies under the VA contracts or VLI
policies. These fees should be described in the Participating Insurance
Companies' prospectuses. Any charges assessed by the Plans should be described
in the Plan documents.
DIVIDENDS AND DISTRIBUTIONS
Each Portfolio will be treated separately in determining the amounts of
dividends of investment income and distributions of capital gains payable to
holders of its shares. Dividends and distributions will be automatically
reinvested on the payment date for each shareholder's account in additional
shares of the Portfolio that paid the dividend or distribution at net asset
value or, in the case of VA contracts and VLI policies, will be paid in cash at
the election of the Participating Insurance Company. Dividends of the Portfolios
will be declared and paid annually. Distributions of any net realized capital
gains earned by a Portfolio usually will be made annually after the close of the
fiscal year in which the gains are earned. Participating Insurance Companies
will be informed about the amount and character of dividends and distributions
from the relevant Portfolio for federal income tax purposes.
TAXES
Each Portfolio will be treated as a separate taxpayer with the result that,
for federal income tax purposes, the amounts of net investment income and
capital gains earned will be determined on a Portfolio-by-Portfolio (rather than
on a Fund-wide) basis.
The Fund intends that each Portfolio will qualify separately as a "regulated
investment company" (within the meaning of the Internal Revenue Code of 1986, as
amended) for each taxable year of each Portfolio. If so qualified, and providing
certain distribution requirements are met, a Portfolio will not be subject to
federal income tax on its net investment income and net capital gains that it
distributes to its shareholders.
Dividends paid from net investment income and distributions of net realized
short-term capital gains are treated as ordinary income earned by the
shareholders of a Portfolio. Distributions of net long-term capital gains are
treated as such by shareholders for federal income tax purposes. Federal income
taxation of separate accounts of life insurance companies, VA contracts, VLI
policies and of the Plans is discussed in the prospectuses of the Participating
Insurance Companies and in the plan documents. With respect to participants in
the Plans, dividends from net investment income and net realized capital gains
will ordinarily not be subject to taxation until such dividends are distributed
to such participants from their Plan accounts.
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PERFORMANCE
The Portfolios advertise different types of yield and total return
performance. All performance figures are based on historical earnings and are
not intended to indicate future performance. 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.
Each Portfolio may include quotations of its "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 a
Portfolio from the beginning date of the measuring period to the end of the
measuring period. These figures reflect changes in the price of the Portfolio's
shares and assume that any income dividends and/or capital gains distributions
made by the Portfolio during the period were reinvested in shares of the
Portfolio. Figures will be given for recent 1, 5 and 10 year periods, and may by
given for other periods as well (such as from commencement of the Portfolio's
operations, or on a year-by-year basis) and may utilize dollar cost averaging.
The Portfolio may also use "aggregate" total return figures for various periods,
representing the cumulative change in value of an investment in the Portfolio
for the specific period (again reflecting changes in Portfolio share price 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" and "yield" for a
Portfolio will vary based on changes in market conditions. In addition, since
the deduction of a Portfolio's expenses is reflected in the total return and
yield figures, "total return" and "yield" will also vary based on the level of
the Portfolio's expenses.
The Statement of Additional Information further describes the method used to
determine the yields and total return figures. Current yield and/or total return
quotations may be obtained by contacting the Fund.
The actual return of a holder of a VA contract or VLI policy will also be
affected by charges imposed by the separate accounts of Participating Insurance
Companies or, in the case of Plan participants, by any charges imposed under the
plan.
INVESTOR AND
SHAREHOLDER INFORMATION
Investors and shareholders may contact the Fund toll-free at (800) 992-3863
for further information regarding the Fund and the Portfolios, including current
performance quotations, as well as for assistance in selecting a Portfolio and
obtaining a Statement of Additional Information. Holders of VA contracts or VLI
policies issued by Participating Insurance Companies and participants in Plans
for which shares of one or more Portfolios are the investment vehicle may
receive from the Participating Insurance Companies or Plan sponsor unaudited
semi annual financial statements and year-end financial statements audited by
the Fund's independent public accountants. Each report will show the investments
owned by each of the Portfolios and the market values of the investments and
will provide other information about the Fund and its operations. The Fund's
Annual Report as of December 31, 1994 contains additional performance
information and is available upon request and without charge by contacting the
Fund at the toll-free number listed above.
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No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus or the Statement
of Additional Information in connection with the offering of the Fund's shares,
and if given or made, such other information or representations must not be
relied on as having been authorized by the Fund. This Prospectus does not
constitute an offer in any state in which, or to any person to whom, such offer
may not lawfully be made.
----------
Investment Manager:
Fred Alger Management, Inc.
75 Maiden Lane
New York, New York 10038
Distributor:
Fred Alger & Company, Incorporated
30 Montgomery Street
Jersey City, New Jersey 07302
Transfer Agent:
Alger Shareholder Services, Inc.
30 Montgomery Street
Box 2001
Jersey City, New Jersey 07302
Independent Public Accountants:
Arthur Andersen LLP
1345 Avenue of the Americas
New York, New York 10105
THE
ALGER Meeting the challenge
AMERICAN of investing
FUND
Alger American
Balanced Portfolio
Alger American
Income and Growth Portfolio
Alger American
Small Capitalization Portfolio
Alger American
Growth Portfolio
Alger American
MidCap Growth Portfolio
Alger American
Leveraged AllCap Portfolio
PROSPECTUS July 31, 1995
<PAGE>
PROSPECTUS
- ----------
THE
ALGER 75 Maiden Lane
AMERICAN New York, New York 10038
FUND (800) 992-FUND (992-3863)
The Alger American Fund is a registered investment company -- a mutual fund
- -- that presently offers interests in six portfolios. This Prospectus sets forth
information about four of these portfolios (the "Portfolios"). Each Portfolio
has distinct investment objectives and policies and a shareholder's interest is
limited to the Portfolio in which he or she owns shares. The four Portfolios
discussed in this Prospectus are:
o Alger American Small Capitalization Portfolio
o Alger American Growth Portfolio
o Alger American MidCap Growth Portfolio
o Alger American Leveraged AllCap Portfolio
Shares of the Portfolios are offered as a pooled funding vehicle for
insurance companies writing all types of variable annuity contracts ("VA
contracts") and variable life insurance policies ("VLI policies") and may also
be offered directly to qualified pension and retirement plans (the "Plans"). See
"The Portfolios."
Shares of the Portfolios are not deposits or obligations of, or guaranteed or
endorsed by any bank, and the shares are not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other agency.
This Prospectus, which should be retained for future reference, contains
important information that you should know before investing. Please read it
along with the prospectuses issued by the insurance companies with respect to
the VA contracts and VLI policies. A "Statement of Additional Information" dated
July 31, 1995 containing further information about The Alger American Fund has
been filed with the Securities and Exchange Commission and is incorporated by
reference into this Prospectus. It is available at no charge by contacting The
Alger American Fund at the address or phone number above.
FRED ALGER FRED ALGER
MANAGEMENT, Investment Manager & COMPANY, Distributor
INC. INCORPORATED
================================================================================
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRE-
SENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
================================================================================
July 31, 1995
<PAGE>
- --------------------------------------------------------------------------------
CONTENTS
Page
----
Portfolio Expenses ................................................. iii
Financial Highlights ............................................... iv
The Portfolios ..................................................... 1
Participating Insurance Companies and Plans ........................ 1
Investment Objectives and Policies ................................. 1
Alger American Small Capitalization
Portfolio ...................................................... 1
Alger American Growth Portfolio .................................. 1
Alger American MidCap Growth
Portfolio ...................................................... 1
Alger American Leveraged AllCap
Portfolio ...................................................... 2
Investment Practices ............................................... 2
Management of the Fund ............................................. 4
Net Asset Value .................................................... 6
Purchases and Redemptions .......................................... 6
Dividends and Distributions ........................................ 6
Taxes .............................................................. 6
Performance ........................................................ 7
Investor and Shareholder Information ............................... 7
- --------------------------------------------------------------------------------
ii
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO EXPENSES
The Table below is designed to assist you in understanding the various costs
and expenses that you will bear as a shareholder. The amounts listed under
"Other Expenses" and "Interest Expense" for the Alger American Leveraged AllCap
Portfolio are based on estimated amounts for the Fund's fiscal year ending
December 31, 1995. The Table does not reflect charges and deductions which are,
or may be, imposed under the VA contracts, VLI policies or Plans; such charges
and deductions are described in the prospectus for the VA contract or VLI policy
accompanying this Prospectus or in the Plan documents.
The Example below shows the amount of expenses you would pay on a $1,000
investment in the Portfolios. These amounts assume the reinvestment of all
dividends and distributions and payment by the Portfolios of operating expenses
as shown in the Table under Annual Fund Operating Expenses. The Example is an
illustration only and actual expenses may be greater or less than those shown.
<TABLE>
<CAPTION>
Alger Alger Alger
American Alger American American
Small American MidCap Leveraged
Capitalization Growth Growth AllCap
Portfolio Portfolio Portfolio Portfolio
-------------- --------- --------- ---------
<S> <C> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on
Purchases................................... None None None None
Maximum Sales Load Imposed
on Reinvested Dividends...................... None None None None
Deferred Sales Load............................ None None None None
Redemption Fees................................ None None None None
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees................................ .85% .75% .80% .85%
12b-1 Fees..................................... -- -- -- --
Other Expenses (excluding interest)............ .11% .11% .17% .19%
---- ---- ---- ----
Total Fund Operating Expenses
(before interest)........................... .96% .86% .97% 1.04%
Interest Expense............................... -- -- -- .75%
---- ---- ---- ----
Total Fund Expenses............................ .96% .86% .97% 1.79%
==== ==== ==== ====
Example
You would pay the following expenses on
a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at
the end of each time period:
One Year....................................... $ 10 $ 9 $ 10 $ 18
Three Years.................................... 31 27 31 56
Five Years..................................... 53 48 54 97
Ten Years...................................... 118 106 119 211
</TABLE>
- --------------------------------------------------------------------------------
iii
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The Financial Highlights for the years ended December 31, 1990 through 1994
have been audited by Arthur Andersen LLP, the Fund's independent public
accountants, as indicated in their report dated February 2, 1995 on the Fund's
financial statements as of December 31, 1994 which are included in the Fund's
Statement of Additional Information. The Financial Highlights should be read in
conjunction with the Fund's financial statements and notes thereto. The
Financial Highlights, with the exception of the total return information, for
the periods ended December 31, 1989 and 1988 have been audited by other
independent accountants, who have expressed an unqualified opinion thereon. The
Statement of Additional Information may be obtained from the Fund without
charge.
THE ALGER AMERICAN FUND
GROWTH PORTFOLIO
Financial Highlights
For a share outstanding throughout the period
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------------------
1994 1993 1992 1991 1990 1989(ii)
-------- ------- ------- ------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year 24.67 $ 20.17 $ 18.00 $ 12.86 $12.41 $ 10.00
-------- ------- ------- ------- ------ ------
Net investment income............ 0.07 0.03 0.03 0.08(i) 0.07 0.09
Net realized and unrealized gain
on investments................. 0.15 4.50 2.19 5.11 0.44 2.32
-------- ------- ------- ------- ------ ------
Total from investment
operations.................. 0.22 4.53 2.22 5.19 0.51 2.41
-------- ------- ------- ------- ------ ------
Dividends from net investment
income......................... (0.03) (0.03) (0.03) (0.05) (0.06) --
Distributions from net realized
gains......................... (1.73) -- (0.02) -- -- --
-------- ------- ------- ------- ------ ------
Total Distributions............ (1.76) (0.03) (0.05) (0.05) (0.06) --
-------- ------- ------- ------- ------ ------
Net asset value, end of year..... $ 23.13 $ 24.67 $ 20.17 $ 18.00 $12.86 $12.41
======== ======= ======= ======= ====== ======
Total Return..................... 1.45% 22.47% 12.38% 40.39% 4.14% 24.10%(iii)
======== ======= ======= ======= ====== ======
Ratios and Supplemental Data:
Net assets, end of year
(000's omitted).............. $150,390 $74,878 $30,316 $10,094 $1,228 $ 171
======== ======= ======= ======= ====== ======
Ratio of expenses to average
net assets................... 0.86% 0.97% 0.99% 1.29% 1.50% 1.50%
======== ======= ======= ======= ====== ======
Decrease reflected in above
expense ratios due to
expense reimbursements....... -- -- -- -- 2.31% 7.32%
======== ======= ======= ======= ====== ======
Ratio of net investment income
to average net assets........ 0.48% 0.25% 0.33% 0.52% 1.69% 1.30%
======== ======= ======= ======= ====== ======
Portfolio Turnover Rate........ 111.76% 112.64% 63.91% 58.95% 86.77% 79.59%
======== ======= ======= ======= ====== ======
</TABLE>
(i) Amount was computed based on average shares outstanding during the period.
(ii) For the period January 9, 1989 (commencement of operations) to December
31, 1989. Ratios have been annualized; total return has not been
annualized.
(iii) Unaudited.
- --------------------------------------------------------------------------------
iv
<PAGE>
- --------------------------------------------------------------------------------
THE ALGER AMERICAN FUND
SMALL CAPITALIZATION PORTFOLIO
Financial Highlights
For a share outstanding throughout the period
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988(iii)
-------- -------- -------- ------- ------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year........ $ 30.88 $ 27.26 $ 26.79 $ 17.02 $ 15.79 $ 9.60 $10.00
-------- -------- -------- ------- ------- ------ ------
Net investment
income (loss)............ (0.03)(i) (0.05) (0.06) (0.03) 0.02 0.04 0.06
Net realized and
unrealized gain
(loss) on investments.... (1.45) 3.67 0.91 9.82 1.35 6.15 (0.40)
-------- -------- -------- ------- ------- ------ ------
Total from investment
operations............. (1.48) 3.62 0.85 9.79 1.37 6.19 (0.34)
-------- -------- -------- ------- ------- ------ ------
Dividends from net
investment income........ -- -- -- (0.02) (0.01) -- (0.06)
Distributions from net
realized gains.......... (2.09) -- (0.38) -- (0.13) -- --
-------- -------- -------- ------- ------- ------ ------
Total Distributions...... (2.09) -- (0.38) (0.02) (0.14) -- (0.06)
-------- -------- -------- ------- ------- ------ ------
Net asset value, end
of year.................. $ 27.31 $ 30.88 $ 27.26 $ 26.79 $ 17.02 $ 15.79 $ 9.60
======== ======== ======== ======= ======= ====== ======
Total Return............... (4.38%) 13.28% 3.55% 57.54% 8.71% 64.48%(ii) 3.35%(ii)
======== ======== ======== ======= ======= ====== ======
Ratios and
Supplemental Data:
Net assets, end of year
(000's omitted)........ $397,037 $238,850 $135,718 $56,798 $ 7,149 $ 569 $ 39
======== ======== ======== ======= ======= ====== ======
Ratio of expenses to
average net assets.... 0.96% 1.03% 0.98% 1.06% 1.50% 1.50% 1.50%
======== ======== ======== ======= ======= ====== ======
Decrease reflected in
above expense ratios
due to expense
reimbursements......... -- -- -- -- 0.33% 9.15% 12.31%
======== ======== ======== ======= ======= ====== ======
Ratio of net investment
income (loss) to
average net assets..... (0.10%) (0.35%) (0.37%) (0.12%) 0.50% 1.11% 2.27%
======== ======== ======== ======= ======= ====== ======
Portfolio Turnover
Rate................... 117.61% 148.07% 108.06% 125.90% 132.46% 133.61% 20.86%
======== ======== ======== ======= ======= ====== ======
</TABLE>
(i) Amount was computed based on average shares outstanding during the
period.
(ii) Unaudited.
(iii) For the period September 21, 1988 (commencement of operations) to
December 31, 1988. Ratios have been annualized; total return has not been
annualized.
- --------------------------------------------------------------------------------
v
<PAGE>
- --------------------------------------------------------------------------------
THE ALGER AMERICAN FUND
MIDCAP GROWTH PORTFOLIO
Financial Highlights
For a share outstanding throughout the period
<TABLE>
<CAPTION>
From May 3, 1993
Year Ended (commencement of
December 31, operations)
1994 to December 31, 1993(i)
---------- ------------------
<S> <C> <C>
Net asset value, beginning of year.................................. $ 13.72 $ 10.00
-------- -------
Net investment income (loss)........................................ 0.00(ii) (0.02)
Net realized and unrealized gain (loss) on investments.............. (0.21) 3.88
-------- -------
Total from investment operations.................................. (0.21) 3.86
Distributions from net realized gains............................... (0.05) (0.14)
-------- -------
Net asset value, end of year........................................ $ 13.46 $ 13.72
======== =======
Total Return........................................................ (1.54%) 38.67%
======== =======
Ratios and Supplemental Data:
Net assets, end of year (000's omitted)........................... $ 62,178 $21,301
======== =======
Ratio of expenses to average net assets........................... 0.97% 1.50%
======== =======
Decrease reflected in above expense ratios due to expense
reimbursements.................................................. -- 0.03%
======== =======
Ratio of net investment income (loss) to average net assets....... 0.03% (0.58%)
======== =======
Portfolio Turnover Rate........................................... 83.96% 67.22%
======== =======
</TABLE>
(i) Ratios have been annualized; total return has not been annualized.
(ii) Amount was computed based on average shares outstanding during the period.
- --------------------------------------------------------------------------------
vi
<PAGE>
- --------------------------------------------------------------------------------
THE ALGER AMERICAN FUND
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
Financial Highlights
For a share outstanding throughout the period
From January 25, 1995
(commencement of
operations)
to June 30, 1995(i)
---------------------
Net asset value, beginning of period........................... $ 10.00
-------
Net investment (loss).......................................... (0.04)
Net realized and unrealized gain (loss) on investments........ 4.55
-------
Total from investment operations........................... 4.51
-------
Net asset value, end of period................................. $ 14.51
=======
Total Return................................................... 45.10%
=======
Ratios and Supplemental Data:
Net assets, end of period (000's omitted).................... $ 386
=======
Ratio of expenses excluding interest to average net assets... 1.50%
=======
Ratio of expenses including interest to average net assets... 1.94%
=======
Decrease reflected in above expense ratios
due to expense reimbursements.............................. 6.83%
=======
Ratio of net investment (loss) to average net assets......... (0.91%)
=======
Portfolio Turnover Rate...................................... 123.0%
=======
Debt outstanding at end of period.............................. $ 0
=======
Average amount of debt outstanding during the period........... $13,748
=======
Average daily number of shares outstanding during the period... 24,688
=======
Average amount of debt per share during the period............. $ 0.56
=======
(i) Unaudited. Ratios have been annualized; total return has not been
annualized.
- --------------------------------------------------------------------------------
vii
<PAGE>
THE PORTFOLIOS
The Portfolios are designed to permit insurance companies that issue variable
annuity contracts ("VA contracts") and variable life insurance policies ("VLI
policies") to offer contract and policy holders the opportunity to participate
in the performance of one or more of the Portfolios. Upon receipt by the Fund of
an exemptive order (the "Order") for which an application is currently pending
with the Securities and Exchange Commission, the Fund may also be a funding
vehicle for qualified pension and retirement plans (the "Plans") which elect to
make the Fund an investment option for Plan participants. If the Order is
issued, the Fund will, without notice to shareholders, accept orders from Plans
to purchase shares of the Portfolios.
The Fund is a diversified, open-end management investment company that offers
a selection of six Portfolios, each having distinct investment objectives and
policies. The Fund's Board of Trustees may establish additional Portfolios at
any time.
PARTICIPATING INSURANCE
COMPANIES AND PLANS
The Portfolios are intended to be funding vehicles for VA contracts and VLI
policies to be offered by the separate accounts of certain life insurance
companies ("Participating Insurance Companies") and, if the Order is issued,
Plans. Individuals cannot invest in a Portfolio directly but may do so only
through a VA contract or VLI policy or, if the Order is issued, a Plan. The Fund
currently does not foresee any disadvantages to the holders of VA contracts and
VLI policies arising from the fact that the interests of the holders of VA
contracts and VLI policies may differ, that the Participating Insurance
Companies may not be affiliated with each other or that the Fund may offer its
shares to Plans. Nevertheless, the Fund's Trustees intend to monitor events in
order to identify any material irreconcilable conflicts which may possibly arise
due to differences of tax treatment or other considerations, and to determine
what action, if any, should be taken in response to such conflicts. If such a
conflict were to occur, one or more Participating Insurance Company separate
accounts or Plans might withdraw its investment in a Portfolio, which may cause
the Portfolio to sell portfolio securities at disadvantageous prices. The VA
contracts and VLI policies are described in the separate prospectuses issued by
the Participating Insurance Companies, and the Plans are described in the Plan
documents made available by the Plan sponsors. The Fund assumes no
responsibility for such prospectuses or Plan documents.
INVESTMENT OBJECTIVES
AND POLICIES
The investment objectives and restrictions summarized below are fundamental
which means that they may not be changed without shareholder approval. All
investment policies and practices described elsewhere in this Prospectus are not
fundamental, so the Fund's Board of Trustees may change them without shareholder
approval. There is no guarantee that any Portfolio's objectives will be
achieved.
As a matter of fundamental policy, no Portfolio will: (1) with respect to 75%
of its total assets, invest more than 5% of its total assets in any one issuer,
except for obligations issued or guaranteed by the U.S. Government, its agencies
or instrumentalities ("U.S. Government securities"); (2) own more than 10% of
the outstanding voting securities of any company; (3) invest more than 10% (15%
for the Alger American Leveraged AllCap Portfolio) of its net assets in
securities that are not readily marketable and in repurchase agreements with
maturities of more than seven days; (4) invest more than 25% of its total assets
in any one industry, except for U.S. Government securities; (5) borrow money or
pledge its assets, except for temporary or emergency purposes, in an amount
exceeding 10% of its total assets; except that the Alger American Leveraged
AllCap Portfolio may borrow for investment purposes. The Statement of Additional
Information contains additional investment restrictions as well as information
on the Portfolios' investment practices.
Alger American Small Capitalization Portfolio
The investment objective of the Portfolio is long-term capital appreciation.
Except during temporary defensive periods, the Portfolio invests at least 65% of
its total assets in equity securities of companies that, at the time of
purchase, have "total market capitalization" -- present market value per share
multiplied by the total number of shares outstanding -- of less than $1 billion.
The Portfolio may invest up to 35% of its total assets in equity securities
of companies that, at the time of purchase, have total market capitalization of
$1 billion or greater and in excess of that amount (up to 100% of its assets)
during temporary defensive periods.
1
<PAGE>
Alger American Growth Portfolio
The investment objective of the Portfolio is long-term capital appreciation.
Except during temporary defensive periods, the Portfolio invests at least 65% of
its total assets in equity securities of companies that, at the time of purchase
of the securities, have total market capitalization of $1 billion or greater.
The Portfolio may invest up to 35% of its total assets in equity securities
of companies that, at the time of purchase, have total market capitalization of
less than $1 billion and in excess of that amount (up to 100% of its assets)
during temporary defensive periods.
Alger American MidCap Growth Portfolio
The investment objective of the Portfolio is long-term capital appreciation.
Except during temporary defensive periods, the Portfolio invests at least 65% of
its total assets in equity securities of companies that, at the time of purchase
of the securities, have total market capitalization between $750 million and
$3.5 billion.
Alger American Leveraged AllCap Portfolio
The investment objective of the Portfolio is long-term capital appreciation.
Except during temporary defensive periods, the Portfolio invests at least 85% of
its net assets in equity securities of companies of any size.
The Portfolio may purchase put and call options and sell (write) covered call
and put options on securities and securities indexes to increase gain and to
hedge against the risk of unfavorable price movements, and may enter into
futures contracts on securities indexes and purchase and sell call and put
options on these futures contracts. The Portfolio may also borrow money for the
purchase of additional securities. The Portfolio may borrow only from banks and
may not borrow in excess of one third of the market value of its assets, less
liabilities other than such borrowing. These practices are deemed to be
speculative and may cause the Portfolio's net asset value to be more volatile
than the net asset value of a fund that does not engage in these activities. See
"Investment Practices."
In General
The Portfolios seek to achieve their objectives by investing in equity
securities, such as common or preferred stocks, or securities convertible into
or exchangeable for equity securities, including warrants and rights. The
Portfolios will invest primarily in companies whose securities are traded on
domestic stock exchanges or in the over-the-counter market. These companies may
still be in the developmental stage, may be older companies that appear to be
entering a new stage of growth progress owing to factors such as management
changes or development of new technology, products or markets or may be
companies providing products or services with a high unit volume growth rate. In
order to afford the Portfolios the flexibility to take advantage of new
opportunities for investments in accordance with their investment objectives,
they may hold up to 15% of their net assets in money market instruments and
repurchase agreements and in excess of that amount (up to 100% of their assets)
during temporary defensive periods. This amount may be higher than that
maintained by other funds with similar investment objectives.
Investing in smaller, newer issuers generally involves greater risk than
investing in larger, more established issuers. Companies in which the Alger
American Small Capitalization Portfolio is likely to invest may have limited
product lines, markets or financial resources and may lack management depth. The
securities in such companies 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. Accordingly, an
investment in the Portfolio may not be appropriate for all investors. These
risks may also apply to investments in developmental stage companies by the
Alger American MidCap Growth Portfolio, the Alger American Growth Portfolio and
the Alger American Leveraged AllCap Portfolio.
INVESTMENT PRACTICES
The Portfolios may use the investment strategies and invest in the types of
securities described below, which may involve certain risks. The Statement of
Additional Information contains more detailed information about these practices
and information about other investment practices of the Portfolios.
Repurchase Agreements
In a repurchase agreement, a Portfolio buys a security at one price and
simultaneously agrees to sell it back at a higher price. In the event of a
bankruptcy or default of the other party to the repurchase agreement, the
Portfolio could experience costs and delays in liquidating the underlying
2
<PAGE>
security, which is held as collateral, and the Portfolio might incur a loss if
the value of the collateral held declines during this period.
Illiquid and Restricted Securities
Under the policies and procedures established by the Fund's Board of
Trustees, Fred Alger Management Inc. ("Alger Management"), the Fund's investment
manager, determines the liquidity of the Portfolios' investments. Investments
may be illiquid because of the absence of an active trading market, making it
difficult to sell promptly at an acceptable price. Each Portfolio may purchase
securities eligible for resale under Rule 144A of the Securities Act of 1933.
This rule permits otherwise restricted securities to be sold to certain
institutional buyers. The Fund will limit its purchases of these securities to
those which Alger Management, under the supervision of the Fund's Board of
Trustees, determines to be liquid. A restricted security is one that has a
contractual restriction on its resale or which cannot be sold publicly until it
is registered under the Securities Act of 1933.
Lending of Portfolio Securities
In order to generate income and to offset expenses, each Portfolio may lend
portfolio securities with a value up to 331/3% of the Portfolio's total assets
to brokers, dealers and other financial organizations. Any such loan will be
continuously secured by collateral at least equal to the value of the securities
loaned. Such lending could result in delays in receiving additional collateral
or in the recovery of the securities or possible loss of rights in the
collateral should the borrower fail financially.
Foreign Securities
Each Portfolio may invest up to 20% of its total assets in foreign
securities. Investing in securities of foreign companies and foreign
governments, which generally are denominated in foreign currencies, may involve
certain risk and opportunity considerations not typically associated with
investing in domestic companies and could cause the Portfolio to be affected
favorably or unfavorably by changes in currency exchange rates and revaluations
of currencies.
Each Portfolio may purchase American Depositary Receipts ("ADRs") or U.S.
dollar-denominated securities of foreign issuers that are not included in the
20% foreign securities limitation. ADRs are receipts issued by U.S. banks or
trust companies in respect of securities of foreign issuers held on deposit for
use in the U.S. securities markets. While ADRs may not necessarily be
denominated in the same currency as the securities into which they may be
converted, many of the risks associated with foreign securities may also apply
to ADRs.
Leverage Through Borrowing
The Alger American Leveraged AllCap Portfolio may borrow money from banks and
use it to purchase additional securities. This borrowing is known as leveraging.
Leverage increases both investment opportunity and investment risk. If the
investment gains on securities purchased with borrowed money exceed the interest
paid on the borrowing, the net asset value of the Portfolio'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 Portfolio's shares will decrease faster than
would otherwise be the case. The Portfolio 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 Portfolio 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.
Options
The Alger American Leveraged AllCap Portfolio may buy and sell (write)
exchange listed options in order to obtain additional return or to hedge the
value of its portfolio. The Portfolio may write covered call options only if the
Portfolio owns the securities on which the call is written or owns securities
which are exchangeable or convertible into such securities. Although the
Portfolio will generally purchase or write only those options for which there
appears to be an active secondary market, there is no assurance that a liquid
secondary market on an exchange will exist for any particular option. The
Portfolio will not purchase options if, as a result, the aggregate cost of all
outstanding options exceeds 10% of the Portfolio's total assets, although no
more than 5% will be committed to transactions entered into for non-hedging
purposes. The Portfolio may purchase and sell put and call options on stock
indexes in order to increase its gross income or to hedge its portfolio against
price fluctuations.
3
<PAGE>
The writing and purchase of options is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. Additional discussion of these risks
and techniques is included in the Statement of Additional Information.
Stock Index Futures and Options on
Stock Index Futures
The Alger American Leveraged AllCap Portfolio may purchase and sell stock
index futures contracts and options on stock index futures contracts. These
investments may be made only for hedging, not speculative, purposes. Hedging
transactions are made to reduce the risk of price fluctuations.
There can be no assurance of the Portfolio's successful use of stock index
futures as a hedging device. If Alger Management uses a hedging instrument at
the wrong time or judges market conditions incorrectly, hedging strategies may
reduce the Portfolio's return. The Portfolio could also experience losses if the
prices of its futures and options positions were not correlated with its other
investments or if it could not close out a position because of an illiquid
market for the future or option.
Portfolio Turnover
Portfolio changes will generally be made without regard to the length of time
a security has been held or whether a sale would result in a profit or loss.
While it is not possible to predict future market conditions or turnover rates
with certainty, Alger Managment anticipates that under normal market conditions
the annual turnover rate for the Alger American Leveraged AllCap Portfolio
should not exceed 120%. Increased portfolio turnover will have the effect of
increasing the Portfolios' brokerage and custodial expenses.
Other Investments
In addition to the securities and investment techniques listed above, each
Portfolio may invest in bank and thrift obligations, obligations issued or
guaranteed by the U.S. Government or by its agencies or instrumentalities,
foreign bank obligations and obligations of foreign branches of domestic banks,
and variable rate master demand notes; and the Alger American Balanced Portfolio
may engage in reverse repurchase agreements, firm commitment agreements and
"when-issued" purchases. See "Investment Objectives and Policies" in the
Statement of Additional Information.
MANAGEMENT OF THE FUND
Organization
The Fund was organized on April 6, 1988 as a multi-series Massachusetts
business trust. The Fund offers an unlimited number of shares of six series,
representing the shares of the Fund's portfolios including the Portfolios.
Although 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. Shareholders of one Portfolio may
vote only on matters that affect that Portfolio.
Under normal circumstances, other than the shares issued to Alger Inc. in
connection with its creation and initial capitalization, the Fund intends to
distribute its shares of the Portfolios to Participating Insurance Companies
and, if the Order is issued, Plans, so that only Participating Insurance
Companies and their separate accounts and Plans will be considered shareholders
of the Portfolios. Although the Participating Insurance Companies and their
separate accounts and the Plans are the shareholders or investors, the
Participating Insurance Companies will pass through voting rights to their VA
contract and VLI policy holders. Plan sponsors may or may not pass through
voting rights to Plan participants, depending on the terms of the Plan's
governing documents. For a discussion of voting rights please refer to the
Participating Insurance Companies' prospectuses or the Plan documents.
When matters are submitted for shareholder vote, shareholders of each
Portfolio will have one vote for each full share held and proportionate,
fractional votes for fractional shares held. A separate vote of a portfolio of
the Fund is required on any matter affecting the portfolio on which shareholders
are entitled to vote, such as approval of a portfolio's agreement with Alger
Management. Shareholders of one portfolio are not entitled to vote on a matter
that does not affect that portfolio but that does require a separate vote of the
other portfolios. There normally will be no annual meetings of shareholders for
the purpose of electing Trustees unless and until such time as less than a
majority of 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. Any Trustee may be removed from office on the vote of
4
<PAGE>
shareholders holding at least two thirds of the Fund's outstanding shares at a
meeting called for that purpose. The Trustees are required to call such a
meeting on the written request of shareholders holding at least 10% of the
Fund's outstanding shares.
Board of Trustees
The Fund is governed by a Board of Trustees which is responsible for
protecting the interests of shareholders under Massachusetts law. The Statement
of Additional Information contains general background information about each
Trustee and officer of the Fund.
Investment Manager
Alger Management is the Fund's investment manager and is responsible for the
overall administration of the Fund, subject to the supervision of the Board of
Trustees. Alger Management makes investment decisions for the Portfolios, places
orders to purchase and sell securities on behalf of the Portfolios and selects
broker-dealers that, in its judgment, provide prompt and reliable execution at
favorable prices and reasonable commission rates. It is anticipated that the
Fund's distributor, Fred Alger & Company, Incorporated ("Alger Inc."), an
affiliate of Alger Management, will serve as the Fund's broker in effecting
substantially all of the Portfolios' transactions on securities exchanges and
will retain commissions in accordance with certain regulations of the Securities
and Exchange Commission. In addition, Alger Management employs professional
securities analysts who provide research services exclusively to the Portfolios
and other accounts for which Alger Management or its affiliates serve as
investment adviser or subadviser.
Alger Management has been in the business of providing investment advisory
services since 1964 and, as of December 31, 1994, had approximately $2.9 billion
under management, $1.4 billion in mutual fund accounts and $1.5 billion in other
advisory accounts. Alger Management is owned by Alger Inc. which in turn is
owned by Alger Associates, Inc., a financial services holding company. Fred M.
Alger, III and his brother, David D. Alger, are the majority shareholders of
Alger Associates, Inc. and may be deemed to control that company and its
subsidiaries. As of April 14, 1995, those persons and companies may also be
deemed to control the Alger Leveraged AllCap Portfolio.
Portfolio Managers
David D. Alger, President of Alger Management, is primarily responsible for
the day-to-day management of the Portfolios of the Fund. He has been employed by
Alger Management as Executive Vice President and Director of Research since 1971
and as President since 1995 and he serves as portfolio manager for other mutual
funds and investment accounts managed by Alger Management. Shelton Y. Swei
serves as co-manager of the Alger American Leveraged AllCap Portfolio. He has
been employed by Alger Management since 1984 and he serves as a senior research
analyst, providing research for other mutual funds and investment accounts
managed by Alger Management. Also participating in the management of the
Portfolios are Ronald Tartaro and Seilai Khoo. Mr. Tartaro has been employed by
Alger Management since 1990 and he serves as a senior research analyst. Prior to
1990, he was a member of the technical staff at AT&T Bell Laboratories. Ms. Khoo
has been employed by Alger Management since 1989 and she serves as a senior
research analyst.
Fund personnel ("Access Persons") are permitted to engage in personal
securities transactions subject to the restrictions and procedures of the Fund's
Code of Ethics. Pursuant to the Code of Ethics, Access Persons generally must
preclear all personal securities transactions prior to trading and are subject
to certain prohibitions on personal trading. You can get a copy of the Fund's
Code of Ethics by calling the Fund toll-free at (800) 992-3863.
Fees
Each Portfolio pays Alger Management a management fee computed daily and paid
monthly at annual rates based on a percentage of the value of the relevant
Portfolio's average daily net assets, as follows: Alger American Small
Capitalization Portfolio and Alger American Leveraged AllCap Portfolio-.85%;
Alger American MidCap Growth Portfolio-.80%; Alger American Growth
Portfolio-.75%. The management fees paid by the Portfolios are higher than those
paid by most other investment companies; however, such fees do not exceed those
paid by funds with similar investment objectives.
From time to time Alger Management or its affiliates may compensate insurance
companies or their affiliates whose customers hold shares of the Portfolios for
providing a variety of record-keeping, administrative, marketing and/or
shareholder support services. This compensation, which may be paid at a rate of
up to .30% of the net asset value of shares held by those customers depending on
the nature, extent and quality of the services provided, will be paid from Alger
5
<PAGE>
Management's own resources and not from the assets of the Fund.
Expenses
Each Portfolio pays expenses related to its daily operations, such as
management fees, brokerage fees, custodian fees, Trustees' fees, transfer agency
fees and legal and auditing costs. Alger Management has agreed to reimburse the
Portfolios to the extent that the annual operating expenses (excluding interest,
taxes, fees for brokerage services and extraordinary expenses) of the Alger
American Small Capitalization Portfolio exceed 1.50%; the Alger American Growth
Portfolio exceed 1.50%; the Alger American MidCap Growth Portfolio exceed 1.50%;
and the Alger American Leveraged AllCap Portfolio exceed 1.50% of the average
daily net assets of the applicable Portfolio for any fiscal year. In addition,
from time to time, Alger Management, in its sole discretion and as it deems
appropriate, may assume certain expenses of one or more of the Portfolios while
retaining the ability to be reimbursed by the applicable Portfolio for such
amounts prior to the end of the fiscal year. This will have the effect of
lowering the applicable Portfolio's overall expense ratio and of increasing
yield to investors, or the converse, at the time such amounts are assumed or
reimbursed, as the case may be. More information about each Portfolio's
investment management agreement and other expenses paid by the Portfolios is
included in the Statement of Additional Information.
The Statement of Additional Information contains information about the Fund's
brokerage policies and practices.
Distributor
Alger Inc. serves as the Fund's distributor and also distributes the shares
of other mutual funds managed by Alger Management.
Transfer Agent
Alger Shareholder Services, Inc., an affiliate of Alger Management, serves as
transfer agent for the Fund.
NET ASSET VALUE
The price of one share of a Portfolio is its "net asset value." The net asset
value is computed by adding the value of the Portfolio's investments plus cash
and other assets, deducting liabilities and then dividing the result by the
number of its shares outstanding. The net asset value of each Portfolio is
calculated on each day the New York Stock Exchange is open as of the close of
business (normally 4:00 p.m. Eastern time).
PURCHASES AND REDEMPTIONS
Contract or policy holders or Plan participants would not deal directly with
the Fund regarding the purchase or redemption of a Portfolio's shares. The
separate accounts of the Participating Insurance Companies place orders to
purchase and redeem shares of each Portfolio based on, among other things, the
amount of premium payments to be invested and the amount of surrender and
transfer requests (as defined in the prospectuses describing the VA contracts
and VLI policies issued by the Participating Insurance Companies) to be effected
on that day pursuant to VA contracts and VLI policies. Plan trustees purchase
Portfolio shares. Plan participants cannot contact the Fund directly to purchase
shares of the Portfolios but may invest in shares of the Portfolios only through
their Plan. Participants should contact their Plan sponsor for information
concerning the appropriate procedure for investing in the Fund.
Orders received by the Fund or the Fund's transfer agent are effected on days
on which the NYSE is open for trading. For orders received before the close of
regular trading on the NYSE, purchases and redemptions of the shares of each
Portfolio are effected at the respective net asset values per share determined
as of the close of regular trading on the NYSE on that same day. Orders received
after the close of regular trading on the NYSE are effected at the next
calculated net asset value. See "Net Asset Value." All orders for the purchase
of shares are subject to acceptance or rejection by the Fund. Payment for
redemptions will be made by the Fund's transfer agent on behalf of the Fund and
the relevant Portfolios within seven days after the request is received. The
Fund does not assess any fees, either when it sells or when it redeems its
shares. Surrender charges, mortality and expense risk fees and other charges may
be assessed by Participating Insurance Companies under the VA contracts or VLI
policies. These fees should be described in the Participating Insurance
Companies' prospectuses. Any charges assessed by the Plans should be described
in the Plan documents.
6
<PAGE>
DIVIDENDS AND DISTRIBUTIONS
Each Portfolio will be treated separately in determining the amounts of
dividends of investment income and distributions of capital gains payable to
holders of its shares. Dividends and distributions will be automatically
reinvested on the payment date for each shareholder's account in additional
shares of the Portfolio that paid the dividend or distribution at net asset
value or, in the case of VA contracts and VLI policies, will be paid in cash at
the election of the Participating Insurance Company. Dividends of the Portfolios
will be declared and paid annually. Distributions of any net realized capital
gains earned by a Portfolio usually will be made annually after the close of the
fiscal year in which the gains are earned. Participating Insurance Companies
will be informed about the amount and character of dividends and distributions
from the relevant Portfolio for federal income tax purposes.
TAXES
Each Portfolio will be treated as a separate taxpayer with the result that,
for federal income tax purposes, the amounts of net investment income and
capital gains earned will be determined on a Portfolio-by-Portfolio (rather than
on a Fund-wide) basis.
The Fund intends that each Portfolio will qualify separately as a "regulated
investment company" (within the meaning of the Internal Revenue Code of 1986, as
amended) for each taxable year of each Portfolio. If so qualified, and providing
certain distribution requirements are met, a Portfolio will not be subject to
federal income tax on its net investment income and net capital gains that it
distributes to its shareholders.
Dividends paid from net investment income and distributions of net realized
short-term capital gains are treated as ordinary income earned by the
shareholders of a Portfolio. Distributions of net long-term capital gains are
treated as such by shareholders for federal income tax purposes. Federal income
taxation of separate accounts of life insurance companies, VA contracts, VLI
policies and of the Plans is discussed in the prospectuses of the Participating
Insurance Companies and in the Plan documents. With respect to participants in
the Plans, dividends from net investment income and net realized capital gains
will ordinarily not be subject to taxation until such dividends are distributed
to such participants from their Plan accounts.
PERFORMANCE
The Portfolios advertise different types of yield and total return
performance. All performance figures are based on historical earnings and are
not intended to indicate future performance. 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.
Each Portfolio may include quotations of its "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 a
Portfolio from the beginning date of the measuring period to the end of the
measuring period. These figures reflect changes in the price of the Portfolio's
shares and assume that any income dividends and/or capital gains distributions
made by the Portfolio during the period were reinvested in shares of the
Portfolio. Figures will be given for recent 1, 5 and 10 year periods, and may by
given for other periods as well (such as from commencement of the Portfolio's
operations, or on a year-by-year basis) and may utilize dollar cost averaging.
The Portfolio may also use "aggregate" total return figures for various periods,
representing the cumulative change in value of an investment in the Portfolio
for the specific period (again reflecting changes in Portfolio share price 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" and "yield" for a
Portfolio will vary based on changes in market conditions. In addition, since
the deduction of a Portfolio's expenses is reflected in the total return and
yield figures, "total return" and "yield" will also vary based on the level of
the Portfolio's expenses.
The Statement of Additional Information further describes the method used to
determine the yields and total return figures. Current yield and/or total return
quotations may be obtained by contacting the Fund.
The actual return of a holder of a VA contract or VLI policy will also be
affected by charges imposed by the separate accounts of Participating Insurance
Companies or, in the case of Plan participants, by any charges imposed under the
Plan.
7
<PAGE>
INVESTOR AND
SHAREHOLDER INFORMATION
Investors and shareholders may contact the Fund toll-free at (800) 992-3863
for further information regarding the Fund and the Portfolios, including current
performance quotations, as well as for assistance in selecting a Portfolio and
obtaining a Statement of Additional Information. Holders of VA contracts or VLI
policies issued by Participating Insurance Companies and participants in Plans
for which shares of one or more Portfolios are the investment vehicle may
receive from the Participating Insurance Companies or Plan sponsor unaudited
semi annual financial statements and year-end financial statements audited by
the Fund's independent public accountants. Each report will show the investments
owned by each of the Portfolios and the market values of the investments and
will provide other information about the Fund and its operations. The Fund's
Annual Report as of December 31, 1994 contains additional performance
information and is available upon request and without charge by contacting the
Fund at the toll-free number listed above.
8
<PAGE>
================================================================================
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus or the Statement
of Additional Information in connection with the offering of the Fund's shares,
and if given or made, such other information or representations must not be
relied on as having been authorized by the Fund. This Prospectus does not
constitute an offer in any state in which, or to any person to whom, such offer
may not lawfully be made.
----------
Investment Manager:
Fred Alger Management, Inc.
75 Maiden Lane
New York, New York 10038
Distributor:
Fred Alger & Company, Incorporated
30 Montgomery Street
Jersey City, New Jersey 07302
Transfer Agent:
Alger Shareholder Services, Inc.
30 Montgomery Street
Box 2001
Jersey City, New Jersey 07302
Independent Public Accountants:
Arthur Andersen LLP
1345 Avenue of the Americas
New York, New York 10105
================================================================================
================================================================================
THE
ALGER Meeting the challenge
AMERICAN of investing
FUND
Alger American
Small Capitalization Portfolio
Alger American
Growth Portfolio
Alger American
MidCap Growth Portfolio
Alger American
Leveraged AllCap Portfolio
PROSPECTUS July 31, 1995
================================================================================
<PAGE>
PROSPECTUS
- ----------
THE
ALGER 75 Maiden Lane
AMERICAN New York, New York 10038
FUND (800) 992-FUND (992-3863)
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
================================================================================
The Alger American Fund (the "Fund") is a registered investment company--a
mutual fund--that presently offers interests in six portfolios. This Prospectus
sets forth information about the Alger American Small Capitalization Portfolio
(the "Portfolio"). The Portfolio seeks long-term capital appreciation by
investing in a diversified, actively managed portfolio of equity securities,
primarily of companies with total market capitalization of less than $1 billion.
Shares of the Portfolio are offered as a pooled funding vehicle for
insurance companies writing all types of variable annuity contracts ("VA
contracts") and variable life insurance policies ("VLI policies") and may also
be offered directly to qualified pension and retirement plans (the "Plans"). See
"The Alger American Small Capitalization Portfolio."
Shares of the Portfolio are not deposits or obligations of, or guaranteed
or endorsed by any bank, and the shares are not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other agency.
This Prospectus, which should be retained for future reference, contains
important information that you should know before investing. Please read it
along with the prospectuses issued by the insurance companies with respect to
the VA contracts and VLI policies or with the Plan documents. A "Statement of
Additional Information" dated July 31, 1995 containing further information about
all the portfolios of the Fund, including the Portfolio, has been filed with the
Securities and Exchange Commission and is incorporated by reference into this
Prospectus. It is available at no charge by contacting the Fund at the address
or phone number above.
FRED ALGER FRED ALGER
MANAGEMENT, Investment Manager & COMPANY, Distributor
INC. INCORPORATED
================================================================================
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
================================================================================
July 31, 1995
<PAGE>
- --------------------------------------------------------------------------------
CONTENTS
Page
----
Portfolio Expenses ................................................. iii
Financial Highlights ............................................... iv
The Alger American Small Capitalization
Portfolio ........................................................ 1
Participating Insurance Companies and Plans ........................ 1
Investment Objective and Policies .................................. 1
Investment Practices ............................................... 2
Management of the Fund ............................................. 2
Net Asset Value .................................................... 4
Purchases and Redemptions .......................................... 4
Dividends and Distributions ........................................ 4
Taxes .............................................................. 5
Performance ........................................................ 5
Investor and Shareholder Information ............................... 5
- --------------------------------------------------------------------------------
ii
<PAGE>
- --------------------------------------------------------------------------------
Portfolio Expenses
The Table below is designed to assist you in understanding the various costs
and expenses that you will bear as a shareholder. The Table does not reflect
charges and deductions which are, or may be, imposed under the VA contracts, VLI
policies or Plans; such charges and deductions are described in the prospectus
for the VA contract or VLI policy accompanying this prospectus or in the Plan
documents.
The Example below shows the amount of expenses you would pay on a $1,000
investment in the Portfolio. These amounts assume the reinvestment of all
dividends and distributions and payment by the Portfolio of operating expenses
as shown in the Table under Annual Portfolio Operating Expenses. The Example is
an illustration only and actual expenses may be greater or less than those
shown.
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases ................................. None
Maximum Sales Load Imposed on Reinvested Dividends ...................... None
Deferred Sales Load ..................................................... None
Redemption Fees ......................................................... None
Annual Portfolio Operating Expenses (as a percentage of average net assets)
Management Fees ......................................................... .85%
12b-1 Fees .............................................................. --
Other Expenses .......................................................... .11%
----
Total Portfolio Operating Expenses ...................................... .96%
====
Example
You would pay the following expenses on a $1,000 investment, assuming (1)
5% annual return and (2) redemption at the end of each time period:
One Year ................................................................ $ 10
Three Years ............................................................. 31
Five Years .............................................................. 53
Ten Years ............................................................... 118
- --------------------------------------------------------------------------------
iii
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The Financial Highlights for the years ended December 31, 1990 through 1994
have been audited by Arthur Andersen LLP, the Fund's independent public
accountants, as indicated in their report dated February 2, 1995 on the Fund's
financial statements as of December 31, 1994 which are included in the Fund's
Statement of Additional Information. The Financial Highlights should be read in
conjunction with the Fund's financial statements and notes thereto. The
Financial Highlights, with the exception of the total return information, for
the periods ended December 31, 1989 and 1988 have been audited by other
independent accountants, who have expressed an unqualified opinion thereon. The
Statement of Additional Information may be obtained from the fund without
charge.
THE ALGER AMERICAN FUND
SMALL CAPITALIZATION PORTFOLIO
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
For a share outstanding throughout the period
- --------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31,
--------------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989 1988(iii)
-------- -------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of year ....................... $ 30.88 $ 27.26 $ 26.79 $ 17.02 $ 15.79 $ 9.60 $ 10.00
-------- -------- -------- -------- -------- -------- --------
Net investment income (loss) .... (0.03)(i) (0.05) (0.06) (0.03) 0.02 0.04 0.06
Net realized and unrealized
gain (loss)
on investments ................ (1.45) 3.67 0.91 9.82 1.35 6.15 (0.40)
-------- -------- -------- -------- -------- -------- --------
Total from investment
operations .................. (1.48) 3.62 0.85 9.79 1.37 6.19 (0.34)
-------- -------- -------- -------- -------- -------- --------
Dividends from net
investment income ............. -- -- -- (0.02) (0.01) -- (0.06)
Distributions from
net realized gains ............ (2.09) -- (0.38) -- (0.13) -- --
-------- -------- -------- -------- -------- -------- --------
Total Distributions ........... (2.09) -- (0.38) (0.02) (0.14) -- (0.06)
-------- -------- -------- -------- -------- -------- --------
Net asset value, end of year .... $ 27.31 $ 30.88 $ 27.26 $ 26.79 $ 17.02 $ 15.79 $ 9.60
======== ======== ======== ======== ======== ======== ========
Total Return .................... (4.38%) 13.28% 3.55% 57.54% 8.71% 64.48%(ii) (3.35%)(ii)
======== ======== ======== ======== ======== ======== ========
Ratios and Supplemental Data:
Net assets, end of year
(000's omitted) ............. $397,037 $238,850 $135,718 $ 56,798 $ 7,149 $ 569 $ 39
======== ======== ======== ======== ======== ======== ========
Ratio of expenses to average
net assets .................. 0.96% 1.03% 0.98% 1.06% 1.50% 1.50% 1.50%
======== ======== ======== ======== ======== ======== ========
Decrease reflected in above
expense ratios due to expense
reimbursements .............. -- -- -- -- 0.33% 9.15% 12.31%
======== ======== ======== ======== ======== ======== ========
Ratio of net investment income
(loss) to average net assets (0.10%) (0.35%) (0.37%) (0.12%) 0.50% 1.11% 2.27%
======== ======== ======== ======== ======== ======== ========
Portfolio Turnover Rate ....... 117.61% 148.07% 108.06% 125.90% 132.46% 133.61% 20.86%
======== ======== ======== ======== ======== ======== ========
</TABLE>
- --------------------------------------------------------------------------------
(i) Amount was computed based on average shares outstanding during the period.
(ii) Unaudited.
(iii) For the period September 21, 1988 (commencement of operations) to December
31, 1988. Ratios have been annualized; total return has not been
annualized.
- --------------------------------------------------------------------------------
iv
<PAGE>
THE ALGER AMERICAN SMALL
CAPITALIZATION PORTFOLIO
The Portfolio is designed to permit insurance companies that issue variable
annuity contracts ("VA contracts") and variable life insurance policies ("VLI
policies") to offer contract and policy holders the opportunity to participate
in the performance of the Portfolio. Upon receipt by the Fund of an exemptive
order (the "Order") for which an application is currently pending with the
Securities and Exchange Commission, the Portfolio may also be a funding vehicle
for qualified pension and retirement plans (the "Plans") which elect to make the
Portfolio an investment option for Plan participants. If the Order is issued,
the Portfolio will, without notice to shareholders, accept orders from Plans to
purchase shares of the Portfolio.
The Fund is a diversified, open-end management investment company that offers
a selection of six portfolios, each having distinct investment objectives and
policies. The Fund's Board of Trustees may establish additional portfolios at
any time.
PARTICIPATING INSURANCE
COMPANIES AND PLANS
The Portfolio is intended to be a funding vehicle for VA contracts and VLI
policies to be offered by the separate accounts of certain life insurance
companies ("Participating Insurance Companies") and, if the Order is issued,
Plans. Individuals cannot invest in the Portfolio directly but may do so only
through a VA contract or VLI policy or, if the Order is issued, a Plan. The Fund
currently does not foresee any disadvantages to the holders of VA contracts and
VLI Policies arising from the fact that the interests of the holders of VA
contracts and VLI policies may differ, that the Participating Insurance
Companies may not be affiliated with each other or that the Portfolio may offer
its shares to Plans. Nevertheless, the Fund's Trustees intend to monitor events
in order to identify any material irreconcilable conflicts which may possibly
arise due to differences of tax treatment or other considerations, and to
determine what action, if any, should be taken in response to such conflicts. If
such a conflict were to occur, one or more Participating Insurance Company
separate accounts or Plans might withdraw its investment in the Portfolio, which
may cause the Portfolio to sell portfolio securities at disadvantageous prices.
The VA contracts and VLI policies are described in the separate prospectuses
issued by the Participating Insurance Companies, and the Plans are described in
the Plan documents made available by the Plan sponsors. The Fund assumes no
responsibility for such prospectuses or Plan documents.
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives and restrictions summarized below are fundamental
which means that they may not be changed without shareholder approval. All
investment policies and practices described elsewhere in this Prospectus are not
fundamental, so the Fund's Board of Trustees may change them without shareholder
approval. There is no guarantee that the Portfolio's objectives will be
achieved.
As a matter of fundamental policy, the Portfolio will not: (1) with respect
to 75% of its total assets, invest more than 5% of its total assets in any one
issuer, except for obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities ("U.S. Government securities"); (2) own more than
10% of the outstanding voting securities of any company, (3) invest more than
10% of its net assets in securities that are not readily marketable and in
repurchase agreements with maturities of more than seven days; (4) invest more
than 25% of its total assets in any one industry, except for U.S. Government
securities; (5) borrow money or pledge its assets, except for temporary or
emergency purposes, in an amount exceeding 10% of its total assets. The
Statement of Additional Information contains additional investment restrictions
as well as information on the Portfolio's investment practices.
The investment objective of the Portfolio is long-term capital appreciation.
Except during temporary defensive periods, the Portfolio invests at least 65% of
its total assets in equity securities of companies that, at the time of
purchase, have total market capitalization--present market value per share
multiplied by the total number of shares outstanding--of less than $1 billion.
The Portfolio may invest up to 35% of its total assets in equity securities of
companies that, at the time of purchase, have total market capitalization of $1
billion or greater and in excess of that amount (up to 100% of its assets)
during temporary defensive periods.
In General
The Portfolio seeks to achieve its objective by investing in equity
securities, such as common or preferred stocks, or securities convertible into
or exchangeable for equity securities, including warrants and rights. The
Portfolio will invest primarily in companies whose securities are traded on
domestic stock exchanges or in the over-the-counter market. These companies may
still be in the developmental stage, may be older companies that appear to be
entering a new stage of growth progress owing to factors such as management
changes or development of new technology, products or markets or may be
companies providing products or services with a high unit volume growth rate. In
order to afford the Portfolio the flexibility to take advantage of new
opportunities for investments in accordance with its investment objective, it
may hold up to 15% of its net assets in money market instruments and repurchase
agreements and in excess of that amount (up to 100% of its assets) during
temporary defensive periods. This amount may be higher than that maintained by
other funds with similar investment objectives.
1
<PAGE>
Investing in smaller, newer issuers generally involves greater risk than
investing in larger, more established issuers. Companies in which the Portfolio
is likely to invest may have limited product lines, markets or financial
resources and may lack management depth. The securities in such companies 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. Accordingly, an investment in the Portfolio may not be
appropriate for all investors.
INVESTMENT PRACTICES
The Portfolio may use the investment strategies and invest in the types of
securities described below, which may involve certain risks. The Statement of
Additional Information contains more detailed information about these practices
and information about other investment practices of the Portfolio.
Repurchase Agreements
In a repurchase agreement, the Portfolio buys a security at one price and
simultaneously agrees to sell it back at a higher price. In the event of a
bankruptcy or default of the other party to the repurchase agreement, the
Portfolio could experience costs and delays in liquidating the underlying
security, which is held as collateral, and the Portfolio might incur a loss if
the value of the collateral held declines during this period.
Illiquid and Restricted Securities
Under the policies and procedures established by the Fund's Board of
Trustees, Fred Alger Management, Inc. ("Alger Management") determines the
liquidity of the Portfolio's investments. Investments may be illiquid because of
the absence of an active trading market, making it difficult to sell promptly at
an acceptable price. The Portfolio may purchase securities eligible for resale
under Rule 144A of the Securities Act of 1933. This rule permits otherwise
restricted securities to be sold to certain institutional buyers. The Portfolio
will limit its purchases of these securities to those which Alger Management,
under the supervision of the Fund's Board of Trustees, determines to be liquid.
A restricted security is one that has a contractual restriction on its resale or
which cannot be sold publicly until it is registered under the Securities Act of
1933.
Lending of Portfolio Securities
In order to generate income and to offset expenses, the Portfolio may lend
portfolio securities with a value up to 331/3% of the Portfolio's total assets
to brokers, dealers and other financial organizations. Any such loan will be
continuously secured by collateral at least equal to the value of the securities
loaned. Such lending could result in delays in receiving additional collateral
or in the recovery of the securities or possible loss of rights in the
collateral should the borrower fail financially.
Foreign Securities
The Portfolio may invest up to 20% of its total assets in foreign securities.
Investing in securities of foreign companies and foreign governments, which
generally are denominated in foreign currencies, may involve certain risk and
opportunity considerations not typically associated with investing in domestic
companies and could cause the Portfolio to be affected favorably or unfavorably
by changes in currency exchange rates and revaluations of currencies.
The Portfolio may purchase American Depositary Receipts ("ADRs") or U.S.
dollar-denominated securities of foreign issuers that are not included in the
20% foreign securities limitation. ADRs are receipts issued by U.S. banks or
trust companies in respect of securities of foreign issuers held on deposit for
use in the U.S. securities markets. While ADRs may not necessarily be
denominated in the same currency as the securities into which they may be
converted, many of the risks associated with foreign securities may also apply
to ADRs.
Other Investments
In addition to the securities and investment techniques listed above, the
Portfolio may invest in bank and thrift obligations, obligations issued or
guaranteed by the U.S. Government or by its agencies or instrumentalities,
foreign bank obligations and obligations of foreign branches of domestic banks,
and variable rate master demand notes. See "Investment Objectives and Policies"
in the Statement of Additional Information.
Portfolio Turnover
Portfolio changes will generally be made without regard to the length of time
a security has been held or whether a sale would result in a profit or loss.
Increased portfolio turnover will have the effect of increasing the Portfolio's
brokerage and custodial expenses.
MANAGEMENT OF THE FUND
Organization
The Fund was organized on April 6, 1988 as a multi-series Massachusetts
business trust. The Fund offers an unlimited number of shares of six series,
representing the shares of the Fund's portfolios, including the Portfolio.
2
<PAGE>
Although 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. Shareholders of the Portfolio may
vote only on matters that affect the Portfolio.
Under normal circumstances, other than the shares issued to Alger Inc. in
connection with its creation and initial capitalization, the Fund intends to
distribute its shares of the Portfolio to Participating Insurance Companies and,
if the Order is issued, Plans, so that only Participating Insurance Companies
and their separate accounts and Plans will be considered shareholders of the
Portfolio. Although the Participating Insurance Companies and their separate
accounts and the Plans are the shareholders or investors, the Participating
Insurance Companies will pass through voting rights to their VA contract and VLI
policy holders. Plan sponsors may or may not pass through voting rights to Plan
participants, depending on the terms of the Plan's governing documents. For a
discussion of voting rights, please refer to the Participating Insurance
Companies' prospectuses or the Plan documents.
When matters are submitted for shareholder vote, shareholders of the
Portfolio will have one vote for each full share held and proportionate,
fractional votes for fractional shares held. A separate vote of a portfolio of
the Fund is required on any matter affecting the portfolio on which shareholders
are entitled to vote, such as approval of a portfolio's agreement with Alger
Management. Shareholders of one portfolio are not entitled to vote on a matter
that does not affect that portfolio but that does require a separate vote of the
other portfolios. There normally will be no annual meetings of shareholders for
the purpose of electing Trustees unless and until such time as less than a
majority of 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. Any Trustee may be removed from office on the vote of
shareholders holding at least two thirds of the Fund's outstanding shares at a
meeting called for that purpose. The Trustees are required to call such a
meeting on the written request of shareholders holding at least 10% of the
Fund's outstanding shares.
Board of Trustees
The Fund is governed by a Board of Trustees which is responsible for
protecting the interests of shareholders under Massachusetts law. The Statement
of Additional Information contains general background information about each
Trustee and officer of the Fund.
Investment Manager
Alger Management is the Fund's investment manager and is responsible for the
overall administration of the Fund, subject to the supervision of the Board of
Trustees. Alger Management makes investment decisions for the Portfolio, places
orders to purchase and sell securities on behalf of the Portfolio and selects
broker-dealers that, in its judgment, provide prompt and reliable execution at
favorable prices and reasonable commission rates. It is anticipated that the
Fund's distributor, Fred Alger & Company, Incorporated ("Alger Inc."), an
affiliate of Alger Management, will serve as the Fund's broker in effecting
substantially all of the Portfolio's transactions on securities exchanges and
will retain commissions in accordance with certain regulations of the Securities
and Exchange Commission. In addition, Alger Management employs professional
securities analysts who provide research services exclusively to the Portfolio
and other accounts for which Alger Management or its affiliates serve as
investment adviser or subadviser.
Alger Management has been in the business of providing investment advisory
services since 1964 and, as of December 31, 1994, had approximately $2.9 billion
under management, $1.4 billion in mutual fund accounts and $1.5 billion in other
advisory accounts. Alger Management is owned by Alger Inc. which in turn is
owned by Alger Associates, Inc., a financial services holding company. Fred M.
Alger III and his brother, David D. Alger, are the majority shareholders of
Alger Associates, Inc. and may be deemed to control that company and its
subsidiaries.
Portfolio Managers
David D. Alger, President of Alger Management, is primarily responsible for
the day-to-day management of the Portfolio. He has been employed by Alger
Management as Executive Vice President and Director of Research since 1971 and
as President since 1995 and he serves as portfolio manager for other mutual
funds and investment accounts managed by Alger Management. Also participating in
the management of the Portfolio are Ronald Tartaro and Seilai Khoo. Mr. Tartaro
has been employed by Alger Management since 1990 and he serves as a senior
research analyst. Prior to 1990, he was a member of the technical staff at AT&T
Bell Laboratories. Ms. Khoo has been employed by Alger Management since 1989 and
she serves as a senior research analyst.
Fund personnel ("Access Persons") are permitted to engage in personal
securities transactions subject to the restrictions and procedures of the Fund's
Code of Ethics. Pursuant to the Code of Ethics, Access Persons generally must
preclear all personal securities transactions prior to trading and are subject
3
<PAGE>
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) 992-3863.
Fees
The Portfolio pays Alger Management a management fee computed daily and paid
monthly at an annual rate of .85% of the value of the Portfolio's average daily
net assets. This management fee is higher than that paid by most other
investment companies; however, such fee does not exceed those paid by funds with
similar investment objectives.
From time to time Alger Management or its affiliates may compensate insurance
companies or their affiliates whose customers hold shares of the Portfolio for
providing a variety of record-keeping, administrative, marketing and/or
shareholder support services. This compensation, which may be paid at a rate of
up to .30% of the net asset value of shares held by those customers depending on
the nature, extent and quality of the services provided, will be paid from Alger
Management's own resources and not from the assets of the Portfolio.
Expenses
The Portfolio pays expenses related to its daily operations, such as
management fees, brokerage fees, custodian fees, Trustees' fees, transfer agency
fees and legal and auditing costs. Alger Management has agreed to reimburse the
Portfolio to the extent that the annual operating expenses (excluding interest,
taxes, fees for brokerage services and extraordinary expenses) exceed 1.50% of
the average daily net assets for any fiscal year. In addition, from time to
time, Alger Management, in its sole discretion and as it deems appropriate, may
assume certain expenses of the Portfolio while retaining the ability to be
reimbursed by the Portfolio for such amounts prior to the end of the fiscal
year. This will have the effect of lowering the Portfolio's overall expense
ratio and of increasing yield to investors, or the converse, at the time such
amounts are assumed or reimbursed, as the case may be. More information about
the Portfolio's investment management agreement and other expenses paid by the
Portfolio is included in the Statement of Additional Information.
The Statement of Additional Information contains information about the Fund's
brokerage policies and practices.
Distributor
Alger Inc. serves as the Fund's distributor and also distributes the shares
of other mutual funds managed by Alger Management.
Transfer Agent
Alger Shareholder Services, Inc., an affiliate of Alger Management, serves as
transfer agent for the Fund.
NET ASSET VALUE
The price of one share of the Portfolio is its "net asset value." The net
asset value is computed by adding the value of the Portfolio's investments plus
cash and other assets, deducting liabilities and then dividing the result by the
number of its shares outstanding. The net asset value of the Portfolio is
calculated on each day the New York Stock Exchange is open as of the close of
business (normally 4:00 p.m. Eastern time).
PURCHASES AND REDEMPTIONS
Contract or policy holders or Plan participants would not deal directly with
the Fund regarding the purchase or redemption of the Portfolio's shares. The
separate accounts of the Participating Insurance Companies place orders to
purchase and redeem shares of the Portfolio based on, among other things, the
amount of premium payments to be invested and the amount of surrender and
transfer requests (as defined in the prospectuses describing the VA contracts
and VLI policies issued by the Participating Insurance Companies) to be effected
on that day pursuant to VA contracts and VLI Policies. Plan trustees purchase
Portfolio shares. Plan participants cannot contact the Fund directly to purchase
shares of the Portfolio but may invest in shares of the Portfolio only through
their Plan. Participants should contact their Plan sponsor for information
concerning the appropriate procedure for investing in the Portfolio.
Orders for shares of the Portfolio received by the Fund or the Fund's
transfer agent are effected on days on which the NYSE is open for trading. For
orders received before the close of regular trading on the NYSE, purchases and
redemptions of the shares of the Portfolio are effected at the respective net
asset values per share determined as of the close of regular trading on the NYSE
on the same day. Orders received after the close of regular trading on the NYSE,
are effected at the next calculated net asset value. See "Net Asset Value." All
orders for the purchase of shares are subject to acceptance or rejection by the
Fund. Payment for redemptions will be made by the Fund's transfer agent on
behalf of the Fund and the Portfolio within seven days after the request is
received. Neither the Fund nor the Portfolio assesses any fees, either when it
sells or when it redeems the Portfolio's shares. Surrender charges, mortality
and expense risk fees and other charges may be assessed by Participating
Insurance Companies under the VA contracts or VLI policies. These fees should be
described in the Participating Insurance Companies' prospectuses. Any Charges
assessed by the Plans should be described in the Plan documents.
DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions will be automatically reinvested on the payment
date for each shareholder's account in additional shares of the Portfolio at net
4
<PAGE>
asset value or, in the case of VA contracts and VLI policies, will be paid in
cash at the election of the Participating Insurance Company. Dividends of the
Portfolio will be declared and paid annually. Distributions of any net realized
capital gains earned by the Portfolio usually will be made annually after the
close of the fiscal year in which the gains are earned. Participating Insurance
Companies will be informed about the amount and character of dividends and
distributions from the Portfolio for federal income tax purposes.
TAXES
The Fund intends that the Portfolio will qualify separately as a "regulated
investment company" (within the meaning of the Internal Revenue Code of 1986, as
amended) for each taxable year. If so qualified, and providing certain
distribution requirements are met, the Portfolio will not be subject to federal
income tax on its net investment income and net capital gains that it
distributes to its shareholders.
Dividends paid from net investment income and distributions of net realized
short-term capital gains are treated as ordinary income earned by the
shareholders of the Portfolio. Distributions of net long-term capital gains are
treated as such by shareholders for federal income tax purposes. Federal income
taxation of separate accounts of life insurance companies, VA contracts, VLI
policies and of the Plans is discussed in the prospectuses of the Participating
Insurance Companies and in the Plan documents. With respect to participants in
the Plans, dividends from net investment income and net realized capital gains
will ordinarily not be subject to taxation until such dividends are distributed
to such participants from their Plan accounts.
PERFORMANCE
All performance figures are based on historical earnings and are not intended
to indicate future performance.
The Portfolio may include quotations of its "total return" and/or "yield" in
advertisements or reports to shareholders or prospective investors. Both "total
return" and/or "yield" figures are based on historical earnings and are not
intended to indicate future performance. Total return figures show the aggregate
or average percentage change in value of an investment in the Portfolio from the
beginning date of the measuring period to the end of the measuring period. These
figures reflect changes in the price of the Portfolio's shares and assume that
any income dividends and/or capital gains distributions made by the Portfolio
during the period were reinvested in shares of the Portfolio. Figures will be
given for recent 1, 5 and 10 year periods, and may be given for other periods as
well (such as from commencement of the Portfolio's operations, or on a
year-by-year basis). The Portfolio may also use "aggregate" total return figures
for various periods, representing the cumulative change in value of an
investment in the Portfolio for the specific period (again reflecting changes in
Portfolio share prices 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"
and "yield" for the Portfolio will vary based on changes in market conditions.
In addition, since the deduction of the Portfolio's expenses is reflected in the
total return and yield figures, "total return" and "yield" will also vary based
on the level of the Portfolio's expenses.
The actual return of a holder of a VA contract or VLI policy will also be
affected by charges imposed by the separate accounts of Participating Insurance
Companies or, in the case of Plan participants, by any charges imposed under the
plan.
INVESTOR AND SHAREHOLDER
INFORMATION
Investors and shareholders may contact the Fund toll-free at (800) 992-3863
for further information regarding the Fund and the Portfolio, including current
performance quotations, as well as for assistance in obtaining a Statement of
Additional Information. Holders of VA contracts or VLI policies issued by
Participating Insurance Companies and participants in Plans for which shares of
the Portfolio are the investment vehicle may receive from the Participating
Insurance Companies or Plan sponsor unaudited semi-annual financial statements
and year-end financial statements audited by the Fund's independent public
accountants. Each report will show the investments owned by the Portfolio and
the market values of the investments and will provide other information about
the Portfolio and its operations. The Fund's Annual Report as of December 31,
1994 contains additional performance information and is available upon request
and without charge by contacting the Fund at the toll-free number listed above.
5
<PAGE>
================================================================================
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus or the Statement
of Additional Information in connection with the offering of the Portfolio's
shares, and if given or made, such other information or representations must not
be relied on as having been authorized by the Fund. This Prospectus does not
constitute an offer in any state in which, or to any person to whom, such offer
may not lawfully be made.
----------
Investment Manager:
Fred Alger Management, Inc.
75 Maiden Lane
New York, New York 10038
Distributor:
Fred Alger & Company, Incorporated
30 Montgomery Street
Jersey City, New Jersey 07302
Transfer Agent:
Alger Shareholder Services, Inc.
30 Montgomery Street
Box 2001
Jersey City, New Jersey 07302
Independent Public Accountants:
Arthur Andersen LLP
1345 Avenue of the Americas
New York, New York 10105
================================================================================
================================================================================
THE
ALGER Meeting the challenge
AMERICAN of investing
FUND
ALGER AMERICAN SMALL
CAPITALIZATION PORTFOLIO
PROSPECTUS July 31, 1995
================================================================================
<PAGE>
PROSPECTUS
- ----------
THE
ALGER 75 Maiden Lane
AMERICAN New York, New York 10038
FUND (800) 992-FUND (992-3863)
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
================================================================================
The Alger American Fund (the "Fund") is a registered investment company--a
mutual fund--that presently offers interests in six portfolios. This Prospectus
sets forth information about the Alger American MidCap Growth Portfolio (the
"Portfolio"). The Portfolio seeks long-term capital appreciation by investing in
a diversified, actively managed portfolio of equity securities, primarily of
companies with total market capitalization between $750 million and $3.5
billion.
Shares of the Portfolio are offered as a pooled funding vehicle for
insurance companies writing all types of variable annuity contracts ("VA
contracts") and variable life insurance policies ("VLI policies") and may also
be offered directly to qualified pension and retirement plans (the "Plans"). See
"The Alger American MidCap Growth Portfolio."
Shares of the Portfolio are not deposits or obligations of, or guaranteed
or endorsed by any bank, and the shares are not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other agency.
This Prospectus, which should be retained for future reference, contains
important information that you should know before investing. Please read it
along with the prospectuses issued by the insurance companies with respect to
the VA contracts and VLI policies or with the Plan documents. A "Statement of
Additional Information" dated July 31, 1995 containing further information about
all the portfolios of the Fund, including the Portfolio, has been filed with the
Securities and Exchange Commission and is incorporated by reference into this
Prospectus. It is available at no charge by contacting the Fund at the address
or phone number above.
FRED ALGER FRED ALGER
MANAGEMENT, Investment Manager & COMPANY, Distributor
INC. INCORPORATED
================================================================================
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
================================================================================
July 31, 1995
<PAGE>
- --------------------------------------------------------------------------------
CONTENTS
Page
----
Portfolio Expenses ........................................................ iii
Financial Highlights ...................................................... iv
The Alger American MidCap
Growth Portfolio ........................................................ 1
Participating Insurance Companies and Plans ............................... 1
Investment Objective and Policies ......................................... 1
Investment Practices ...................................................... 1
Management of the Fund .................................................... 2
Net Asset Value ........................................................... 4
Purchases and Redemptions ................................................. 4
Dividends and Distributions ............................................... 4
Taxes ..................................................................... 4
Performance ............................................................... 4
Investor and Shareholder Information ...................................... 5
- --------------------------------------------------------------------------------
ii
<PAGE>
- --------------------------------------------------------------------------------
Portfolio Expenses
The Table below is designed to assist you in understanding the
various costs and expenses that you will bear as a shareholder. The Table
does not reflect charges and deductions which are, or may be, imposed
under the VA contracts, VLI policies or Plans; such charges and deductions
are described in the prospectus for the VA contract or VLI policy
accompanying this prospectus or in the Plan documents.
The Example below shows the amount of expenses you would pay on a
$1,000 investment in the Portfolio. These amounts assume the reinvestment
of all dividends and distributions and payment by the Portfolio of
operating expenses as shown in the Table under Annual Portfolio Operating
Expenses. The Example is an illustration only and actual expenses may be
greater or less than those shown.
<TABLE>
<CAPTION>
Shareholder Transaction Expenses
<S> <C>
Maximum Sales Load Imposed on Purchases ......................................... None
Maximum Sales Load Imposed on Reinvested Dividends .............................. None
Deferred Sales Load ............................................................. None
Redemption Fees ................................................................. None
Annual Portfolio Operating Expenses (as a percentage of average net assets)
Management Fees ................................................................. .80%
12b-1 Fees ...................................................................... --
Other Expenses .................................................................. .17%
---
Total Portfolio Operating Expenses .............................................. .97%
===
Example
You would pay the following expenses on a $1,000 investment, assuming (1)
5% annual return and (2) redemption at the end of each time period:
One Year ........................................................................ $ 10
Three Years ..................................................................... 31
Five Years ...................................................................... 54
Ten Years ....................................................................... 119
</TABLE>
- --------------------------------------------------------------------------------
iii
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The Financial Highlights for the periods ended December 31, 1993 and
1994 have been audited by Arthur Andersen LLP, the Fund's independent
public accountants, as indicated in their report dated February 2, 1995 on
the Fund's financial statements as of December 31, 1994 which are included
in the Fund's Statement of Additional Information. The Financial
Highlights should be read in conjunction with the Fund's financial
statements and notes thereto. The Statement of Additional Information may
be obtained from the fund without charge.
THE ALGER AMERICAN FUND
MIDCAP GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
For a share outstanding throughout the period
- -------------------------------------------------------------------------------------------------------------------------
From May 3, 1993
Year Ended (commencement of
December 31, operations)
1994 to December 31, 1993(i)
------------ -----------------------
<S> <C> <C>
Net asset value, beginning of year............................... $ 13.72 $ 10.00
------- -------
Net investment income (loss)........................................... 0.00(ii) (0.02)
Net realized and unrealized gain (loss) on investments................. (0.21) 3.88
------- -------
Total from investment operations..................................... (0.21) 3.86
Distributions from net realized gains.................................. (0.05) (0.14)
------- -------
Net asset value, end of year..................................... $ 13.46 $ 13.72
======= =======
Total Return........................................................... (1.54%) 38.67%
======= =======
Ratios and Supplemental Data:
Net assets, end of year (000's omitted)........................ $62,178 $21,301
======= =======
Ratio of expenses to average net assets.............................. 0.97% 1.50%
======= =======
Decrease reflected in above expense ratios due to expense
reimbursements..................................................... -- 0.03%
======= =======
Ratio of net investment income (loss) to average net assets.......... 0.03% (0.58%)
======= =======
Portfolio Turnover Rate.............................................. 83.96% 67.22%
======= =======
(i) Ratios have been annualized; total return has not been annualized.
(ii) Amount was computed based on average shares outstanding during the period.
</TABLE>
- --------------------------------------------------------------------------------
iv
<PAGE>
THE ALGER AMERICAN MIDCAP
GROWTH PORTFOLIO
The Portfolio is designed to permit insurance companies that issue variable
annuity contracts ("VA contracts") and variable life insurance policies ("VLI
policies") to offer contract and policy holders the opportunity to participate
in the performance of the Portfolio. Upon receipt by the Fund of an exemptive
order (the "Order") for which an application is currently pending with the
Securities and Exchange Commission, the Portfolio may also be a funding vehicle
for qualified pension and retirement plans (the "Plans") which elect to make the
Portfolio an investment option for Plan participants. If the Order is issued,
the Portfolio will, without notice to shareholders, accept orders from Plans to
purchase shares of the Portfolio.
The Fund is a diversified, open-end management investment company that offers
a selection of six portfolios, each having distinct investment objectives and
policies. The Fund's Board of Trustees may establish additional portfolios at
any time.
PARTICIPATING INSURANCE
COMPANIES AND PLANS
The Portfolio is intended to be a funding vehicle for VA contracts and VLI
policies to be offered by the separate accounts of certain life insurance
companies ("Participating Insurance Companies") and, if the Order is issued,
Plans. Individuals cannot invest in the Portfolio directly but may do so only
through a VA contract or VLI policy or, if the Order is issued, a Plan. The Fund
currently does not foresee any disadvantages to the holders of VA contracts and
VLI Policies arising from the fact that the interests of the holders of VA
contracts and VLI policies may differ, that the Participating Insurance
Companies may not be affiliated with each other or that the Portfolio may offer
its shares to Plans. Nevertheless, the Fund's Trustees intend to monitor events
in order to identify any material irreconcilable conflicts which may possibly
arise due to differences of tax treatment or other considerations, and to
determine what action, if any, should be taken in response to such conflicts. If
such a conflict were to occur, one or more Participating Insurance Company
separate accounts or Plans might withdraw its investment in the Portfolio, which
may cause the Portfolio to sell portfolio securities at disadvantageous prices.
The VA contracts and VLI policies are described in the separate prospectuses
issued by the Participating Insurance Companies, and the Plans are described in
the Plan documents made available by the Plan sponsors. The Fund assumes no
responsibility for such prospectuses or Plan documents.
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives and restrictions summarized below are fundamental
which means that they may not be changed without shareholder approval. All
investment policies and practices described elsewhere in this Prospectus are not
fundamental, so the Fund's Board of Trustees may change them without shareholder
approval. There is no guarantee that the Portfolio's objectives will be
achieved.
As a matter of fundamental policy, the Portfolio will not: (1) with respect
to 75% of its total assets, invest more than 5% of its total assets in any one
issuer, except for obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities ("U.S. Government securities"); (2) own more than
10% of the outstanding voting securities of any company, (3) invest more than
10% of its net assets in securities that are not readily marketable and in
repurchase agreements with maturities of more than seven days; (4) invest more
than 25% of its total assets in any one industry, except for U.S. Government
securities; (5) borrow money or pledge its assets, except for temporary or
emergency purposes, in an amount exceeding 10% of its total assets. The
Statement of Additional Information contains additional investment restrictions
as well as information on the Portfolio's investment practices.
The investment objective of the Portfolio is long-term capital appreciation.
Except during temporary defensive periods, the Portfolio invests at least 65% of
its total assets in equity securities of companies that, at the time of
purchase, have total market capitalization--present market value per share
multiplied by the total number of shares outstanding--between $750 million and
$3.5 billion. The Portfolio may invest up to 35% of its total assets in equity
securities of companies that, at the time of purchase, have total market
capitalization of less than $750 million or more than $3.5 billion.
In General
The Portfolio seeks to achieve its objective by investing in equity
securities, such as common or preferred stocks, or securities convertible into
or exchangeable for equity securities, including warrants and rights. The
Portfolio will invest primarily in companies whose securities are traded on
domestic stock exchanges or in the over-the-counter market. These companies may
still be in the developmental stage, may be older companies that appear to be
entering a new stage of growth progress owing to factors such as management
changes or development of new technology, products or markets or may be
companies providing products or services with a high unit volume growth rate. In
1
<PAGE>
order to afford the Portfolio the flexibility to take advantage of new
opportunities for investments in accordance with its investment objective, it
may hold up to 15% of its net assets in money market instruments and repurchase
agreements and in excess of that amount (up to 100% of its assets) during
temporary defensive periods. This amount may be higher than that maintained by
other funds with similar investment objectives.
INVESTMENT PRACTICES
The Portfolio may use the investment strategies and invest in the types of
securities described below, which may involve certain risks. The Statement of
Additional Information contains more detailed information about these practices
and information about other investment practices of the Portfolio.
Repurchase Agreements
In a repurchase agreement, the Portfolio buys a security at one price and
simultaneously agrees to sell it back at a higher price. In the event of a
bankruptcy or default of the other party to the repurchase agreement, the
Portfolio could experience costs and delays in liquidating the underlying
security, which is held as collateral, and the Portfolio might incur a loss if
the value of the collateral held declines during this period.
Illiquid and Restricted Securities
Under the policies and procedures established by the Fund's Board of
Trustees, Fred Alger Management, Inc. ("Alger Management") determines the
liquidity of the Portfolio's investments. Investments may be illiquid because of
the absence of an active trading market, making it difficult to sell promptly at
an acceptable price. The Portfolio may purchase securities eligible for resale
under Rule 144A of the Securities Act of 1933. This rule permits otherwise
restricted securities to be sold to certain institutional buyers. The Portfolio
will limit its purchases of these securities to those which Alger Management,
under the supervision of the Fund's Board of Trustees, determines to be liquid.
A restricted security is one that has a contractual restriction on its resale or
which cannot be sold publicly until it is registered under the Securities Act of
1933.
Lending of Portfolio Securities
In order to generate income and to offset expenses, the Portfolio may lend
portfolio securities with a value up to 331/3% of the Portfolio's total assets
to brokers, dealers and other financial organizations. Any such loan will be
continuously secured by collateral at least equal to the value of the securities
loaned. Such lending could result in delays in receiving additional collateral
or in the recovery of the securities or possible loss of rights in the
collateral should the borrower fail financially.
Foreign Securities
The Portfolio may invest up to 20% of its total assets in foreign securities.
Investing in securities of foreign companies and foreign governments, which
generally are denominated in foreign currencies, may involve certain risk and
opportunity considerations not typically associated with investing in domestic
companies and could cause the Portfolio to be affected favorably or unfavorably
by changes in currency exchange rates and revaluations of currencies.
The Portfolio may purchase American Depositary Receipts ("ADRs") or U.S.
dollar-denominated securities of foreign issuers that are not included in the
20% foreign securities limitation. ADRs are receipts issued by U.S. banks or
trust companies in respect of securities of foreign issuers held on deposit for
use in the U.S. securities markets. While ADRs may not necessarily be
denominated in the same currency as the securities into which they may be
converted, many of the risks associated with foreign securities may also apply
to ADRs.
Other Investments
In addition to the securities and investment techniques listed above, the
Portfolio may invest in bank and thrift obligations, obligations issued or
guaranteed by the U.S. Government or by its agencies or instrumentalities,
foreign bank obligations and obligations of foreign branches of domestic banks,
and variable rate master demand notes. See "Investment Objectives and Policies"
in the Statement of Additional Information.
Portfolio Turnover
Portfolio changes will generally be made without regard to the length of time
a security has been held or whether a sale would result in a profit or loss.
Increased portfolio turnover will have the effect of increasing the Portfolio's
brokerage and custodial expenses.
MANAGEMENT OF THE FUND
Organization
The Fund was organized on April 6, 1988 as a multi-series Massachusetts
business trust. The Fund offers an unlimited number of shares of six series,
representing the shares of the Fund's portfolios, including the Portfolio.
Although 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
2
<PAGE>
described in the Trust's Declaration of Trust. Shareholders of the Portfolio may
vote only on matters that affect the Portfolio.
Under normal circumstances, other than the shares issued to Alger Inc. in
connection with its creation and initial capitalization, the Fund intends to
distribute its shares of the Portfolio to Participating Insurance Companies and,
if the Order is issued, Plans, so that only Participating Insurance Companies
and their separate accounts and Plans will be considered shareholders of the
Portfolio. Although the Participating Insurance Companies and their separate
accounts and the Plans are the shareholders or investors, the Participating
Insurance Companies will pass through voting rights to their VA contract and VLI
policy holders. Plan sponsors may or may not pass through voting rights to Plan
participants, depending on the terms of the Plan's governing documents. For a
discussion of voting rights, please refer to the Participating Insurance
Companies' prospectuses or the Plan documents.
When matters are submitted for shareholder vote, shareholders of the
Portfolio will have one vote for each full share held and proportionate,
fractional votes for fractional shares held. A separate vote of a portfolio of
the Fund is required on any matter affecting the portfolio on which shareholders
are entitled to vote, such as approval of a portfolio's agreement with Alger
Management. Shareholders of one portfolio are not entitled to vote on a matter
that does not affect that portfolio but that does require a separate vote of the
other portfolios. There normally will be no annual meetings of shareholders for
the purpose of electing Trustees unless and until such time as less than a
majority of 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. Any Trustee may be removed from office on the vote of
shareholders holding at least two thirds of the Fund's outstanding shares at a
meeting called for that purpose. The Trustees are required to call such a
meeting on the written request of shareholders holding at least 10% of the
Fund's outstanding shares.
Board of Trustees
The Fund is governed by a Board of Trustees which is responsible for
protecting the interests of shareholders under Massachusetts law. The Statement
of Additional Information contains general background information about each
Trustee and officer of the Fund.
Investment Manager
Alger Management is the Fund's investment manager and is responsible for the
overall administration of the Fund, subject to the supervision of the Board of
Trustees. Alger Management makes investment decisions for the Portfolio, places
orders to purchase and sell securities on behalf of the Portfolio and selects
broker-dealers that, in its judgment, provide prompt and reliable execution at
favorable prices and reasonable commission rates. It is anticipated that the
Fund's distributor, Fred Alger & Company, Incorporated ("Alger Inc."), an
affiliate of Alger Management, will serve as the Fund's broker in effecting
substantially all of the Portfolio's transactions on securities exchanges and
will retain commissions in accordance with certain regulations of the Securities
and Exchange Commission. In addition, Alger Management employs professional
securities analysts who provide research services exclusively to the Portfolio
and other accounts for which Alger Management or its affiliates serve as
investment adviser or subadviser.
Alger Management has been in the business of providing investment advisory
services since 1964 and, as of December 31, 1994, had approximately $2.9 billion
under management, $1.4 billion in mutual fund accounts and $1.5 billion in other
advisory accounts. Alger Management is owned by Alger Inc. which in turn is
owned by Alger Associates, Inc., a financial services holding company. Fred M.
Alger III and his brother, David D. Alger, are the majority shareholders of
Alger Associates, Inc. and may be deemed to control that company and its
subsidiaries.
Portfolio Managers
David D. Alger, President of Alger Management, is primarily responsible for
the day-to-day management of the Portfolio. He has been employed by Alger
Management as Executive Vice President and Director of Research since 1971 and
as President since 1995 and he serves as portfolio manager for other mutual
funds and investment accounts managed by Alger Management. Also participating in
the management of the Portfolio are Ronald Tartaro and Seilai Khoo. Mr. Tartaro
has been employed by Alger Management since 1990 and he serves as a senior
research analyst. Prior to 1990, he was a member of the technical staff at AT&T
Bell Laboratories. Ms. Khoo has been employed by Alger Management since 1989 and
she serves as a senior research analyst.
Fund personnel ("Access Persons") are permitted to engage in personal
securities transactions subject to the restrictions and procedures of the Fund's
Code of Ethics. Pursuant to the Code of Ethics, Access Persons generally must
preclear all personal securities transactions prior to trading and are subject
to certain prohibitions on personal trading. You can get a copy of the Fund's
Code of Ethics by calling the Fund toll-free at (800) 992-3863.
Fees
The Portfolio pays Alger Management a management fee computed daily and paid
monthly at an annual rate of .80% of the value of the Portfolio's average daily
3
<PAGE>
net assets. This management fee is higher than that paid by most other
investment companies; however, such fee does not exceed those paid by funds with
similar investment objectives.
From time to time Alger Management or its affiliates may compensate insurance
companies or their affiliates whose customers hold shares of the Portfolio for
providing a variety of record-keeping, administrative, marketing and/or
shareholder support services. This compensation, which may be paid at a rate of
up to .30% of the net asset value of shares held by those customers depending on
the nature, extent and quality of the services provided, will be paid from Alger
Management's own resources and not from the assets of the Portfolio.
Expenses
The Portfolio pays expenses related to its daily operations, such as
management fees, brokerage fees, custodian fees, Trustees' fees, transfer agency
fees and legal and auditing costs. Alger Management has agreed to reimburse the
Portfolio to the extent that the annual operating expenses (excluding interest,
taxes, fees for brokerage services and extraordinary expenses) exceed 1.50% of
the average daily net assets for any fiscal year. In addition, from time to
time, Alger Management, in its sole discretion and as it deems appropriate, may
assume certain expenses of the Portfolio while retaining the ability to be
reimbursed by the Portfolio for such amounts prior to the end of the fiscal
year. This will have the effect of lowering the Portfolio's overall expense
ratio and of increasing yield to investors, or the converse, at the time such
amounts are assumed or reimbursed, as the case may be. More information about
the Portfolio's investment management agreement and other expenses paid by the
Portfolio is included in the Statement of Additional Information.
The Statement of Additional Information contains information about the Fund's
brokerage policies and practices.
Distributor
Alger Inc. serves as the Fund's distributor and also distributes the shares
of other mutual funds managed by Alger Management.
Transfer Agent
Alger Shareholder Services, Inc., an affiliate of Alger Management, serves as
transfer agent for the Fund.
NET ASSET VALUE
The price of one share of the Portfolio is its "net asset value." The net
asset value is computed by adding the value of the Portfolio's investments plus
cash and other assets, deducting liabilities and then dividing the result by the
number of its shares outstanding. The net asset value of the Portfolio is
calculated on each day the New York Stock Exchange is open as of the close of
business (normally 4:00 p.m. Eastern time).
PURCHASES AND REDEMPTIONS
Contract or policy holders or Plan participants would not deal directly with
the Fund regarding the purchase or redemption of the Portfolio's shares. The
separate accounts of the Participating Insurance Companies place orders to
purchase and redeem shares of the Portfolio based on, among other things, the
amount of premium payments to be invested and the amount of surrender and
transfer requests (as defined in the prospectuses describing the VA contracts
and VLI policies issued by the Participating Insurance Companies) to be effected
on that day pursuant to VA contracts and VLI Policies. Plan trustees purchase
Portfolio shares. Plan participants cannot contact the Fund directly to purchase
shares of the Portfolio but may invest in shares of the Portfolio only through
their Plan. Participants should contact their Plan sponsor for information
concerning the appropriate procedure for investing in the Portfolio.
Orders for shares of the Portfolio received by the Fund or the Fund's
transfer agent are effected on days on which the NYSE is open for trading. For
orders received before the close of regular trading on the NYSE, purchases and
redemptions of the shares of the Portfolio are effected at the respective net
asset values per share determined as of the close of regular trading on the NYSE
on the same day. Orders received after the close of regular trading on the NYSE,
are effected at the next calculated net asset value. See "Net Asset Value." All
orders for the purchase of shares are subject to acceptance or rejection by the
Fund. Payment for redemptions will be made by the Fund's transfer agent on
behalf of the Fund and the Portfolio within seven days after the request is
received. Neither the Fund nor the Portfolio assesses any fees, either when it
sells or when it redeems the Portfolio's shares. Surrender charges, mortality
and expense risk fees and other charges may be assessed by Participating
Insurance Companies under the VA contracts or VLI policies. These fees should be
described in the Participating Insurance Companies' prospectuses. Any charges
assessed by the Plans should be described in the Plan documents.
DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions will be automatically reinvested on the payment
date for each shareholder's account in additional shares of the Portfolio at net
asset value or, in the case of VA contracts and VLI policies, will be paid in
4
<PAGE>
cash at the election of the Participating Insurance Company. Dividends of the
Portfolio will be declared and paid annually. Distributions of any net realized
capital gains earned by the Portfolio usually will be made annually after the
close of the fiscal year in which the gains are earned. Participating Insurance
Companies will be informed about the amount and character of dividends and
distributions from the Portfolio for federal income tax purposes.
TAXES
The Fund intends that the Portfolio will qualify separately as a "regulated
investment company" (within the meaning of the Internal Revenue Code of 1986, as
amended) for each taxable year. If so qualified, and providing certain
distribution requirements are met, the Portfolio will not be subject to federal
income tax on its net investment income and net capital gains that it
distributes to its shareholders.
Dividends paid from net investment income and distributions of net realized
short-term capital gains are treated as ordinary income earned by the
shareholders of the Portfolio. Distributions of net long-term capital gains are
treated as such by shareholders for federal income tax purposes. Federal income
taxation of separate accounts of life insurance companies, VA contracts, VLI
policies and of the Plans is discussed in the prospectuses of the Participating
Insurance Companies and in the Plan documents. With respect to participants in
the Plans, dividends from net investment income and net realized capital gains
will ordinarily not be subject to taxation until such dividends are distributed
to such participants from their Plan accounts.
PERFORMANCE
All performance figures are based on historical earnings and are not intended
to indicate future performance.
The Portfolio may include quotations of its "total return" and/or "yield" in
advertisements or reports to shareholders or prospective investors. Both "total
return" and/or "yield" figures are based on historical earnings and are not
intended to indicate future performance. Total return figures show the aggregate
or average percentage change in value of an investment in the Portfolio from the
beginning date of the measuring period to the end of the measuring period. These
figures reflect changes in the price of the Portfolio's shares and assume that
any income dividends and/or capital gains distributions made by the Portfolio
during the period were reinvested in shares of the Portfolio. Figures will be
given for recent 1, 5 and 10 year periods, and may be given for other periods as
well (such as from commencement of the Portfolio's operations, or on a
year-by-year basis). The Portfolio may also use "aggregate" total return figures
for various periods, representing the cumulative change in value of an
investment in the Portfolio for the specific period (again reflecting changes in
Portfolio share prices 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"
and "yield" for the Portfolio will vary based on changes in market conditions.
In addition, since the deduction of the Portfolio's expenses is reflected in the
total return and yield figures, "total return" and "yield" will also vary based
on the level of the Portfolio's expenses.
The actual return of a holder of a VA contract or VLI policy will also be
affected by charges imposed by the separate accounts of Participating Insurance
Companies or, in the case of Plan participants, by any charges imposed under the
Plan.
INVESTOR AND SHAREHOLDER
INFORMATION
Investors and shareholders may contact the Fund toll-free at (800) 992-3863
for further information regarding the Fund and the Portfolio, including current
performance quotations, as well as for assistance in obtaining a Statement of
Additional Information. Holders of VA contracts or VLI policies issued by
Participating Insurance Companies and participants in Plans for which shares of
the Portfolio are the investment vehicle may receive from the Participating
Insurance Companies or Plan sponsor unaudited semi-annual financial statements
and year-end financial statements audited by the Fund's independent public
accountants. Each report will show the investments owned by the Portfolio and
the market values of the investments and will provide other information about
the Portfolio and its operations. The Fund's Annual Report as of December 31,
1994 contains additional performance information and is available upon request
and without charge by contacting the Fund at the toll-free number listed above.
5
<PAGE>
================================================================================
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus or the Statement
of Additional Information in connection with the offering of the Portfolio's
shares, and if given or made, such other information or representations must not
be relied on as having been authorized by the Fund. This Prospectus does not
constitute an offer in any state in which, or to any person to whom, such offer
may not lawfully be made.
----------
Investment Manager:
Fred Alger Management, Inc.
75 Maiden Lane
New York, New York 10038
Distributor:
Fred Alger & Company, Incorporated
30 Montgomery Street
Jersey City, New Jersey 07302
Transfer Agent:
Alger Shareholder Services, Inc.
30 Montgomery Street
Box 2001
Jersey City, New Jersey 07302
Independent Public Accountants:
Arthur Andersen LLP
1345 Avenue of the Americas
New York, New York 10105
================================================================================
================================================================================
THE
ALGER Meeting the challenge
AMERICAN of investing
FUND
ALGER AMERICAN MIDCAP
GROWTH PORTFOLIO
PROSPECTUS July 31, 1995
================================================================================
<PAGE>
PROSPECTUS
- ----------
THE
ALGER 75 Maiden Lane
AMERICAN New York, New York 10038
FUND (800) 992-FUND (992-3863)
ALGER AMERICAN GROWTH PORTFOLIO
================================================================================
The Alger American Fund (the "Fund") is a registered investment company--a
mutual fund--that presently offers interests in six portfolios. This Prospectus
sets forth information about the Alger American Growth Portfolio (the
"Portfolio"). The Portfolio seeks long-term capital appreciation by investing in
a diversified, actively managed portfolio of equity securities, primarily of
companies with total market capitalization of $1 billion or greater.
Shares of the Portfolio are offered as a pooled funding vehicle for
insurance companies writing all types of variable annuity contracts ("VA
contracts") and variable life insurance policies ("VLI policies") and may also
be offered directly to qualified pension and retirement plans (the "Plans"). See
"The Alger American Growth Portfolio."
Shares of the Portfolio are not deposits or obligations of, or guaranteed
or endorsed by any bank, and the shares are not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other agency.
This Prospectus, which should be retained for future reference, contains
important information that you should know before investing. Please read it
along with the prospectuses issued by the insurance companies with respect to
the VA contracts and VLI policies or with the Plan documents. A "Statement of
Additional Information" dated July 31, 1995 containing further information about
all the portfolios of the Fund, including the Portfolio, has been filed with the
Securities and Exchange Commission and is incorporated by reference into this
Prospectus. It is available at no charge by contacting the Fund at the address
or phone number above.
FRED ALGER FRED ALGER
MANAGEMENT, Investment Manger & COMPANY, Distributor
INC. INCORPORATED
================================================================================
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
================================================================================
July 31, 1995
<PAGE>
- --------------------------------------------------------------------------------
CONTENTS
Page
----
Portfolio Expenses .................................................. iii
Financial Highlights ................................................ iv
The Alger American Growth
Portfolio ......................................................... 1
Participating Insurance Companies and Plans ......................... 1
Investment Objective and Policies ................................... 1
Investment Practices ................................................ 2
Management of the Fund .............................................. 2
Net Asset Value ..................................................... 4
Purchases and Redemptions ........................................... 4
Dividends and Distributions ......................................... 4
Taxes ............................................................... 5
Performance ......................................................... 5
Investor and Shareholder Information ................................ 5
- --------------------------------------------------------------------------------
ii
<PAGE>
- --------------------------------------------------------------------------------
Portfolio Expenses
The Table below is designed to assist you in understanding the various
costs and expenses that you will bear as a shareholder. The Table does not
reflect charges and deductions which are, or may be, imposed under the VA
contracts, VLI policies or Plans; such charges and deductions are described in
the prospectus for the VA contract or VLI policy accompanying this prospectus or
in the Plan documents.
The Example below shows the amount of expenses you would pay on a $1,000
investment in the Portfolio. These amounts assume the reinvestment of all
dividends and distributions and payment by the Portfolio of operating expenses
as shown in the Table under Annual Portfolio Operating Expenses. The Example is
an illustration only and actual expenses may be greater or less than those
shown.
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases ................................. None
Maximum Sales Load Imposed on Reinvested Dividends ...................... None
Deferred Sales Load ..................................................... None
Redemption Fees ......................................................... None
Annual Portfolio Operating Expenses (as a percentage of average net assets)
Management Fees ......................................................... .75%
12b-1 Fees .............................................................. --
Other Expenses .......................................................... .11%
----
Total Portfolio Operating Expenses ...................................... .86%
====
Example
You would pay the following expenses on a $1,000 investment, assuming (1)
5% annual return and (2) redemption at the end of each time period:
One Year ................................................................ $ 9
Three Years ............................................................. 27
Five Years .............................................................. 48
Ten Years ............................................................... 106
- --------------------------------------------------------------------------------
iii
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The Financial Highlights for the years ended December 31, 1990 through 1994
have been audited by Arthur Andersen LLP, the Fund's independent public
accountants, as indicated in their report dated February 2, 1995 on the Fund's
financial statements as of December 31, 1994 which are included in the Fund's
Statement of Additional Information. The Financial Highlights should be read in
conjunction with the Fund's financial statements and notes thereto. The
Financial Highlights, with the exception of the total return information, for
the period ended December 31, 1989 have been audited by other independent
accountants, who have expressed an unqualified opinion thereon. The Statement of
Additional Information may be obtained from the fund without charge.
THE ALGER AMERICAN FUND
GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
For a share outstanding throughout the period
- -------------------------------------------------------------------------------------------------------------------
Year Ended December 31,
---------------------------------------------------------------------------------
1994 1993 1992 1991 1990 1989(ii)
--------- -------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of year....................... $ 24.67 $ 20.17 $ 18.00 $ 12.86 $12.41 $ 10.00
--------- ------- ------- ------- ------ ------
Net investment income........... 0.07 0.03 0.03 0.08(i) 0.07 0.09
Net realized and unrealized
gain on investments........... 0.15 4.50 2.19 5.11 0.44 2.32
--------- ------- ------- ------- ------ ------
Total from investment
operations.................. 0.22 4.53 2.22 5.19 0.51 2.41
--------- ------- ------- ------- ------ ------
Dividends from net investment
income........................ (0.03) (0.03) (0.03) (0.05) (0.06) --
Distributions from net realized
gains......................... (1.73) -- (0.02) -- -- --
--------- ------- ------- ------- ------ ------
Total Distributions........... (1.76) (0.03) (0.05) (0.05) (0.06) --
--------- ------- ------- ------- ------ ------
Net asset value, end of year.... $ 23.13 $ 24.67 $ 20.17 $ 18.00 $12.86 $ 12.41
========= ======= ======= ======= ====== ======
Total Return.................... 1.45% 22.47% 12.38% 40.39% 4.14% 24.10%(iii)
========= ======= ======= ======= ====== ======
Ratios and Supplemental Data:
Net assets, end of year
(000's omitted)............. $ 150,390 $74,878 $30,316 $10,094 $1,228 $ 171
========= ======= ======= ======= ====== ======
Ratio of expenses to average
net assets.................. 0.86% 0.97% 0.99% 1.29% 1.50% 1.50%
========= ======= ======= ======= ====== ======
Decrease reflected in above
expense ratios due to
expense reimbursements...... -- -- -- -- 2.31% 7.32%
========= ======= ======= ======= ====== ======
Ratio of net investment income
to average net assets....... 0.48% 0.25% 0.33% 0.52% 1.69% 1.30%
========= ======= ======= ======= ====== ======
Portfolio Turnover Rate....... 111.76% 112.64% 63.91% 58.95% 86.77% 79.59%
========= ======= ======= ======= ====== ======
</TABLE>
(i) Amount was computed based on average shares outstanding during the period.
(ii) For the period January 9, 1989 (commencement of operations) to December
31, 1989. Ratios have been annualized; total return has not been
annualized.
(iii) Unaudited.
- --------------------------------------------------------------------------------
iv
<PAGE>
THE ALGER AMERICAN GROWTH
PORTFOLIO
The Portfolio is designed to permit insurance companies that issue variable
annuity contracts ("VA contracts") and variable life insurance policies ("VLI
policies") to offer contract and policy holders the opportunity to participate
in the performance of the Portfolio. Upon receipt by the Fund of an exemptive
order (the "Order") for which an application is currently pending with the
Securities and Exchange Commission, the Portfolio may also be a funding vehicle
for qualified pension and retirement plans (the "Plans") which elect to make the
Portfolio an investment option for Plan participants. If the Order is issued,
the Portfolio will, without notice to shareholders, accept orders from Plans to
purchase shares of the Portfolio.
The Fund is a diversified, open-end management investment company that offers
a selection of six portfolios, each having distinct investment objectives and
policies. The Fund's Board of Trustees may establish additional portfolios at
any time.
PARTICIPATING INSURANCE
COMPANIES AND PLANS
The Portfolio is intended to be a funding vehicle for VA contracts and VLI
policies to be offered by the separate accounts of certain life insurance
companies ("Participating Insurance Companies") and, if the order is issued,
Plans. Individuals cannot invest in the Portfolio directly but may do so only
through a VA contract or VLI policy or, if the Order is issued, a Plan. The Fund
currently does not foresee any disadvantages to the holders of VA contracts and
VLI Policies arising from the fact that the interests of the holders of VA
contracts and VLI policies may differ, that the Participating Insurance
Companies may not be affiliated with each other or that the Portfolio may offer
its shares to Plans. Nevertheless, the Fund's Trustees intend to monitor events
in order to identify any material irreconcilable conflicts which may possibly
arise due to differences of tax treatment or other considerations, and to
determine what action, if any, should be taken in response to such conflicts. If
such a conflict were to occur, one or more Participating Insurance Company
separate accounts or Plans might withdraw its investment in the Portfolio, which
may cause the Portfolio to sell portfolio securities at disadvantageous prices.
The VA contracts and VLI policies are described in the separate prospectuses
issued by the Participating Insurance Companies, and the Plans are described in
the Plan documents made available by the Plan sponsors. The Fund assumes no
responsibility for such prospectuses or Plan documents.
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives and restrictions summarized below are fundamental
which means that they may not be changed without shareholder approval. All
investment policies and practices described elsewhere in this Prospectus are not
fundamental, so the Fund's Board of Trustees may change them without shareholder
approval. There is no guarantee that the Portfolio's objectives will be
achieved.
As a matter of fundamental policy, the Portfolio will not: (1) with respect
to 75% of its total assets, invest more than 5% of its total assets in any one
issuer, except for obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities ("U.S. Government securities"); (2) own more than
10% of the outstanding voting securities of any company, (3) invest more than
10% of its net assets in securities that are not readily marketable and in
repurchase agreements with maturities of more than seven days; (4) invest more
than 25% of its total assets in any one industry, except for U.S. Government
securities; (5) borrow money or pledge its assets, except for temporary or
emergency purposes, in an amount exceeding 10% of its total assets. The
Statement of Additional Information contains additional investment restrictions
as well as information on the Portfolio's investment practices.
The investment objective of the Portfolio is long-term capital appreciation.
Except during temporary defensive periods, the Portfolio invests at least 65% of
its total assets in equity securities of companies that, at the time of
purchase, have total market capitalization--present market value per share
multiplied by the total number of shares outstanding--of $1 billion or greater.
The Portfolio may invest up to 35% of its total assets in equity securities of
companies that, at the time of purchase, have total market capitalization of
less than $1 billion and in excess of that amount (up to 100% of its assets)
during temporary defensive periods.
In General
The Portfolio seeks to achieve its objective by investing in equity
securities, such as common or preferred stocks, or securities convertible into
or exchangeable for equity securities, including warrants and rights. The
Portfolio will invest primarily in companies whose securities are traded on
domestic stock exchanges or in the over-the-counter market. These companies may
still be in the developmental stage, may be older companies that appear to be
entering a new stage of growth progress owing to factors such as management
changes or development of new technology, products or markets or may be
companies providing products or services with a high unit volume growth rate. In
order to afford the Portfolio the flexibility to take advantage of new
opportunities for investments in accordance with its investment objective, it
may hold up to 15% of its net assets in money market instruments and repurchase
agreements and in excess of that amount (up to 100% of its assets) during
temporary defensive periods. This amount may be higher than that maintained by
other funds with similar investment objectives.
1
<PAGE>
INVESTMENT PRACTICES
The Portfolio may use the investment strategies and invest in the types of
securities described below, which may involve certain risks. The Statement of
Additional Information contains more detailed information about these practices
and information about other investment practices of the Portfolio.
Repurchase Agreements
In a repurchase agreement, the Portfolio buys a security at one price and
simultaneously agrees to sell it back at a higher price. In the event of a
bankruptcy or default of the other party to the repurchase agreement, the
Portfolio could experience costs and delays in liquidating the underlying
security, which is held as collateral, and the Portfolio might incur a loss if
the value of the collateral held declines during this period.
Illiquid and Restricted Securities
Under the policies and procedures established by the Fund's Board of
Trustees, Fred Alger Management, Inc. ("Alger Management") determines the
liquidity of the Portfolio's investments. Investments may be illiquid because of
the absence of an active trading market, making it difficult to sell promptly at
an acceptable price. The Portfolio may purchase securities eligible for resale
under Rule 144A of the Securities Act of 1933. This rule permits otherwise
restricted securities to be sold to certain institutional buyers. The Portfolio
will limit its purchases of these securities to those which Alger Management,
under the supervision of the Fund's Board of Trustees, determines to be liquid.
A restricted security is one that has a contractual restriction on its resale or
which cannot be sold publicly until it is registered under the Securities Act of
1933.
Lending of Portfolio Securities
In order to generate income and to offset expenses, the Portfolio may lend
portfolio securities with a value up to 331/3% of the Portfolio's total assets
to brokers, dealers and other financial organizations. Any such loan will be
continuously secured by collateral at least equal to the value of the securities
loaned. Such lending could result in delays in receiving additional collateral
or in the recovery of the securities or possible loss of rights in the
collateral should the borrower fail financially.
Foreign Securities
The Portfolio may invest up to 20% of its total assets in foreign securities.
Investing in securities of foreign companies and foreign governments, which
generally are denominated in foreign currencies, may involve certain risk and
opportunity considerations not typically associated with investing in domestic
companies and could cause the Portfolio to be affected favorably or unfavorably
by changes in currency exchange rates and revaluations of currencies.
The Portfolio may purchase American Depositary Receipts ("ADRs") or U.S.
dollar-denominated securities of foreign issuers that are not included in the
20% foreign securities limitation. ADRs are receipts issued by U.S. banks or
trust companies in respect of securities of foreign issuers held on deposit for
use in the U.S. securities markets. While ADRs may not necessarily be
denominated in the same currency as the securities into which they may be
converted, many of the risks associated with foreign securities may also apply
to ADRs.
Other Investments
In addition to the securities and investment techniques listed above, the
Portfolio may invest in bank and thrift obligations, obligations issued or
guaranteed by the U.S. Government or by its agencies or instrumentalities,
foreign bank obligations and obligations of foreign branches of domestic banks,
and variable rate master demand notes. See "Investment Objectives and Policies"
in the Statement of Additional Information.
Portfolio Turnover
Portfolio changes will generally be made without regard to the length of time
a security has been held or whether a sale would result in a profit or loss.
Increased portfolio turnover will have the effect of increasing the Portfolio's
brokerage and custodial expenses.
MANAGEMENT OF THE FUND
Organization
The Fund was organized on April 6, 1988 as a multi-series Massachusetts
business trust. The Fund offers an unlimited number of shares of six series,
representing the shares of the Fund's portfolios, including the Portfolio.
Although 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. Shareholders of the Portfolio may
vote only on matters that affect the Portfolio.
Under normal circumstances, other than the shares issued to Alger Inc. in
connection with its creation and initial capitalization, the Fund intends to
distribute its shares of the Portfolio to Participating Insurance Companies and,
if the Order is issued, Plans, so that only Participating Insurance Companies
and their separate accounts and Plans will be considered shareholders of the
2
<PAGE>
Portfolio. Although the Participating Insurance Companies and their separate
accounts and the Plans are the shareholders or investors, the Participating
Insurance Companies will pass through voting rights to their VA contract and VLI
policy holders. Plan sponsors may or may not pass through voting rights to Plan
participants, depending on the terms of the Plan's governing documents. For a
discussion of the voting rights, please refer to the Participating Insurance
Companies' prospectuses or the Plan documents.
When matters are submitted for shareholder vote, shareholders of the
Portfolio will have one vote for each full share held and proportionate,
fractional votes for fractional shares held. A separate vote of a portfolio of
the Fund is required on any matter affecting the portfolio on which shareholders
are entitled to vote, such as approval of a portfolio's agreement with Alger
Management. Shareholders of one portfolio are not entitled to vote on a matter
that does not affect that portfolio but that does require a separate vote of the
other portfolios. There normally will be no annual meetings of shareholders for
the purpose of electing Trustees unless and until such time as less than a
majority of 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. Any Trustee may be removed from office on the vote of
shareholders holding at least two thirds of the Fund's outstanding shares at a
meeting called for that purpose. The Trustees are required to call such a
meeting on the written request of shareholders holding at least 10% of the
Fund's outstanding shares.
Board of Trustees
The Fund is governed by a Board of Trustees which is responsible for
protecting the interests of shareholders under Massachusetts law. The Statement
of Additional Information contains general background information about each
Trustee and officer of the Fund.
Investment Manager
Alger Management is the Fund's investment manager and is responsible for the
overall administration of the Fund, subject to the supervision of the Board of
Trustees. Alger Management makes investment decisions for the Portfolio, places
orders to purchase and sell securities on behalf of the Portfolio and selects
broker-dealers that, in its judgment, provide prompt and reliable execution at
favorable prices and reasonable commission rates. It is anticipated that the
Fund's distributor, Fred Alger & Company, Incorporated ("Alger Inc."), an
affiliate of Alger Management, will serve as the Fund's broker in effecting
substantially all of the Portfolio's transactions on securities exchanges and
will retain commissions in accordance with certain regulations of the Securities
and Exchange Commission. In addition, Alger Management employs professional
securities analysts who provide research services exclusively to the Portfolio
and other accounts for which Alger Management or its affiliates serve as
investment adviser or subadviser.
Alger Management has been in the business of providing investment advisory
services since 1964 and, as of December 31, 1994, had approximately $2.9 billion
under management, $1.4 billion in mutual fund accounts and $1.5 billion in other
advisory accounts. Alger Management is owned by Alger Inc. which in turn is
owned by Alger Associates, Inc., a financial services holding company. Fred M.
Alger III and his brother, David D. Alger, are the majority shareholders of
Alger Associates, Inc. and may be deemed to control that company and its
subsidiaries.
Portfolio Managers
David D. Alger, President of Alger Management, is primarily responsible for
the day-to-day management of the Portfolio. He has been employed by Alger
Management as Executive Vice President and Director of Research since 1971 and
as President since 1995 and he serves as portfolio manager for other mutual
funds and investment accounts managed by Alger Management. Also participating in
the management of the Portfolio are Ronald Tartaro and Seilai Khoo. Mr. Tartaro
has been employed by Alger Management since 1990 and he serves as a senior
research analyst. Prior to 1990, he was a member of the technical staff at AT&T
Bell Laboratories. Ms. Khoo has been employed by Alger Management since 1989 and
she serves as a senior research analyst.
Fund personnel ("Access Persons") are permitted to engage in personal
securities transactions subject to the restrictions and procedures of the Fund's
Code of Ethics. Pursuant to the Code of Ethics, Access Persons generally must
preclear all personal securities transactions prior to trading and are subject
to certain prohibitions on personal trading. You can get a copy of the Fund's
Code of Ethics by calling the Fund toll-free at (800) 992-3863.
Fees
The Portfolio pays Alger Management a management fee computed daily and paid
monthly at an annual rate of .75% of the value of the Portfolio's average daily
net assets. This management fee is higher than that paid by most other
investment companies; however, such fee does not exceed those paid by funds with
similar investment objectives.
From time to time Alger Management or its affiliates may compensate insurance
companies or their affiliates whose customers hold shares of the Portfolio for
providing a variety of record-keeping, administrative, marketing and/or
shareholder support services. This compensation, which may be paid at a rate of
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<PAGE>
up to .30% of the net asset value of shares held by those customers depending on
the nature, extent and quality of the services provided, will be paid from Alger
Management's own resources and not from the assets of the Portfolio.
Expenses
The Portfolio pays expenses related to its daily operations, such as
management fees, brokerage fees, custodian fees, Trustees' fees, transfer agency
fees and legal and auditing costs. Alger Management has agreed to reimburse the
Portfolio to the extent that the annual operating expenses (excluding interest,
taxes, fees for brokerage services and extraordinary expenses) exceed 1.50% of
the average daily net assets for any fiscal year. In addition, from time to
time, Alger Management, in its sole discretion and as it deems appropriate, may
assume certain expenses of the Portfolio while retaining the ability to be
reimbursed by the Portfolio for such amounts prior to the end of the fiscal
year. This will have the effect of lowering the Portfolio's overall expense
ratio and of increasing yield to investors, or the converse, at the time such
amounts are assumed or reimbursed, as the case may be. More information about
the Portfolio's investment management agreement and other expenses paid by the
Portfolio is included in the Statement of Additional Information.
The Statement of Additional Information contains information about the Fund's
brokerage policies and practices.
Distributor
Alger Inc. serves as the Fund's distributor and also distributes the shares
of other mutual funds managed by Alger Management.
Transfer Agent
Alger Shareholder Services, Inc., an affiliate of Alger Management, serves as
transfer agent for the Fund.
NET ASSET VALUE
The price of one share of the Portfolio is its "net asset value." The net
asset value is computed by adding the value of the Portfolio's investments plus
cash and other assets, deducting liabilities and then dividing the result by the
number of its shares outstanding. The net asset value of the Portfolio is
calculated on each day the New York Stock Exchange is open as of the close of
business (normally 4:00 p.m. Eastern time).
PURCHASES AND REDEMPTIONS
Contract or policy holders or Plan participants would not deal directly with
the Fund regarding the purchase or redemption of the Portfolio's shares. The
separate accounts of the Participating Insurance Companies place orders to
purchase and redeem shares of the Portfolio based on, among other things, the
amount of premium payments to be invested and the amount of surrender and
transfer requests (as defined in the prospectuses describing the VA contracts
and VLI policies issued by the Participating Insurance Companies) to be effected
on that day pursuant to VA contracts and VLI Policies. Plan trustees purchase
Portfolio shares. Plan participants cannot contact the Fund directly to purchase
shares of the Portfolio but may invest in shares of the Portfolio only through
their Plan. Participants should contact their Plan sponsor for information
concerning the appropriate procedure for investing in the Portfolio.
Orders for shares of the Portfolio received by the Fund or the Fund's
transfer agent are effected on days on which the NYSE is open for trading. For
orders received before the close of regular trading on the NYSE, purchases and
redemptions of the shares of the Portfolio are effected at the respective net
asset values per share determined as of the close of regular trading on the NYSE
on the same day. Orders received after the close of regular trading on the NYSE,
are effected at the next calculated net asset value. See "Net Asset Value." All
orders for the purchase of shares are subject to acceptance or rejection by the
Fund. Payment for redemptions will be made by the Fund's transfer agent on
behalf of the Fund and the Portfolio within seven days after the request is
received. Neither the Fund nor the Portfolio assesses any fees, either when it
sells or when it redeems the Portfolio's shares. Surrender charges, mortality
and expense risk fees and other charges may be assessed by Participating
Insurance Companies under the VA contracts or VLI policies. These fees should be
described in the Participating Insurance Companies' prospectuses. Any changes
assessed by the Plans should be described in the Plan documents.
DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions will be automatically reinvested on the payment
date for each shareholder's account in additional shares of the Portfolio at net
asset value or, in the case of VA contracts and VLI policies, will be paid in
cash at the election of the Participating Insurance Company. Dividends of the
Portfolio will be declared and paid annually. Distributions of any net realized
capital gains earned by the Portfolio usually will be made annually after the
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<PAGE>
close of the fiscal year in which the gains are earned. Participating Insurance
Companies will be informed about the amount and character of dividends and
distributions from the Portfolio for federal income tax purposes.
TAXES
The Fund intends that the Portfolio will qualify separately as a "regulated
investment company" (within the meaning of the Internal Revenue Code of 1986, as
amended) for each taxable year. If so qualified, and providing certain
distribution requirements are met, the Portfolio will not be subject to federal
income tax on its net investment income and net capital gains that it
distributes to its shareholders.
Dividends paid from net investment income and distributions of net realized
short-term capital gains are treated as ordinary income earned by the
shareholders of the Portfolio. Distributions of net long-term capital gains are
treated as such by shareholders for federal income tax purposes. Federal income
taxation of separate accounts of life insurance companies, VA contracts, VLI
policies and of the Plans is discussed in the prospectuses of the Participating
Insurance Companies and in the Plan documents. With respect to participants in
the Plans, dividends from net investment income and net realized capital gains
will ordinarily not be subject to taxation until such dividends are distributed
to such participants from their Plan accounts.
PERFORMANCE
All performance figures are based on historical earnings and are not intended
to indicate future performance.
The Portfolio may include quotations of its "total return" and/or "yield" in
advertisements or reports to shareholders or prospective investors. Both "total
return" and/or "yield" figures are based on historical earnings and are not
intended to indicate future performance. Total return figures show the aggregate
or average percentage change in value of an investment in the Portfolio from the
beginning date of the measuring period to the end of the measuring period. These
figures reflect changes in the price of the Portfolio's shares and assume that
any income dividends and/or capital gains distributions made by the Portfolio
during the period were reinvested in shares of the Portfolio. Figures will be
given for recent 1, 5 and 10 year periods, and may be given for other periods as
well (such as from commencement of the Portfolio's operations, or on a
year-by-year basis). The Portfolio may also use "aggregate" total return figures
for various periods, representing the cumulative change in value of an
investment in the Portfolio for the specific period (again reflecting changes in
Portfolio share prices 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"
and "yield" for the Portfolio will vary based on changes in market conditions.
In addition, since the deduction of the Portfolio's expenses is reflected in the
total return and yield figures, "total return" and "yield" will also vary based
on the level of the Portfolio's expenses.
The actual return of a holder of a VA contract or VLI policy will also be
affected by charges imposed by the separate accounts of Participating Insurance
Companies or, in the case of Plan participants, by any charges imposed under the
Plan.
INVESTOR AND SHAREHOLDER
INFORMATION
Investors and shareholders may contact the Fund toll-free at (800) 992-3863
for further information regarding the Fund and the Portfolio, including current
performance quotations, as well as for assistance in obtaining a Statement of
Additional Information. Holders of VA contracts or VLI policies issued by
Participating Insurance Companies and participants in Plans for which shares of
the Portfolio are the investment vehicle may receive from the Participating
Insurance Companies or Plan sponsor unaudited semi-annual financial statements
and year-end financial statements audited by the Fund's independent public
accountants. Each report will show the investments owned by the Portfolio and
the market values of the investments and will provide other information about
the Portfolio and its operations. The Fund's Annual Report as of December 31,
1994 contains additional performance information and is available upon request
and without charge by contacting the Fund at the toll-free number listed above.
5
<PAGE>
================================================================================
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus or the Statement
of Additional Information in connection with the offering of the Portfolio's
shares, and if given or made, such other information or representations must not
be relied on as having been authorized by the Fund. This Prospectus does not
constitute an offer in any state in which, or to any person to whom, such offer
may not lawfully be made.
----------
Investment Manager:
Fred Alger Management, Inc.
75 Maiden Lane
New York, New York 10038
Distributor:
Fred Alger & Company, Incorporated
30 Montgomery Street
Jersey City, New Jersey 07302
Transfer Agent:
Alger Shareholder Services, Inc.
30 Montgomery Street
Box 2001
Jersey City, New Jersey 07302
Independent Public Accountants:
Arthur Andersen LLP
1345 Avenue of the Americas
New York, New York 10105
================================================================================
================================================================================
THE
ALGER Meeting the challenge
AMERICAN of investing
FUND
ALGER AMERICAN GROWTH
PORTFOLIO
PROSPECTUS July 31, 1995
================================================================================
<PAGE>
PROSPECTUS
- ----------
THE
ALGER 75 Maiden Lane
AMERICAN New York, New York 10038
FUND (800) 992-FUND (992-3863)
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
================================================================================
The Alger American Fund (the "Fund") is a registered investment company--a
mutual fund--that presently offers interests in six portfolios. This Prospectus
sets forth information about the Alger American Leveraged AllCap Portfolio (the
"Portfolio"). The Portfolio seeks long-term capital appreciation by investing in
a diversified, actively managed portfolio of equity securities. The Portfolio
may engage in leveraging (up to 331/3% of its assets) and options and futures
transactions, which are deemed to be speculative and which may cause the
Portfolio's net asset value to be more volatile than the net asset value of a
fund that does not engage in these activities.
Shares of the Portfolio are offered as a pooled funding vehicle for
insurance companies writing all types of variable annuity contracts ("VA
contracts") and variable life insurance policies ("VLI policies") and may also
be offered directly to qualified pension and retirement plans (the "Plans"). See
"The Alger American Leveraged AllCap Portfolio."
Shares of the Portfolio are not deposits or obligations of, or guaranteed
or endorsed by any bank, and the shares are not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other agency.
This Prospectus, which should be retained for future reference, contains
important information that you should know before investing. Please read it
along with the prospectuses issued by the insurance companies with respect to
the VA contracts and VLI policies or with the Plan documents. A "Statement of
Additional Information" dated July 31, 1995 containing further information about
all the portfolios of the Fund, including the Portfolio, has been filed with the
Securities and Exchange Commission and is incorporated by reference into this
Prospectus. It is available at no charge by contacting the Fund at the address
or phone number above.
FRED ALGER FRED ALGER
MANAGEMENT, Investment Manager & COMPANY, Distributor
INC. INCORPORATED
================================================================================
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
================================================================================
July 31, 1995
<PAGE>
- --------------------------------------------------------------------------------
CONTENTS
Page
----
Portfolio Expenses ........................................................ iii
Financial Highlights ...................................................... iv
The Alger American Leveraged
AllCap Portfolio ........................................................ 1
Participating Insurance Companies and Plans ............................... 1
Investment Objective and Policies ......................................... 1
Investment Practices ...................................................... 1
Management of the Fund .................................................... 3
Net Asset Value ........................................................... 4
Purchases and Redemptions ................................................. 4
Dividends and Distributions ............................................... 5
Taxes ..................................................................... 5
Performance ............................................................... 6
Investor and Shareholder Information ...................................... 6
- --------------------------------------------------------------------------------
ii
<PAGE>
- --------------------------------------------------------------------------------
Portfolio Expenses
The Table below is designed to assist you in understanding the various costs
and expenses that you will bear as a shareholder. The amounts listed under
"Other Expenses" and "Interest Expense" are based on estimated amounts for the
Fund's fiscal year ending December 31, 1995. The Table does not reflect charges
and deductions which are, or may be, imposed under the VA contracts, VLI
policies or Plans; such charges and deductions are described in the prospectus
for the VA contract or VLI policy accompanying this prospectus or in the Plan
documents.
The Example below shows the amount of expenses you would pay on a $1,000
investment in the Portfolio. These amounts assume the reinvestment of all
dividends and distributions and payment by the Portfolio of operating expenses
as shown in the Table under Annual Portfolio Operating Expenses. The Example is
an illustration only and actual expenses may be greater or less than those
shown.
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases .......................... None
Maximum Sales Load Imposed on Reinvested Dividends ............... None
Deferred Sales Load .............................................. None
Redemption Fees .................................................. None
Annual Portfolio Operating Expenses (as a percentage
of average net assets)
Management Fees .................................................. .85%
12b-1 Fees ....................................................... --
Other Expenses (excluding interest) .............................. .19%
----
Total Portfolio Operating Expenses (before interest) ............. 1.04%
Interest Expense ................................................. .75%
----
Total Portfolio Operating Expenses ............................... 1.79%
====
Example
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return and (2) redemption at the
end of each time period:
One Year ......................................................... $ 18
Three Years ...................................................... 56
Five Years ....................................................... 97
Ten Years ........................................................ 211
- --------------------------------------------------------------------------------
iii
<PAGE>
- --------------------------------------------------------------------------------
THE ALGER AMERICAN FUND
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
Financial Highlights
For a share outstanding throughout the period
From January 25, 1995
(commencement of
operations)
to June 30, 1995(i)
---------------------
Net asset value, beginning of period............................ $ 10.00
-------
Net investment (loss)........................................... (0.04)
Net realized and unrealized gain (loss) on investments......... 4.55
-------
Total from investment operations............................ 4.51
-------
Net asset value, end of period.................................. $ 14.51
=======
Total Return.................................................... 45.10%
=======
Ratios and Supplemental Data:
Net assets, end of period (000's omitted)..................... $ 386
=======
Ratio of expenses excluding interest to average net assets.... 1.50%
=======
Ratio of expenses including interest to average net assets.... 1.94%
=======
Decrease reflected in above expense ratios
due to expense reimbursements............................... 6.83%
=======
Ratio of net investment (loss) to average net assets.......... (0.91%)
=======
Portfolio Turnover Rate....................................... 123.0%
=======
Debt outstanding at end of period............................... $ 0
=======
Average amount of debt outstanding during the period............ $13,748
=======
Average daily number of shares outstanding during the period.... 24,688
=======
Average amount of debt per share during the period.............. $ 0.56
=======
(i) Unaudited. Ratios have been annualized; total return has not been
annualized.
- --------------------------------------------------------------------------------
iv
<PAGE>
THE ALGER AMERICAN LEVERAGED
ALLCAP PORTFOLIO
The Portfolio is designed to permit insurance companies that issue variable
annuity contracts ("VA contracts") and variable life insurance policies ("VLI
policies") to offer contract and policy holders the opportunity to participate
in the performance of the Portfolio. Upon receipt by the Fund of an exemptive
order (the "Order") for which an application is currently pending with the
Securities and Exchange Commission, the Portfolio may also be a funding vehicle
for qualified pension and retirement plans (the "Plans") which elect to make the
Portfolio an investment option for Plan participants. If the Order is issued,
the Portfolio will, without notice to shareholders, accept orders from Plans to
purchase shares of the Portfolio.
The Fund is a diversified, open-end management investment company that offers
a selection of six portfolios, each having distinct investment objectives and
policies. The Fund's Board of Trustees may establish additional portfolios at
any time.
PARTICIPATING INSURANCE
COMPANIES AND PLANS
The Portfolio is intended to be a funding vehicle for VA contracts and VLI
policies to be offered by the separate accounts of certain life insurance
companies ("Participating Insurance Companies") and, if the Order is issued,
Plans. Individuals cannot invest in the Portfolio directly but may do so only
through a VA contract or VLI policy or, if the Order is issued, a Plan. The Fund
currently does not foresee any disadvantages to the holders of VA contracts and
VLI Policies arising from the fact that the interests of the holders of VA
contracts and VLI policies may differ, that the Participating Insurance
Companies may not be affiliated with each other or that the Portfolio may offer
its shares to Plans. Nevertheless, the Fund's Trustees intend to monitor events
in order to identify any material irreconcilable conflicts which may possibly
arise due to differences of tax treatment or other considerations, and to
determine what action, if any, should be taken in response to such conflicts. If
such a conflict were to occur, one or more Participating Insurance Company
separate accounts or Plans might withdraw its investment in the Portfolio, which
may cause the Portfolio to sell portfolio securities at disadvantageous prices.
The VA contracts and VLI policies are described in the separate prospectuses
issued by the Participating Insurance Companies, and the Plans are described in
the Plan documents made available by the Plan sponsors. The Fund assumes no
responsibility for such prospectuses or Plan documents.
INVESTMENT OBJECTIVES AND POLICIES
The investment objectives and restrictions summarized below are fundamental
which means that they may not be changed without shareholder approval. All
investment policies and practices described elsewhere in this Prospectus are not
fundamental, so the Fund's Board of Trustees may change them without shareholder
approval. There is no guarantee that the Portfolio's objectives will be
achieved.
As a matter of fundamental policy, the Portfolio will not: (1) with respect
to 75% of its total assets, invest more than 5% of its total assets in any one
issuer, except for obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities ("U.S. Government securities"); (2) own more than
10% of the outstanding voting securities of any company, (3) invest more than
10% of its net assets in securities that are not readily marketable and in
repurchase agreements with maturities of more than seven days; (4) invest more
than 25% of its total assets in any one industry, except for U.S. Government
securities; (5) borrow money or pledge its assets, except for temporary or
emergency purposes, in an amount exceeding 10% of its total assets. The
Statement of Additional Information contains additional investment restrictions
as well as information on the Portfolio's investment practices.
The investment objective of the Portfolio is long-term capital appreciation.
Except during temporary defensive periods, the Portfolio invests at least 85% of
its net assets in equity securities of companies of any size.
The Portfolio may purchase put and call options and sell (write) covered call
and put options on securities indexes to increase gain and to hedge against the
risk of unfavorable price movements, and may enter into futures contracts on
securities indexes and purchase and sell call and put options on these futures
contracts. The Portfolio may also borrow money for the purchase of additional
securities. The Portfolio may borrow only from banks and may not borrow in
excess of one third of the market value of its assets, less liabilities other
than such borrowing. These practices are deemed to be speculative and may cause
the Portfolio's net asset value to be more volatile than the net asset value of
a fund that does not engage in these activities. See "Investment Practices."
In General
The Portfolio seeks to achieve its objective by investing in equity
securities, such as common or preferred stocks, or securities convertible into
or exchangeable for equity securities, including warrants and rights. The
Portfolio will invest primarily in companies whose securities are traded on
domestic stock exchanges or in the over-the-counter market. These companies may
1
<PAGE>
still be in the developmental stage, may be older companies that appear to be
entering a new stage of growth progress owing to factors such as management
changes or development of new technology, products or markets or may be
companies providing products or services with a high unit volume growth rate. In
order to afford the Portfolio the flexibility to take advantage of new
opportunities for investments in accordance with its investment objective, it
may hold up to 15% of its net assets in money market instruments and repurchase
agreements and in excess of that amount (up to 100% of its assets) during
temporary defensive periods. This amount may be higher than that maintained by
other funds with similar investment objectives.
INVESTMENT PRACTICES
The Portfolio may use the investment strategies and invest in the types of
securities described below, which may involve certain risks. The Statement of
Additional Information contains more detailed information about these practices
and information about other investment practices of the Portfolio.
Repurchase Agreements
In a repurchase agreement, the Portfolio buys a security at one price and
simultaneously agrees to sell it back at a higher price. In the event of a
bankruptcy or default of the other party to the repurchase agreement, the
Portfolio could experience costs and delays in liquidating the underlying
security, which is held as collateral, and the Portfolio might incur a loss if
the value of the collateral held declines during this period.
Illiquid and Restricted Securities
Under the policies and procedures established by the Fund's Board of
Trustees, Fred Alger Management, Inc. ("Alger Management") determines the
liquidity of the Portfolio's investments. Investments may be illiquid because of
the absence of an active trading market, making it difficult to sell promptly at
an acceptable price. The Portfolio may purchase securities eligible for resale
under Rule 144A of the Securities Act of 1933. This rule permits otherwise
restricted securities to be sold to certain institutional buyers. The Portfolio
will limit its purchases of these securities to those which Alger Management,
under the supervision of the Fund's Board of Trustees, determines to be liquid.
A restricted security is one that has a contractual restriction on its resale or
which cannot be sold publicly until it is registered under the Securities Act of
1933.
Lending of Portfolio Securities
In order to generate income and to offset expenses, the Portfolio may lend
portfolio securities with a value up to 331/3% of the Portfolio's total assets
to brokers, dealers and other financial organizations. Any such loan will be
continuously secured by collateral at least equal to the value of the securities
loaned. Such lending could result in delays in receiving additional collateral
or in the recovery of the securities or possible loss of rights in the
collateral should the borrower fail financially.
Foreign Securities
The Portfolio may invest up to 20% of its total assets in foreign securities.
Investing in securities of foreign companies and foreign governments, which
generally are denominated in foreign currencies, may involve certain risk and
opportunity considerations not typically associated with investing in domestic
companies and could cause the Portfolio to be affected favorably or unfavorably
by changes in currency exchange rates and revaluations of currencies.
The Portfolio may purchase American Depositary Receipts ("ADRs") or U.S.
dollar-denominated securities of foreign issuers that are not included in the
20% foreign securities limitation. ADRs are receipts issued by U.S. banks or
trust companies in respect of securities of foreign issuers held on deposit for
use in the U.S. securities markets. While ADRs may not necessarily be
denominated in the same currency as the securities into which they may be
converted, many of the risks associated with foreign securities may also apply
to ADRs.
Leverage Through Borrowing
The Portfolio may borrow money from banks and use it to purchase additional
securities. This borrowing is known as leveraging. Leverage increases both
investment opportunity and investment risk. If the investment gains on
securities purchased with borrowed money exceed the interest paid on the
borrowing, the net asset value of the Portfolio'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 Portfolio's shares will decrease faster than would
otherwise be the case. The Portfolio 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
Portfolio 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.
Options
The Portfolio may buy and sell (write) exchange listed options in order to
obtain additional return or to hedge the value of its portfolio. The Portfolio
may write covered call options only if the Portfolio owns the securities on
which the call is written or owns securities which are exchangeable or
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convertible into such securities. Although the Portfolio will generally purchase
or write only those options for which there appears to be an active secondary
market, there is no assurance that a liquid secondary market on an exchange will
exist for any particular option. The Portfolio will not purchase options if, as
a result, the aggregate cost of all outstanding options exceeds 10% of the
Portfolio's total assets, although no more than 5% will be committed to
transactions entered into for non-hedging purposes. The Portfolio may purchase
and sell put and call options on stock indexes in order to increase its gross
income or to hedge its portfolio against price fluctuations.
The writing and purchase of options is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. Additional discussion of these risks
and techniques is included in the Statement of Additional Information.
Stock Index Futures and Options on
Stock Index Futures
The Portfolio may purchase and sell stock index futures contracts and options
on stock index futures contracts. These investments may be made only for
hedging, not speculative, purposes. Hedging transactions are made to reduce the
risk of price fluctuations.
There can be no assurance of the Portfolio's successful use of stock index
futures as a hedging device. If Alger Management uses a hedging instrument at
the wrong time or judges market conditions incorrectly, hedging strategies may
reduce the Portfolio's return. The Portfolio could also experience losses if the
prices of its futures and options positions were not correlated with its other
investments or if it could not close out a position because of an illiquid
market for the future or option.
Other Investments
In addition to the securities and investment techniques listed above, the
Portfolio may invest in bank and thrift obligations, obligations issued or
guaranteed by the U.S. Government or by its agencies or instrumentalities,
foreign bank obligations and obligations of foreign branches of domestic banks,
and variable rate master demand notes. See "Investment Objectives and Policies"
in the Statement of Additional Information.
Portfolio Turnover
Portfolio changes will generally be made without regard to the length of time
a security has been held or whether a sale would result in a profit or loss.
While it is not possible to predict future market conditions or turnover rates
with certainty, Alger Management anticipates that under normal market
conditions, the annual turnover rate for the Portfolio should not exceed 120%.
Increased portfolio turnover will have the effect of increasing the Portfolio's
brokerage and custodial expenses.
MANAGEMENT OF THE FUND
Organization
The Fund was organized on April 6, 1988 as a multi-series Massachusetts
business trust. The Fund offers an unlimited number of shares of six series,
representing the shares of the Fund's portfolios, including the Portfolio.
Although 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. Shareholders of the Portfolio may
vote only on matters the affect the Portfolio.
Under normal circumstances, other than the shares issued to Alger Inc. in
connection with its creation and initial capitalization, the Fund intends to
distribute its shares of the Portfolio to Participating Insurance Companies and,
if the Order is issued, Plans, so that only Participating Insurance Companies
and their separate accounts and plans will be considered shareholders of the
Portfolio. Although the Participating Insurance Companies and their separate
accounts and the Plans are the shareholders or investors, the Participating
Insurance Companies will pass through voting rights to their VA contract and VLI
policy holders. Plan sponsors may or may not pass through voting rights to Plan
participants, depending on the terms of the Plan's governing documents. For a
discussion of voting rights, please refer to the Participating Insurance
Companies' prospectuses or the Plan documents.
When matters are submitted for shareholder vote, shareholders of the
Portfolio will have one vote for each full share held and proportionate,
fractional votes for fractional shares held. A separate vote of a portfolio of
the Fund is required on any matter affecting the portfolio on which shareholders
are entitled to vote, such as approval of a portfolio's agreement with Alger
Management. Shareholders of one portfolio are not entitled to vote on a matter
that does not affect that portfolio but that does require a separate vote of the
other portfolios. There normally will be no annual meetings of shareholders for
the purpose of electing Trustees unless and until such time as less than a
majority of 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. Any Trustee may be removed from office on the vote of
shareholders holding at least two thirds of the Fund's outstanding shares at a
meeting called for that purpose. The Trustees are required to call such a
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meeting on the written request of shareholders holding at least 10% of the
Fund's outstanding shares.
Board of Trustees
The Fund is governed by a Board of Trustees which is responsible for
protecting the interests of shareholders under Massachusetts law. The Statement
of Additional Information contains general background information about each
Trustee and officer of the Fund.
Investment Manager
Alger Management is the Fund's investment manager and is responsible for the
overall administration of the Fund, subject to the supervision of the Board of
Trustees. Alger Management makes investment decisions for the Portfolio, places
orders to purchase and sell securities on behalf of the Portfolio and selects
broker-dealers that, in its judgment, provide prompt and reliable execution at
favorable prices and reasonable commission rates. It is anticipated that the
Fund's distributor, Fred Alger & Company, Incorporated ("Alger Inc."), an
affiliate of Alger Management, will serve as the Fund's broker in effecting
substantially all of the Portfolio's transactions on securities exchanges and
will retain commissions in accordance with certain regulations of the Securities
and Exchange Commission. In addition, Alger Management employs professional
securities analysts who provide research services exclusively to the Portfolio
and other accounts for which Alger Management or its affiliates serve as
investment adviser or subadviser.
Alger Management has been in the business of providing investment advisory
services since 1964 and, as of December 31, 1994, had approximately $2.9 billion
under management, $1.4 billion in mutual fund accounts and $1.5 billion in other
advisory accounts. Alger Management is owned by Alger Inc. which in turn is
owned by Alger Associates, Inc., a financial services holding company. Fred M.
Alger III and his brother, David D. Alger, are the majority shareholders of
Alger Associates, Inc. and may be deemed to control that company and its
subsidiaries. As of April 14, 1995, those persons and companies may also be
deemed to control the Portfolio.
Portfolio Managers
David D. Alger, President of Alger Management, is primarily responsible for
the day-to-day management of the Portfolio. He has been employed by Alger
Management as Executive Vice President and Director of Research since 1971 and
as President since 1995 and he serves as portfolio manager for other mutual
funds and investment accounts managed by Alger Management. Shelton Y. Swei
serves as co-manager of the Portfolio. He has been employed by Alger Management
since 1984 and he serves as a senior research analyst, providing research for
other mutual funds and investment accounts managed by Alger Management.
Fund personnel ("Access Persons") are permitted to engage in personal
securities transactions subject to the restrictions and procedures of the Fund's
Code of Ethics. Pursuant to the Code of Ethics, Access Persons generally must
preclear all personal securities transactions prior to trading and are subject
to certain prohibitions on personal trading. You can get a copy of the Fund's
Code of Ethics by calling the Fund toll-free at (800) 992-3863.
Fees
The Portfolio pays Alger Management a management fee computed daily and paid
monthly at an annual rate of .85% of the value of the Portfolio's average daily
net assets. This management fee is higher than that paid by most other
investment companies; however, such fee does not exceed those paid by funds with
similar investment objectives.
From time to time Alger Management or its affiliates may compensate insurance
companies or their affiliates whose customers hold shares of the Portfolio for
providing a variety of record-keeping, administrative, marketing and/or
shareholder support services. This compensation, which may be paid at a rate of
up to .30% of the net asset value of shares held by those customers depending on
the nature, extent and quality of the services provided, will be paid from Alger
Management's own resources and not from the assets of the Portfolio.
Expenses
The Portfolio pays expenses related to its daily operations, such as
management fees, brokerage fees, custodian fees, Trustees' fees, transfer agency
fees and legal and auditing costs. Alger Management has agreed to reimburse the
Portfolio to the extent that the annual operating expenses (excluding interest,
taxes, fees for brokerage services and extraordinary expenses) exceed 1.50% of
the average daily net assets for any fiscal year. In addition, from time to
time, Alger Management, in its sole discretion and as it deems appropriate, may
assume certain expenses of the Portfolio while retaining the ability to be
reimbursed by the Portfolio for such amounts prior to the end of the fiscal
year. This will have the effect of lowering the Portfolio's overall expense
ratio and of increasing yield to investors, or the converse, at the time such
amounts are assumed or reimbursed, as the case may be. More information about
the Portfolio's investment management agreement and other expenses paid by the
Portfolio is included in the Statement of Additional Information.
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The Statement of Additional Information contains information about the Fund's
brokerage policies and practices.
Distributor
Alger Inc. serves as the Fund's distributor and also distributes the shares
of other mutual funds managed by Alger Management.
Transfer Agent
Alger Shareholder Services, Inc., an affiliate of Alger Management, serves as
transfer agent for the Fund.
NET ASSET VALUE
The price of one share of the Portfolio is its "net asset value." The net
asset value is computed by adding the value of the Portfolio's investments plus
cash and other assets, deducting liabilities and then dividing the result by the
number of its shares outstanding. The net asset value of the Portfolio is
calculated on each day the New York Stock Exchange is open as of the close of
business (normally 4:00 p.m. Eastern time).
PURCHASES AND REDEMPTIONS
Contract or policy holders or Plan participants would not deal directly with
the Fund regarding the purchase or redemption of the Portfolio's shares. The
separate accounts of the Participating Insurance Companies place orders to
purchase and redeem shares of the Portfolio based on, among other things, the
amount of premium payments to be invested and the amount of surrender and
transfer requests (as defined in the prospectuses describing the VA contracts
and VLI policies issued by the Participating Insurance Companies) to be effected
on that day pursuant to VA contracts and VLI Policies. Plan trustees purchase
Portfolio shares. Plan participants cannot contact the Fund directly to purchase
shares of the Portfolio but may invest in shares of the Portfolio only through
their Plan. Participants should contact their Plan sponsor for information
concerning the appropriate procedure for investing in the Portfolio.
Orders for shares of the Portfolio received by the Fund or the Fund's
transfer agent are effected on days on which the NYSE is open for trading. For
orders received before the close of regular trading on the NYSE, purchases and
redemptions of the shares of the Portfolio are effected at the respective net
asset values per share determined as of the close of regular trading on the NYSE
on the same day. Orders received after the close of regular trading on the NYSE,
are effected at the next calculated net asset value. See "Net Asset Value." All
orders for the purchase of shares are subject to acceptance or rejection by the
Fund. Payment for redemptions will be made by the Fund's transfer agent on
behalf of the Fund and the Portfolio within seven days after the request is
received. Neither the Fund nor the Portfolio assesses any fees, either when it
sells or when it redeems the Portfolio's shares. Surrender charges, mortality
and expense risk fees and other charges may be assessed by Participating
Insurance Companies under the VA contracts or VLI policies. These fees should be
described in the Participating Insurance Companies' prospectuses. Any charges
assessed by the Plans should be described in the Plan documents.
DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions will be automatically reinvested on the payment
date for each shareholder's account in additional shares of the Portfolio at net
asset value or, in the case of VA contracts and VLI policies will be paid in
cash at the election of the Participating Insurance Company. Dividends of the
Portfolio will be declared and paid annually. Distributions of any net realized
capital gains earned by the Portfolio usually will be made annually after the
close of the fiscal year in which the gains are earned. Participating Insurance
Companies will be informed about the amount and character of dividends and
distributions from the Portfolio for federal income tax purposes.
TAXES
The Fund intends that the Portfolio will qualify separately as a "regulated
investment company" (within the meaning of the Internal Revenue Code of 1986, as
amended) for each taxable year. If so qualified, and providing certain
distribution requirements are met, the Portfolio will not be subject to federal
income tax on its net investment income and net capital gains that it
distributes to its shareholders.
Dividends paid from net investment income and distributions of net realized
short-term capital gains are treated as ordinary income earned by the
shareholders of the Portfolio. Distributions of net long-term capital gains are
treated as such by shareholders for federal income tax purposes. Federal income
taxation of separate accounts of life insurance companies, VA contracts, VLI
policies and of the Plans is discussed in the prospectuses of the Participating
Insurance Companies and in the Plan documents. With respect to participants in
the Plans, dividends from net investment income and net realized capital gains
will ordinarily not be subject to taxation until such dividends are distributed
to such participants from their Plan accounts.
PERFORMANCE
All performance figures are based on historical earnings and are not intended
to indicate future performance.
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The Portfolio may include quotations of its "total return" and/or "yield" in
advertisements or reports to shareholders or prospective investors. Both "total
return" and/or "yield" figures are based on historical earnings and are not
intended to indicate future performance. Total return figures show the aggregate
or average percentage change in value of an investment in the Portfolio from the
beginning date of the measuring period to the end of the measuring period. These
figures reflect changes in the price of the Portfolio's shares and assume that
any income dividends and/or capital gains distributions made by the Portfolio
during the period were reinvested in shares of the Portfolio. Figures will be
given for recent 1, 5 and 10 year periods, and may be given for other periods as
well (such as from commencement of the Portfolio's operations, or on a
year-by-year basis). The Portfolio may also use "aggregate" total return figures
for various periods, representing the cumulative change in value of an
investment in the Portfolio for the specific period (again reflecting changes in
Portfolio share prices 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"
and "yield" for the Portfolio will vary based on changes in market conditions.
In addition, since the deduction of the Portfolio's expenses is reflected in the
total return and yield figures, "total return" and "yield" will also vary based
on the level of the Portfolio's expenses.
The actual return of a holder of a VA contract or VLI policy will also be
affected by charges imposed by the separate accounts of Participating Insurance
Companies or, in the case of Plan participants, by any charges imposed under the
Plan.
INVESTOR AND SHAREHOLDER
INFORMATION
Investors and shareholders may contact the Fund toll-free at (800) 992-3863
for further information regarding the Fund and the Portfolio, including current
performance quotations, as well as for assistance in obtaining a Statement of
Additional Information. Holders of VA contracts or VLI policies issued by
Participating Insurance Companies and participants in Plans for which shares of
the Portfolio are the investment vehicle may receive from the Participating
Insurance Companies or Plan sponsor unaudited semi-annual financial statements
and year-end financial statements audited by the Fund's independent public
accountants. Each report will show the investments owned by the Portfolio and
the market values of the investments and will provide other information about
the Portfolio and its operations. The Fund's Annual Report as of December 31,
1994 contains additional performance information and is available upon request
and without charge by contacting the Fund at the toll-free number listed above.
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================================================================================
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus or the Statement
of Additional Information in connection with the offering of the Portfolio's
shares, and if given or made, such other information or representations must not
be relied on as having been authorized by the Fund. This Prospectus does not
constitute an offer in any state in which, or to any person to whom, such offer
may not lawfully be made.
----------
Investment Manager:
Fred Alger Management, Inc.
75 Maiden Lane
New York, New York 10038
Distributor:
Fred Alger & Company, Incorporated
30 Montgomery Street
Jersey City, New Jersey 07302
Transfer Agent:
Alger Shareholder Services, Inc.
30 Montgomery Street
Box 2001
Jersey City, New Jersey 07302
Independent Public Accountants:
Arthur Andersen LLP
1345 Avenue of the Americas
New York, New York 10105
================================================================================
================================================================================
THE
ALGER Meeting the challenge
AMERICAN of investing
FUND
ALGER AMERICAN LEVERAGED
ALLCAP PORTFOLIO
PROSPECTUS July 31, 1995
================================================================================
<PAGE>
THE
ALGER 75 Maiden Lane
AMERICAN New York, New York 10038
FUND (800) 992-3863
================================================================================
The Alger American Fund (the "Fund") is a registered investment company -- a
mutual fund -- that presently offers interests in the following six portfolios
(the "Portfolios"):
o Alger American Balanced Portfolio
o Alger American Income and Growth Portfolio
o Alger American Small Capitalization Portfolio
o Alger American Growth Portfolio
o Alger American MidCap Growth Portfolio
o Alger American Leveraged AllCap Portfolio
The Fund is designed to permit insurance companies that issue Variable Annuity
Contracts ("VA contracts") and Variable Life Insurance Policies ("VLI policies")
to offer VA contract and VLI policy holders the opportunity to participate in
the performance of one or more of the Portfolios of the Fund. Depending on
receipt by the Fund of an exemptive order (the "Order") for which an application
is currently pending with the Securities and Exchange Commission, the Fund may
also offer participation to qualified pension and retirement plans (the "Plans")
which elect to make the Fund an investment option for plan Participants.
This Statement of Additional Information is not a Prospectus. This document
contains additional information about The Alger American Fund and supplements
information in the Prospectus dated July 31, 1995. It should be read together
with the Prospectus which may be obtained free of charge by writing or calling
the Fund at the address or toll-free number shown above.
CONTENTS
Investment Objectives and Policies......................................... 2
Net Asset Value............................................................ 9
Purchases and Redemptions.................................................. 10
Management................................................................. 10
Taxes...................................................................... 12
Custodian.................................................................. 13
Transfer Agent............................................................. 13
Certain Shareholders....................................................... 13
Organization............................................................... 14
Determination of Performance............................................... 15
Financial Statements....................................................... F-1
Appendix................................................................... A-1
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
Certain Securities and Investment Techniques
The Prospectus discusses the investment objectives of each Portfolio and the
policies to be employed to achieve those objectives. This section contains
supplemental information concerning the types of securities and other
instruments in which the Portfolios may invest, the investment policies and
portfolio strategies that the Portfolios may utilize and certain risks attendant
to those investments, policies and strategies.
U.S. Government Obligations
Bills, notes, bonds and other debt securities issued by the U.S. Treasury are
direct obligations of the U.S. Government and differ mainly in the length of
their maturities.
U.S. Government Agency Securities
These securities are issued or guaranteed by U.S. Government-sponsored
enterprises and federal agencies. These include securities issued by the Federal
National Mortgage Association, Government National Mortgage Association, Federal
Home Loan Bank, Federal Land Banks, Farmers Home Administration, Banks for
Cooperatives, Federal Intermediate Credit Banks, Federal Financing Bank, Farm
Credit Banks, the Small Business Administration, Federal Housing Administration
and Maritime Administration. Some of these securities are supported by the full
faith and credit of the U.S. Treasury; and the remainder are supported only by
the credit of the instrumentality, which may or may not include the right of the
issuer to borrow from the Treasury.
Bank Obligations
These are certificates of deposit, bankers' acceptances and other short-term
debt obligations. Certificates of deposit are short-term obligations of
commercial banks. A bankers' acceptance is a time draft drawn on a commercial
bank by a borrower, usually in connection with international commercial
transactions. Certificates of deposit may have fixed or variable rates.
The Portfolios will not invest in any security issued by a commercial bank
unless (i) the bank has total assets of at least $1 billion, or the equivalent
in other currencies, or, in the case of domestic banks which do not have total
assets of at least $1 billion, the aggregate investment made in any one such
bank is limited to $100,000 and the principal amount of such investment is
insured in full by the Federal Deposit Insurance Corporation, (ii) in the case
of U.S. banks, it is a member of the Federal Deposit Insurance Corporation, and
(iii) in the case of foreign banks, the security is, in the opinion of the
Fund's investment manager, of an investment quality comparable to other debt
securities which may be purchased by the Portfolios. These limitations do not
prohibit investments in securities issued by foreign branches of U.S. banks,
provided such U.S. banks meet the foregoing requirements.
Foreign Bank Obligations
Investments by the Portfolios in foreign bank obligations and obligations of
foreign branches of domestic banks present certain risks, including the impact
of future political and economic developments, the possible imposition of
withholding taxes on interest income, the possible seizure or nationalization of
foreign deposits, the possible establishment of exchange controls and/or the
addition of other foreign governmental restrictions that might affect adversely
the payment of principal and interest on these obligations. In addition, there
may be less publicly available and reliable information about a foreign bank
than about domestic banks owing to different accounting, auditing, reporting and
recordkeeping standards. In view of these risks, Fred Alger Management, Inc.
("Alger Management") will carefully evaluate these investments on a case-by-case
basis.
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.
Variable Rate Master Demand Notes
These are unsecured instruments that permit the indebtedness thereunder to vary
and provide for periodic adjustments in the interest rate. Because these notes
are direct lending arrangements between the Portfolio and the issuer, they are
not normally traded. Although no active secondary market may exist for these
notes, the Portfolio may demand payment of principal and accrued interest at any
time or may resell the note to a third party. While the notes are not typically
rated by credit rating agencies, issuers of variable rate master demand notes
must satisfy Alger Management that the same criteria for issuers of commercial
paper are met. In addition, when purchasing variable rate master demand notes,
Alger Management will consider the earning power, cash flows and other liquidity
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<PAGE>
ratios of the issuers of the notes and will continuously monitor their financial
status and ability to meet payment on demand. In the event an issuer of a
variable rate master demand note defaulted on its payment obligations, the
Portfolio might be unable to dispose of the note because of the absence of a
secondary market and could, for this or other reasons, suffer a loss to the
extent of the default.
Repurchase Agreements
Under the terms of a repurchase agreement, a Portfolio 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
Portfolio to resell, the instrument at an agreed price (including accrued
interest) and time, thereby determining the yield during the Portfolio's holding
period. Repurchase agreements may be seen to be loans by the Portfolio
collateralized by the underlying instrument. This arrangement results in a fixed
rate of return that is not subject to market fluctuations during the Portfolio'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. A Portfolio bears a risk of loss in
the event that the other party to a repurchase agreement defaults on its
obligations and the Portfolio 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
Portfolio 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. Alger Management, acting under the supervision of the
Fund's Board of Trustees, reviews the credit worthiness of those banks and
dealers with which the Portfolios enter 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.
Reverse Repurchase Agreements
(Alger American Balanced Portfolio)
Reverse repurchase agreements are the same as repurchase agreements except that,
in this instance, the Portfolio would assume the role of seller/borrower in the
transaction. The Portfolio will maintain segregated accounts with the Fund's
custodian consisting of U.S. Government securities, cash or money market
instruments that at all times are in an amount equal to their obligations under
reverse repurchase agreements. The Portfolio will invest the proceeds in other
money market instruments or repurchase agreements maturing not later than the
expiration of the reverse repurchase agreement. Reverse repurchase agreements
involve the risk that the market value of the securities sold by the Portfolio
may decline below the repurchase price of the securities. Under the Investment
Company Act of 1940, as amended (the "Act"), reverse repurchase agreements may
be considered borrowings by the seller; accordingly, the Portfolio will limit
its investments in reverse repurchase agreements and other borrowings to no more
than one third of its total assets.
Firm Commitment Agreements and
When-Issued Purchases
(Alger American Balanced Portfolio)
Firm commitment agreements and "when-issued" purchases call for the purchase of
securities at an agreed price on a specified future date and would be used, for
example, when a decline in the yield of securities of a given issuer is
anticipated and a more advantageous yield may be obtained by committing
currently to purchase securities to be issued later. When the Portfolio
purchases a security under a firm commitment agreement or on a when-issued basis
it assumes the risk of any decline in value of the security occurring between
the date of the agreement or purchase and the settlement date of the
transaction. The Portfolio will not use these transactions for leveraging
purposes and, accordingly, will segregate with the Fund's custodian cash or high
quality money market instruments in an amount sufficient at all times to meet
its purchase obligations under these agreements.
Warrants and Rights
Each Portfolio may invest in warrants and rights. A warrant is a type of
security that entitles the holder to buy a proportionate amount of common stock
at a specified price, usually higher than the market price at the time of
issuance, for a period of years or to perpetuity. In contrast, rights, which
also represent the right to buy common shares, normally have a subscription
price lower than the current market value of the common stock and a life of two
to four weeks. Warrants are freely transferable and are traded on the major
securities exchanges.
Restricted Securities
Each Portfolio may invest in restricted securities issued under Rule 144A of the
Securities Act of 1933, as amended. In adopting Rule 144A, the Securities and
Exchange Commission (the "SEC") specifically stated that restricted securities
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<PAGE>
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.
Examples of factors that the Fund's Board of Trustees will take into account in
evaluating the liquidity of a Rule 144A security, both with respect to the
initial purchase and on an ongoing basis, 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). In accordance with Rule 144A, 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. Because institutional trading in restricted securities is
relatively new, it is not possible to predict how institutional markets will
develop. If institutional trading in restricted securities were to decline to
limited levels, the liquidity of the Fund's Portfolio could be adversely
affected.
Short Sales
Each Portfolio may sell securities "short against the box." While a short sale
is the sale of a security the Portfolio does not own, it is "against the box" if
at all times when the short position is open the Portfolio 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
Each Portfolio may lend securities to brokers, dealers and other financial
organizations. The Portfolios will not lend securities to Alger Management or
its affiliates. By lending its securities, a Portfolio 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. Each Portfolio will adhere to the following
conditions whenever its securities are loaned: (a) the Portfolio must receive at
least 100 percent cash collateral or equivalent securities from the borrower;
(b) the borrower must increase this collateral whenever the market value of the
securities including accrued interest, exceeds the value of the collateral; (c)
the Portfolio must be able to terminate the loan at any time; (d) the Portfolio
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 Portfolio 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. A Portfolio bears a risk of loss in the
event that the other party to a stock loan transaction defaults on its
obligations and the Portfolio 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 Portfolio
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
Each Portfolio may invest up to 20% of the value of its total assets in foreign
securities (not including American Depositary Receipts ("ADRs")). 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 among 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 Portfolio by domestic
corporations. It should be noted that there may be less publicly available
information about foreign issuers than about domestic issuers, and foreign
issuers are not subject to uniform accounting, auditing and financial reporting
standards and requirements comparable to those of domestic issuers. Securities
of some foreign issuers are less liquid and more volatile than securities of
comparable domestic issuers and foreign brokerage commissions are generally
higher than in the United States. Foreign securities markets may also be less
liquid, more volatile and less subject to government supervision than those in
the United States. Investments in foreign countries could be affected by other
factors not present in the United States, including expropriation, confiscatory
taxation and potential difficulties in enforcing contractual obligations.
Securities purchased on foreign exchanges may be held in custody by a foreign
branch of a domestic bank.
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<PAGE>
Options (Alger American Leveraged
AllCap Portfolio)
A call option 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 is a contract that, in
return for the premium, gives the holder of the option the right to sell to the
writer (seller) the underlying security at a specified price during the term of
the option. The writer of the put, who receives the premium, has the obligation
to buy the underlying security upon exercise at the exercise price during the
option period.
A call option is "covered" if the Portfolio owns the underlying security covered
by the call or has an absolute and immediate right to acquire that security
without additional cash consideration (or for additional cash consideration held
in a segregated account by its custodian) upon conversion or exchange of other
securities held in its portfolio. A call option is also covered if the Portfolio
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 Portfolio in cash, U.S. Government securities or
other high-grade short-term obligations in a segregated account held with its
custodian. A put option is "covered" if the Portfolio maintains cash or other
high-grade short-term obligations with a value equal to the exercise price in a
segregated account held with its custodian, or else holds a put on the same
security as the put written where the exercise price of the put held is equal to
or greater than the exercise price of the put written.
If the Portfolio 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
Portfolio has been assigned an exercise notice, the Portfolio will be unable to
effect a closing purchase transaction. Similarly, if the Portfolio 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 Portfolio so desires.
The Portfolio 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 Portfolio 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 Portfolio will
generally purchase or write only those options for which there appears to be an
active secondary market, there is no assurance that a liquid secondary market on
an exchange will exist for any particular option. In such event it might not be
possible to effect closing transactions in a particular option so that the
Portfolio would have to exercise its option in order to realize any profit and
would incur brokerage commissions upon the exercise of the option. If the
Portfolio, 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 Portfolio 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 Portfolio is obligated, in return for the premium
received, to make delivery of this amount. The Portfolio 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 Portfolio will not purchase these options unless Alger
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<PAGE>
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 Portfolio'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.
The Portfolio has qualified and intends to continue to qualify as a "Regulated
Investment Company" under the Internal Revenue Code of 1986, as amended
(the"Code"). One requirement for such qualification is that the Portfolio must
derive less than 30% of its gross income from gains from the sale or other
disposition of securities held for less than three months. Therefore, the
Portfolio may be limited in its ability to engage in options transactions.
Although Alger Management will attempt to take appropriate measures to minimize
the risks relating to the Portfolio's writing of put and call options, there can
be no assurance that the Portfolio will succeed in any option-writing program it
undertakes.
Stock Index Futures and Options on Stock
Index Futures (Alger American Leveraged
AllCap Portfolio)
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 Portfolio, as
seller, to deliver to the buyer the net cash amount called for in the contract
at a specified future time. Put options on futures might be purchased to protect
against declines in the market values of securities occasioned by a decline in
stock prices and securities index futures might be sold to protect against a
general decline in the value of securities of the type that comprise the index.
Options on futures contracts are similar to options on securities except that an
option on a futures contract gives the purchaser the right in return for the
premium paid to assume a position in a futures contract and obligates the seller
to deliver such position.
A stock index future obligates the seller to deliver (and the purchaser to take)
an amount of cash equal to a specific dollar amount times the difference between
the value of a specific stock index at the close of the last trading day of the
contract and the price at which the agreement is made. No physical delivery of
the underlying stocks in the index is made. With respect to stock indexes that
are permitted investments, the Portfolio intends to purchase and sell futures
contracts on the stock index for which it can obtain the best price with
considerations also given to liquidity. While incidental to its securities
activities, the Portfolio may use index futures as a substitute for a comparable
market position in the underlying securities.
The risk of imperfect correlation increases as the composition of the Portfolio
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 Portfolio may
buy or sell stock index futures contracts in a greater or lesser dollar amount
than the dollar amount of the securities being hedged if the historical
volatility of the stock index futures has been less or greater than that of the
securities. Such "over-hedging" or "under-hedging" may adversely affect the
Portfolio'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 Portfolio will sell options on stock index futures contracts only as part of
closing purchase transactions to terminate its options positions. No assurance
can be given that such closing transactions can be effected or that there will
be correlation between price movements in the options on stock index futures and
price movements in the Portfolio's securities which are the subject of the
hedge. In addition, the Portfolio's purchase of such options will be based upon
predictions as to anticipated market trends, which could prove to be inaccurate.
The Portfolio's use of stock index futures and options thereon will in all cases
be consistent with applicable regulatory requirements and in particular the
rules and regulations of the Commodity Futures Trading Commission and will be
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<PAGE>
entered into only for bona fide hedging, risk management or other portfolio
management purposes. Typically, maintaining a futures contract or selling an
option thereon requires the Portfolio 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 market-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 Portfolio. If the Portfolio
exercises an option on a futures contract it will be obligated to post initial
margin (and potential subsequent variation margin) for the resulting futures
position just as it would for any position. Futures contracts and options
thereon are generally settled by entering into an offsetting transaction but
there can be no assurance that the position can be offset prior to settlement at
an advantageous price, nor that delivery will occur.
The Portfolio 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 Portfolio's total assets (taken at current value);
however, in the case of an option that is in-the-money at the time of the
purchase, the in-the-money amount may be excluded in calculating the 5%
limitation.
Investment Restrictions
The investment restrictions numbered 1 through 10 and 14 below have been adopted
by the Fund with respect to each of the Portfolios as fundamental policies.
Under the Act, a "fundamental" policy may not be changed without the vote of a
"majority of the outstanding voting securities" of the Fund, which is defined in
the Act as the lesser of (a) 67 percent or more of the shares present at a Fund
meeting if the holders of more than 50 percent of the outstanding shares of the
Fund are present or represented by proxy or (b) more than 50 percent of the
outstanding shares. A fundamental policy affecting a particular Portfolio may
not be changed without the vote of a majority of the outstanding voting
securities of the affected Portfolio. Investment restrictions 11 through 18
(excluding 14) may be changed by vote of a majority of the Fund's Board of
Trustees at any time.
The investment policies adopted by the Fund prohibit each Portfolio from:
1. Purchasing the securities of any issuer, other than U.S. Government
securities, if as a result more than 5% of the value of a Portfolio's total
assets would be invested in the securities of the issuer, except that up to 25
percent of the value of the Portfolio's total assets may be invested without
regard to this limitation.
2. Purchasing more than 10 percent of the voting securities of any one issuer or
more than 10 percent of the securities of any class of any one issuer. This
limitation shall not apply to investments in U.S.
Government securities.
3. Selling securities short or purchasing securities on margin, except that the
Portfolio may obtain any short-term credit necessary for the clearance of
purchases and sales of securities. These restrictions shall not apply to
transactions involving selling securities "short against the box."
4. Borrowing money, except that (a) the Portfolio may borrow for temporary or
emergency (but not leveraging, except for the Alger American Leveraged AllCap
Portfolio) purposes, including the meeting of redemption requests that might
otherwise require the untimely disposition of securities, in an amount not
exceeding 10 percent of the value of the Portfolio's total assets (including the
amount borrowed) valued at the lesser of cost or market, less liabilities (not
including the amount borrowed) at the time the borrowing is made; (b) the Alger
American Balanced Portfolio may engage in transactions in reverse repurchase
agreements; and (c) the Alger American Leveraged AllCap Portfolio may borrow
from banks for investment purposes as set forth in the Prospectus. Whenever
borrowings described in (a) exceed 5% of the value of the Portfolio's total
assets, the Portfolio will not make any additional investments. Immediately
after any borrowing, including reverse repurchase agreements and mortgage-backed
rolls, the Portfolio will maintain asset coverage of not less than 300 percent
with respect to all borrowings.
5. Pledging, hypothecating, mortgaging or otherwise encumbering more than 10
percent of the value of the Portfolio's total assets except in conjunction with
borrowings as noted in 4(c) above. These restrictions shall not apply to
transactions involving reverse repurchase agreements or the purchase of
securities subject to firm commitment agreements or on a when-issued basis.
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<PAGE>
6. Underwriting the securities of other issuers, except insofar as the Portfolio
may be deemed to be an underwriter under the Securities Act of 1933, as amended,
by virtue of disposing of portfolio securities.
7. Making loans to others, except through purchasing qualified debt obligations,
lending portfolio securities or entering into repurchase agreements.
8. Investing in securities of other investment companies, except as they may be
acquired as part of a merger, consolidation, reorganization, acquisition of
assets or offer of exchange.
9. Purchasing any securities that would cause more than 25 percent of the value
of the Portfolio's total assets to be invested in the securities of issuers
conducting their principal business activities in the same industry; provided
that there shall be no limit on the purchase of U.S. Government securities.
10. Investing in commodities.
11. Purchasing or selling real estate, except that the Portfolio may purchase
and sell securities secured by real estate, mortgages or interests therein and
securities that are issued by companies that invest or deal in real estate.
12. Writing or selling puts, calls, straddles, spreads or combinations thereof.
13. Investing in oil, gas or other mineral exploration or development programs,
except that the Portfolio may invest in the securities of companies that invest
in or sponsor those programs.
14. Investing more than 10 percent of its net assets in securities which are
illiquid by virtue of legal or contractual restrictions on resale or the absence
of a readily available market. However, securities with legal and contractual
restrictions on resale may be purchased if they are determined to be liquid, and
such purchases would not be subject to the 10 percent limit stated above. The
Board of Trustees will in good faith determine the specific types of securities
deemed to be liquid and the value of such securities.
15. Purchasing any security if as a result the Portfolio would then have more
than 5% of its total assets invested in securities of issuers (including
predecessors) that have been in continual operation for less than three years.
This limitation shall not apply to investments in U.S. Government securities.
16. Making investments for the purpose of exercising control or management.
17. Investing in warrants, except that the Portfolio may invest in warrants if,
as a result, the investments (valued at the lower of cost or market) would not
exceed five percent of the value of the Portfolio's net assets, of which not
more than 2% of the Portfolio's net assets may be invested in warrants not
listed on a recognized domestic stock exchange. Warrants acquired by the
Portfolio as part of a unit or attached to securities at the time of acquisition
are not subject to this limitation.
18. Purchasing or retaining the securities of any issuer if, to the knowledge of
the Fund, any of the officers, directors or trustees of the Fund or Alger
Management individually owns more than 5% of the outstanding securities of the
issuer and together they own beneficially more than 5% of the securities.
Except in the case of the 300 percent limitation set forth in Investment
Restriction No. 4, the percentage limitations contained in the foregoing
restrictions apply at the time of the purchase of the securities and a later
increase or decrease in percentage resulting from a change in the values of the
securities or in the amount of the Portfolio's assets will not constitute a
violation of the restriction. Additional limitations imposed by state law and
regulations may apply.
Portfolio Transactions
Decisions to buy and sell securities and other financial instruments for a
Portfolio 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 each Portfolio are reviewed
independently from those of the other accounts managed by Alger Management and
those of the other Portfolios, investments of the type the Portfolios may make
may also be made by these other accounts or Portfolios. When a Portfolio and one
or more other Portfolios or 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 a Portfolio or
the size of the position obtained or disposed of by a Portfolio.
Transactions in equity securities are in many cases effected on U.S. stock
exchanges and involve the payment of negotiated brokerage commissions. There is
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<PAGE>
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 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 Portfolio involved a rate consistent with that charged to comparable
unaffiliated customers in similar transactions. Such transactions will be fair
and reasonable to the Portfolio's shareholders. 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 on behalf of a
Portfolio, 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 Portfolio
involved, the other Portfolios and/or other accounts over which Alger Management
or its affiliates exercise investment discretion. Alger Management's fees under
its agreements with the Portfolios 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 Portfolios to determine if the commissions
paid over representative periods of time are reasonable in relation to the
benefits inuring to the Portfolios. During the fiscal years ended December 31,
1992 and 1993, the Fund paid an aggregate of approximately $253,721 and
$590,712, respectively, in commissions to broker-dealers in connection with
portfolio transactions, 100% of which was paid to Alger Inc. During the fiscal
year ended December 31, 1994, the Fund paid an aggregate of approximately
$1,158,107 in commissions to broker-dealers in connection with portfolio
transactions of which $1,157,607 (99.96%) was paid to Alger Inc. and $500 was
paid to other broker-dealers. Alger Inc. does not engage in principal
transactions with the Fund and, accordingly, received no compensation in
connection with securities purchased or sold in that manner, which include
securities traded in the over-the-counter markets, money market investments and
most debt securities.
NET ASSET VALUE
The Prospectus discusses the time at which the net asset values of the
Portfolios are determined for purposes of sales and redemptions. The New York
Stock Exchange is currently open on each Monday through Friday, except (i)
January 1st, Presidents' Day (the third Monday in February), Good Friday,
Memorial Day (the last Monday in May), July 4th, Labor Day (the first Monday in
September), Thanksgiving Day (the fourth Thursday in November) and December 25th
and (ii) the preceding Friday when any one of those holidays falls on a
Saturday, or the subsequent Monday when any one of those holidays falls on a
Sunday. The following is a description of the procedures used by the Fund in
valuing the Portfolios' assets.
The assets of the Portfolios 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
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<PAGE>
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, as described below, which
constitutes fair value as determined by the Fund's Board of Trustees.
The valuation of money market instruments with maturities of 60 days or less is
based on their amortized cost which does not take into account unrealized
capital gains or losses. Amortized cost valuation involves initially valuing an
instrument at its cost and thereafter assuming a constant amortization to
maturity of any discount or premium, regardless of the impact of fluctuating
interest rates on the market value of the instrument. Although this method
provides certainty in valuation, it may result in periods during which value, as
determined by amortized cost, is higher or lower than the price a Portfolio
would receive if it sold the instrument.
PURCHASES AND REDEMPTIONS
Shares of the Portfolios are offered by the Fund on a continuous basis to
separate accounts of Participating Insurance Companies and, if the order is
issued, to Plans. Shares are distributed by Alger Inc. as principal underwriter
for the Fund pursuant to a distribution agreement (the "Distribution Agreement")
which provides that Alger Inc. accepts orders for shares at net asset value and
no sales commission or load is charged.
Contract or policy holders and Plan participants do not deal directly with the
Fund regarding the purchase or redemption of a Portfolio's shares. The separate
accounts of the Participating Insurance Companies purchase and redeem shares of
each Portfolio based on, among other things, the amount of premium payments to
be invested and surrender and transfer requests (as defined in the prospectuses
describing the VA contracts and VLI policies issued by the Participating
Insurance Companies) to be effected on that day pursuant to VA contracts and VLI
policies. Plan trustees purchase Portfolio shares on behalf of the Plan
participants. Participants should contact their Plan sponsor for information
concerning the appropriate procedure for investing in the Fund. Orders received
by the Fund or its transfer agent are effected on days on which the New York
Stock Exchange (the "NYSE") is open for trading. Such purchases and redemptions
of the shares of each Portfolio are effected at their respective net asset
values per share determined as of the close of regular trading on the NYSE
(currently 4:00 p.m. Eastern time) on that same day. See "Net Asset Value."
Payment for redemptions will be made by the Fund's transfer agent on behalf of
the Fund and the relevant Portfolios within seven days after receipt of
redemption requests.
The Fund may suspend the right of redemption of shares of any Portfolio and may
postpone payment for any period: (i) during which the NYSE is closed other than
customary weekend and holiday closings or during which trading on the NYSE is
restricted; (ii) when the SEC determines that a state of emergency exists which
may make payment or transfer not reasonably practicable; (iii) as the SEC may by
order permit for the protection of the shareholders of the Fund; or (iv) at any
other time when the Fund may, under applicable laws and regulations, suspend
payment on the redemption of its shares.
Should any conflict between VA contract and VLI policy holders and Plans arise
which would require that a substantial amount of net assets be withdrawn from
the Fund, orderly portfolio management could be disrupted to the potential
detriment of the VA contract and VLI policy holders or Plan participants.
MANAGEMENT
Trustees and Officers of the Fund
The names of the Trustees and officers of the Fund, together with information
concerning their principal business occupations, are set forth below. Each of
the officers of the Fund is also an officer, and each of the Trustees is also a
director or Trustee, as the case may be, of Castle Convertible Fund, Inc.
("Castle") and Spectra Fund, Inc. ("Spectra"), registered closed-end investment
companies, and The Alger Fund and The Alger Defined Contribution Trust,
registered open-end management investment companies, for which Alger Management
serves as investment adviser. Fred M. Alger III and David D. Alger are
"interested persons" of the Fund, as defined in the Act. Fred M. Alger III and
David D. Alger are brothers. Unless otherwise noted, the address of each person
named below is 75 Maiden Lane, New York, New York 10038.
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<TABLE>
<CAPTION>
Name, Position with
the Fund and Address Principal Occupations
<S> <C>
Fred M. Alger III Chairman of the Board of Alger Associates, Inc. ("Associates"), Alger Inc.,
Chairman of the Board Alger Management, Alger Properties, Inc. ("Properties"), Alger
Shareholder Services, Inc. ("Services"), Alger Life Insurance
Agency, Inc. ("Agency") and Analysts Resources, Inc. ("ARI").
David D. Alger President and Director of Associates, Alger Management, Alger Inc.,
President and Trustee Properties, Services and Agency. Executive Vice President and
Director of ARI.
Gregory S. Duch Executive Vice President, Treasurer and Director of Alger Management
Treasurer and Properties; Executive Vice President and Treasurer of
Associates, Alger Inc. ARI, Services and Agency.
Nanci K. Staple Secretary of Associates, Alger Management, Alger Inc., Properties,
Secretary ARI, Services and Agency.
Arthur M. Dubow President of Fourth Estate, Inc.; private investor since 1985;
Trustee Director of Coolidge Investment Corporation; formerly
P.O. Box 969 Chairman of the Board of Institutional Shareholder Services, Inc.
Wainscott, NY 11975
Stephen E. O'Neil Of counsel to the law firm of Baker, Nelson, Mishkin & Kohler;
Trustee private investor since 1981; Director of Nova Care, Inc., Syntro 460
Park Avenue Corporation and Brown-Forman Distillers Corporation; formerly New
York, NY 10021 President and Vice Chairman of City Investing Company and
Director of Centerre Bancorporation.
Nathan E. Saint-Amand, M. D. Medical doctor in private practice.
Trustee
2 East 88th Street
New York, NY 10128
John T. Sargent Private investor since 1987; Director of River Bank America
Trustee and Atlantic Mutual Insurance Co.
5 Beekman Place
New York, NY 10022
</TABLE>
No director, officer or employee of Alger Management or its affiliates will
receive any compensation from the Fund for serving as an officer or Trustee of
the Fund. The Fund pays each Trustee who is not a director, officer or employee
of Alger Management or its affiliates a quarterly fee of $1,500, which is
reduced by the proportion of the meetings not attended by the Trustee during the
quarter.
The Fund did not offer its Trustees any pension or retirement benefits during or
prior to the fiscal year ended December 31, 1994. The following table provides
compensation amounts paid to Disinterested Trustees of the Fund for the fiscal
year ended December 31, 1994.
-11-
<PAGE>
COMPENSATION TABLE
<TABLE>
<CAPTION>
Total Compensation Paid to Trustees from
The Alger Defined Contribution Trust,
Aggregate The Alger Fund,
Compensation The Alger American Fund,
from The Alger Castle Convertible Fund, Inc. and
Name of Person, Position American Fund Spectra Fund, Inc.
- ------------------------ ---------------- ---------------------------------------
<S> <C> <C>
Arthur M. Dubow, Trustee $6,000 $28,250
Stephen E. O'Neil, Trustee $6,000 $28,250
Nathan E. Saint-Amand, Trustee $6,000 $28,250
John T. Sargent, Trustee $6,000 $28,250
</TABLE>
Investment Manager
Alger Management serves as investment manager to each of the Portfolios pursuant
to separate written agreements (the "Management Agreements"). Certain of the
services provided by, and the fees paid by the Portfolios to, Alger Management
under the Management Agreements are described in the Prospectus. Alger
Management pays the salaries of all officers who are employed by both it and the
Fund. Alger Management has agreed to maintain office facilities for the Fund,
furnish the Fund with statistical and research data, clerical, accounting and
bookkeeping services, and certain other services required by the Fund, and to
compute the net asset value, net income and realized capital gains or losses of
the Portfolios. Alger Management prepares semi annual reports to the SEC and to
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 Agreements.
Alger Management has agreed to reimburse the Portfolios to the extent that the
annual operating expenses (excluding interest, taxes, fees for brokerage
services and extraordinary expenses) of the Alger American Balanced Portfolio
exceed 1.25%; the Alger American Income and Growth Portfolio exceed 1.25%; the
Alger American Small Capitalization Portfolio exceed 1.50%; the Alger American
Growth Portfolio exceed 1.50%; the Alger American MidCap Growth Portfolio exceed
1.50%; and the Alger American Leveraged AllCap Portfolio exceed 1.50% of the
average daily net assets of the applicable Portfolio for any fiscal year. An
expense reimbursement, if any, will be estimated and reconciled daily and paid
on a monthly basis.
During the fiscal years ended December 31, 1992, 1993 and 1994, Alger Management
earned under the terms of the Management Agreements $30,445, $122,834 and
$187,051, respectively, in respect of the Alger American Income and Growth
Portfolio; $726,362, $1,445,487 and $2,366,780, respectively, in respect of the
Alger American Small Capitalization Portfolio; $129,624, $372,682 and $756,637,
respectively, in respect of the Alger American Growth Portfolio; $16,399,
$39,843 and $70,976, respectively, in respect of the Alger American Balanced
Portfolio. For the period from May 3, 1993 (commencement of operations) through
December 31, 1993 and for the fiscal year ended December 31, 1994, Alger
Management earned $42,051 and $311,831, respectively, under the terms of the
Management Agreement in respect of the Alger American MidCap Growth Portfolio.
Certain of these fees, however, were offset by various expense reimbursements
that are described in the Notes to the Financial Statements contained in this
Statement of Additional Information.
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.
Each Portfolio has been structured so as to qualify as a regulated investment
company within the meaning of the Code. To so qualify, a Portfolio must, among
other things: (a) derive at least 90% of its gross income in each taxable year
from dividends, interest, payments with respect to securities loans and gains
from the sale or other disposition of stock or securities; (b) derive less than
30% of its gross income in each taxable year from the sale or other disposition
of securities held for less than three months; and (c) meet certain quarterly
diversification tests.
-12-
<PAGE>
As a regulated investment company, a Portfolio will not be subject to federal
income tax on its net investment income and net capital gains that it
distributes to its shareholders, provided that at least 90% of its net
investment income for the taxable year is distributed. All net investment income
and net capital gains distributed by a Portfolio will be reinvested
automatically in additional shares of the Portfolio or paid in cash. Amounts
reinvested in additional shares will be considered to have been distributed to
shareholders.
Segregated Asset Account
The Fund intends to distribute shares in the Portfolios only to Participating
Insurance Companies which will hold those shares, directly or indirectly, in a
"segregated asset account" within the meaning of the Code. To qualify as a
segregated asset account, the Portfolio in which such an account holds shares
must meet the diversification requirements of Section 817(h) of the Code and the
regulations promulgated thereunder. To meet those requirements, a Portfolio may
not invest more than certain specified percentages of its assets in the
securities of any one, two, three or four issuers.
The Fund has undertaken to meet the diversification requirements of Section
817(h) of the Code. This undertaking may limit the ability of a particular
Portfolio to make certain otherwise permitted investments.
Income on assets of a segregated asset account will not be taxable to VA
contracts or VLI policy holders if that account has met the diversification
requirements under Section 817(h) of the Code. In the event an account is not so
qualified, all VA contracts or VLI policies allocating any amount of premiums to
such account will not qualify as "annuity contracts" or "life insurance" for
federal income tax purposes. In that event, the holder of the VA contract or VLI
policy would be taxed as though he owned a proportionate amount of the assets
held by such account during and after all periods for which the account failed
to be qualified.
Generally, distributions from a Plan will be taxable as ordinary income at the
rate applicable to the participant at the time of distribution. In certain
cases, distributions made to a participant from a Plan prior to the date on
which the participant reaches age 591/2 are subject to a penalty tax equivalent
to 10% of the amount so distributed, in addition to the ordinary income tax
payable on such amount for the year in which it is distributed. Taxation of
dividends and redemption payments received by Plan participants will depend upon
the nature of the Plan participant's retirement plan and the tax status of that
particular Plan participant.
CUSTODIAN
Custodial Trust Company, 101 Carnegie Center, Princeton, New Jersey 08540-6231,
serves as custodian for the Fund pursuant to a custodian agreement under which
it holds the Portfolios' assets.
TRANSFER AGENT
Alger Shareholder Services, Inc., 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 Alger Shareholder Services, Inc.
processes purchases and redemptions of shares of the Portfolios, maintains the
shareholder account records for each Portfolio, handles certain communications
between shareholders and the Fund and distributes any dividends and
distributions payable by the Fund.
CERTAIN SHAREHOLDERS
Set forth below is certain information regarding significant shareholders of the
Portfolios. Alger Management (a New York corporation) is a wholly owned
subsidiary of Alger, Inc. (a Delaware corporation), which in turn is a wholly
owned subsidiary of Alger Associates, Inc. ("Associates") (a Delaware
corporation). Fred M. Alger III and David D. Alger are the majority shareholders
of Associates and may be deemed to control that company and its subsidiaries. As
a result of these securities holdings, these persons and companies individually
and jointly may be deemed to control certain of the Portfolios, which may have
the effect of proportionately diminishing the voting power of other shareholders
of these Portfolios. It can be expected, however, that this effect will diminish
as investors other than those identified above purchase additional shares of the
Portfolios.
The following table contains information regarding persons known to the Fund who
own beneficially or of record 5% or more of the shares of any Portfolio. Unless
otherwise noted, the address of each owner is 75 Maiden Lane, New York, New York
10038. All holdings are expressed as a percentage of a Portfolio's outstanding
shares as of July 21, 1995 and record and beneficial holdings are in each
instance denoted as follows: record/beneficial.
-13-
<PAGE>
<TABLE>
<CAPTION>
Alger Alger
American American Alger Alger
Income Small Alger Alger American American
and Capital- American American MidCap Leveraged
Growth ization Growth Balanced Growth AllCap
Name and Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
Address of (Record/ (Record/ (Record/ (Record/ (Record/ (Record/
Shareholders Beneficial) Beneficial) Beneficial) Beneficial) Beneficial) Beneficial)
- ------------ ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Fred Alger & Company * * * * --/-- 65.4%/65.4%
Incorporated
30 Montgomery Street
Jersey City, NJ 07302
American Skandia 88.0%/-- 55.5%/-- 87.6%/-- 85.4%/-- 89.9%/-- --/--
Life Assurance
Corporation
Tower One
Corporate Drive
P. O. Box 883
Shelton, CT 06484
Ameritas Variable 10.3%/-- * 7.6%/-- 12.6%/-- 7.0% --/--
Life Insurance Co
Separate Acct VA-2
Variable Annuity Product
P.O. Box 82550
Lincoln, NE 68501
Aetna Life Insurance * 37.6%/-- * * * *
and Annuity Company
151 Farmington Avenue
Hartford, CT 06156
CG Variable Annuity --/-- * * --/-- * 24.3%/--
Separate Acct II
900 Cottage Grove Road
Hartford, CT 06152
Officers and ** ** ** ** ** **
Trustees as a Group**
</TABLE>
- ----------
* Indicates shareholder owns less than 5% of the Portfolio's shares.
** Indicates Group owns less than 1% of the Portfolio's shares.
ORGANIZATION
The Fund has been organized as an unincorporated business trust under the laws
of the Commonwealth of Massachusetts pursuant to an Agreement and Declaration of
Trust dated April 6, 1988 (the "Trust Agreement"). The Alger American Small
Capitalization Portfolio, the Alger American Income and Growth Portfolio, the
Alger American Growth Portfolio, the Alger American Balanced Portfolio (formerly
the Alger American Fixed Income Portfolio) and the Alger American MidCap Growth
Portfolio commenced operations on November 15, 1988, January 9, 1989, August 9,
1989, September 5, 1989 and May 3, 1993, respectively. The Alger American
Leveraged AllCap Portfolio commenced operations on January 25, 1995. The word
"Alger" in the Fund's name has been adopted pursuant to a provision contained in
the Agreement and Declaration of Trust. Under that provision, Alger Associates,
Inc. may terminate the Fund's license to use the word "Alger" in its name when
Alger Management ceases to act as the Fund's investment manager.
Shares do not have cumulative voting rights, which means that holders of more
than 50 percent of the shares voting for the election of Trustees can elect all
Trustees. Shares are transferable but have no preemptive, conversion or
subscription rights. Shareholders generally vote by Portfolio, except with
respect to the election of Trustees and the ratification of the selection of
independent accountants. In the interest of economy and convenience,
-14-
<PAGE>
certificates representing shares of a Portfolio are physically issued only upon
specific written request of a shareholder.
Meetings of shareholders normally will not be held for the purpose of electing
Trustees unless and until such time as less than a majority of the Trustees
holding office have been elected by shareholders, at which time the Trustees
then in office will call a shareholders' meeting for the election of Trustees.
Under the Act, shareholders of record of no less than two-thirds of the
outstanding shares of the Fund may remove a Trustee through a declaration in
writing or by vote cast in person or by proxy at a meeting called for that
purpose. Under the Trust Agreement, the Trustees are required to call a meeting
of shareholders for the purpose of voting on the question of removal of any such
Trustee when requested in writing to do so by the shareholders of record of not
less than 10 percent of the Fund's outstanding shares.
Massachusetts law provides that shareholders could, under certain circumstances,
be held personally liable for the obligations of the Fund. However, the Trust
Agreement disclaims shareholder liability for acts or obligations of the Fund
and requires that notice of such disclaimer be given in each agreement,
obligation or instrument entered into or executed by the Fund or a Trustee. The
Trust Agreement provides for indemnification from the Fund's property for all
losses and expenses of any shareholder held personally liable for the
obligations of the Fund. Thus, the risk of a shareholder's incurring financial
loss on account of shareholder liability is limited to circumstances in which
the Fund itself would be unable to meet its obligations, a possibility that the
Fund believes is remote. Upon payment of any liability incurred by the Fund, the
shareholder paying the liability will be entitled to reimbursement from the
general assets of the Fund. The Trustees intend to conduct the operations of the
Fund in a manner so as to avoid, as far as possible, ultimate liability of the
shareholders for liabilities of the Fund.
DETERMINATION OF PERFORMANCE
The "total return" and "yield" described in the Prospectus as to each of the
Portfolios are computed according to formulas prescribed by the SEC. These
performance figures are calculated in the following manner:
A. Total Return--a Portfolio's average annual total return described in the
Prospectus is computed according to the following formula:
P (1+T)^n=ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made
at the beginning of the 1, 5, or 10 year periods at the end of
the 1, 5 and 10 year periods (or fractional portion thereof);
The average annual total returns for the Portfolios for the periods indicated
below were as follows:
Period
Five from
Years Inception*
Year-Ended Ended through
12/31/94 12/31/94 12/31/94
-------- -------- --------
Alger American Balanced
(formerly the Alger
American Fixed Income) -4.27% 4.73% 4.95%
Alger American Income &
Growth -8.28% 6.37% 6.56%
Alger American Small -4.38% 13.95% 19.46%
Capitalization
Alger American Growth 1.45% 15.34% 16.82%
Alger American MidCap
Growth -1.54% n/a 20.55%
* The Alger American Balanced Portfolio, the Alger American Income & Growth
Portfolio, the Alger American Small Capitalization Portfolio, the Alger
American Growth Portfolio and the Alger American MidCap Growth Portfolio
commenced operations on September 5, 1989, November 15, 1988, September 21,
1988, January 9, 1989 and May 3, 1993, respectively.
-15-
<PAGE>
B. Yield--a Portfolio's net annualized yield described in the Prospectus is
computed according to the following formula:
a-b
YIELD = 2[(----- + 1)^6 - 1]
cd
Where: a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the period
that were entitled to receive dividends
d = the maximum offering price per share on the last day of the
period
In General
Current performance information for the Portfolios may be obtained by calling
the Fund at the telephone number provided on the cover page of this Statement of
Additional Information. A Portfolio's quoted performance may not be indicative
of future performance. A Portfolio's performance will depend upon factors such
as the Portfolio's expenses and the types and maturities of instruments held by
the Portfolio. In addition, the actual return of a holder of a VA contract or a
VLI policy will be affected by charges imposed by the separate accounts of
Participating Insurance Companies or, in the case of Plan participants, by any
charges imposed under the Plan.
From time to time, advertisements or reports to shareholders may compare the
yield or performance of a Portfolio to that of other mutual funds with a similar
investment objective. The yield of the Alger Money Market Portfolio might be
compared with, for example, averages compiled by IBC/Donoghues's Money Fund
Report, a widely recognized, independent publication that monitors the
performance of money market mutual funds. The yield of the Alger Money Market
Portfolio might also be compared with the average yield reported by the Bank
Rate Monitor for money market deposit accounts offered by the 50 leading banks
and thrift institutions in the top five standard metropolitan areas. Similarly,
the performance of the other Portfolios, 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 indexes, such as the S&P 500, the Wilshire Small
Company Growth Index, the Lehman Government/Corporate Bond Index or the S&P
MidCap 400 Index. In addition, evaluations of the Portfolios published by
nationally recognized ranking services or articles regarding performance,
rankings and other Portfolio 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 such
Portfolio's performance for any future period.
-16-
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED)
June 30, 1995
- --------------------------------------------------------------------------------
Shares COMMON STOCKS--96.7% Value
------ -----
APPAREL--.7%
100 Gymboree Corp.*+ ...................................... $ 2,905
----------
COMMUNICATIONS--12.8%
200 ADC Telecommunications Inc.* .......................... 7,150
200 DSC Communications Corporation* ....................... 9,300
100 General Instrument Corp.* ............................. 3,838
200 Motorola Inc. ......................................... 13,425
300 Tekelec Inc.*+ ........................................ 7,275
100 Viacom Inc. Cl. B* .................................... 4,638
100 Vodafone Group ADR .................................... 3,787
----------
49,413
----------
COMPUTER RELATED &
BUSINESS EQUIPMENT--10.9%
200 Bay Networks Inc.* .................................... 8,275
150 Cisco Systems Inc.* ................................... 7,584
150 Dell Computer Corp.* .................................. 9,018
100 Hewlett-Packard Co. ................................... 7,450
100 International Business
Machines Corp ....................................... 9,600
----------
41,927
----------
COMPUTER SOFTWARE--11.2%
200 Electronics For Imaging Inc.* ......................... 10,450
400 Informix Corp.*+ ...................................... 10,150
100 Medic Computer Systems Inc.* .......................... 3,850
200 S3 Inc.* .............................................. 7,200
300 Semtech Corp.* ........................................ 5,025
200 Softkey International Inc.*+ .......................... 6,375
----------
43,050
----------
COMPUTER TECHNOLOGY--4.7%
400 C.P. Clare Corp.* ..................................... 8,000
100 Pinnacle Systems Inc.* ................................ 2,250
200 Silicon Graphics Corp.* ............................... 7,975
----------
18,225
----------
CONSUMER PRODUCTS--.7%
100 Nabisco Holdings Corp. Cl. A+ ......................... 2,700
----------
DEFENSE--3.0%
100 McDonnell Douglas Corp. ............................... 7,675
300 Tracor Inc.* .......................................... 4,088
----------
11,763
----------
FINANCIAL SERVICES--2.3%
100 Lehman Brothers Holdings, Inc. ........................ 2,188
150 Charles Schwab Corp. .................................. 6,505
----------
8,693
----------
HEALTHCARE--15.0%
200 American Oncology Resources Inc.* ..................... 5,550
100 Amgen Inc.* ........................................... 8,044
100 Forest Laboratories Inc.*+ ............................ 4,438
200 Healthsource, Inc.* ................................... 7,000
100 Lilly (Eli) Co. ....................................... 7,850
125 Merck & Co., Inc. ..................................... 6,125
100 Oxford Health Plans Inc.* ............................. 4,725
100 Pfizer Inc. ........................................... 9,237
100 St. Jude Medical Inc. ................................. 5,013
----------
57,982
----------
PAPER PACKAGING &
FOREST PRODUCTS--2.1%
100 Alco Standard Corp. ................................... 7,987
----------
RESTAURANTS & LODGING--1.1%
200 Cracker Barrel Old Country Stores, Inc. ............... 4,125
----------
RETAILING --2.7%
100 Circuit City Stores Inc. .............................. 3,163
200 Viking Office Products Inc.*+ ......................... 7,325
----------
10,488
----------
SEMI-CONDUCTORS--24.0%
100 Adaptec Inc.* ......................................... 3,700
200 Altera Corp.* ......................................... 8,650
300 Burr Brown Corp.* ..................................... 8,100
200 Integrated Device & Technology Inc.* .................. 9,250
200 Intel Corp. ........................................... 12,663
200 LSI Logic Corp.* ...................................... 7,825
100 Linear Technology Corporation ......................... 6,600
300 Micrel Inc.*+ ......................................... 6,900
800 Micro Linear Corporation* ............................. 13,000
200 Microchip Technology Inc.* ............................ 7,274
400 Orbit Semiconductor, Inc.* ............................ 8,500
----------
92,462
----------
SEMI-CONDUCTORS CAPITAL
EQUIPMENT--5.5%
100 Applied Materials Inc.* ............................... 8,663
300 FSI International Inc.* ............................... 6,993
300 Opal Inc.* ............................................ 5,550
----------
21,206
----------
Total Common Stocks
(Cost $329,528) ..................................... 372,926
----------
- --------------------------------------------------------------------------------
F-1
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
SCHEDULE OF INVESTMENTS (UNAUDITED) (Cont'd)
June 30, 1995
- --------------------------------------------------------------------------------
Shares PREFERRED STOCKS--3.1% Value
------ -----
COMMUNICATIONS
200 Nokia Corp., ADR
(Cost $9,600) ........................................ $ 11,925
----------
WARRANTS--.8%
SEMI-CONDUCTORS
100 Intel Corp. Warrants,*+
expires 3/14/98 (Cost $1,506) ....................... 3,025
----------
SHORT-TERM INVESTMENTS--10.9%
SECURITIES HELD
UNDER REPURCHASE
AGREEMENTS--
Securities Held Under Repurchase
Agreements, 6.125%-6.375%, 7/3/95,
With Bear, Stearns & Co. Inc., dtd
6/30/95, repurchase price
$42,099; collateralized by
U.S. Treasury Strips
(par value $85,000 due
8/15/01-2/15/11) .................................... $ 42,077
----------
Total Investments
(Cost $ 382,711)(a) .................................... 111.5% 429,953
Liabilities in Excess Of Other Assets .................... (11.5) (44,222)
----- ----------
Net Assets ............................................... 100.0% $ 385,731
===== ==========
- --------------------------------------------------------------------------------
* Non-income producing security.
+ Securities partially or fully on loan.
(a) At June 30, 1995, the net unrealized appreciation on investments, based on
cost for federal income tax purposes of $382,711, amounted to $47,242 which
consisted of aggregate gross unrealized appreciation of $48,970 and
aggregate gross unrealized depreciation of $1,728.
See Notes to Financial Statements.
F-2
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
FINANCIAL HIGHLIGHTS
For a share outstanding throughout the period
- --------------------------------------------------------------------------------
From January 25, 1995
(commencement of
operations)
to June 30, 1995(i)
-------------------
Net asset value, beginning of period ......................... $ 10.00
----------
Net investment (loss) ........................................ (0.04)
Net realized and unrealized gain (loss) on investments ...... 4.55
----------
Total from investment operations ......................... 4.51
----------
Net asset value, end of period ............................... $ 14.51
==========
Total Return ................................................. 45.10%
==========
Ratios and Supplemental Data:
Net assets, end of period (000's omitted) .................. $ 386
==========
Ratio of expenses excluding interest to average net assets . 1.50%
==========
Ratio of expenses including interest to average net assets . 1.94%
==========
Decrease reflected in above expense ratios
due to expense reimbursements ............................ 6.83%
==========
Ratio of net investment (loss) to average net assets ....... (0.91%)
==========
Portfolio Turnover Rate .................................... 123.0%
==========
Debt outstanding at end of period ............................ $ 0
==========
Average amount of debt outstanding during the period ......... $ 13,748
==========
Average daily number of shares outstanding during the period . 24,688
==========
Average amount of debt per share during the period ........... $ 0.56
==========
- --------------------------------------------------------------------------------
(i) Unaudited. Ratios have been annualized; total return has not been
annualized.
See Notes to Financial Statements.
F-3
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES (UNAUDITED)
June 30, 1995
- --------------------------------------------------------------------------------
Assets:
Investments in securities, at value
(identified cost*)--see accompanying
schedule of investments ..................................... $ 429,953
Receivable for investment securities sold ..................... 10,900
Interest and dividends receivable ............................. 160
Receivable from Investment Manager--Note 3(a) ................. 3,101
Other assets .................................................. 3
---------
Total Assets .............................................. 444,117
---------
Liabilities:
Payable for securities loaned ................................. 19,999
Payable for investment securities purchased ................... 34,401
Interest payable .............................................. 271
Accrued investment management fees ............................ 235
Accrued expenses .............................................. 3,480
---------
Total Liabilities ......................................... 58,386
---------
Net Assets ...................................................... $ 385,731
=========
Net Assets Consist of:
Paid-in capital ............................................... $ 273,414
Undistributed net investment income (accumulated loss) ........ (1,119)
Undistributed net realized gain ............................... 66,194
Net unrealized appreciation ................................... 47,242
---------
Net Assets ...................................................... $ 385,731
=========
Shares of beneficial interest outstanding--Note 6 ............... 26,591
=========
Net Asset Value Per Share ....................................... $ 14.51
=========
*Identified cost ................................................ $ 382,711
=========
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
F-4
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
STATEMENT OF OPERATIONS (UNAUDITED)
For the period from January 25, 1995 (commencement of operations)
through June 30, 1995
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Income:
Interest .................................................... $ 531
Dividends ................................................... 740
---------
Total Income .............................................. 1,271
---------
Expenses:
Management fees -- Note 3(a) ................................ 1,047
Interest expense ............................................ 543
Custodian fees .............................................. 3,616
Transfer Agent Fees ......................................... 1,075
Professional fees ........................................... 1,665
Trustees' fees .............................................. 1,721
Miscellaneous ............................................... 1,131
---------
10,798
Less, expense reimbursement -- Note 3(a) .................... (8,408)
---------
Total Expenses ............................................ 2,390
---------
NET INVESTMENT (LOSS) ........................................... (1,119)
---------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments ............................ 66,194
Net change in unrealized appreciation on investments ........ 47,242
---------
Net realized and unrealized gain on investments ........... 113,436
---------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ............ $ 112,317
=========
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
F-5
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
STATEMENT OF CASH FLOWS (UNAUDITED)
For the period from January 25, 1995
(commencement of operations) through June 30, 1995
- --------------------------------------------------------------------------------
Increase (decrease) in cash Cash flows from operating activities:
Interest received ............................................... $ 515
Dividends received .............................................. 595
Operating expenses paid ......................................... (1,506)
Purchase of short-term securities, net .......................... (42,077)
Purchase of portfolio securities ................................ (591,092)
Proceeds from disposition of portfolio securities .............. 340,154
Other ........................................................... (2)
---------
Net cash used for operating activities ...................... (293,413)
---------
Cash flows from financing activities:
Proceeds from shares sold ....................................... 273,414
Increase in cash collateral received on securities loaned ....... 19,999
---------
Net cash provided by financing activities ................... 293,413
---------
Net increase in cash .............................................. 0
Cash--beginning of period ......................................... 0
---------
Cash--end of period ............................................... $ 0
=========
Reconciliation of net increase in net assets to net
cash (used for) operating activities:
Net increase in net assets resulting from operations .............. $ 112,317
Increase in investments ........................................... (316,518)
Increase in receivable for investments sold ....................... (10,900)
Increase in interest and dividends receivable ..................... (161)
Increase in payable for investments purchased ..................... 34,401
Net realized gain ................................................. (66,194)
Net increase in unrealized appreciation ........................... (47,242)
Increase in accrued expenses ...................................... 3,987
Net increase in other assets ...................................... (3,103)
---------
Net cash used for operating activities ............................ $(293,413)
=========
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
F-6
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
For the period from January 25, 1995
(commencement of operations) through June 30, 1995
- --------------------------------------------------------------------------------
Net investment (loss) ........................................... $ (1,119)
Net realized gain on investments ................................ 66,194
Net change in unrealized appreciation on investments ............ 47,242
---------
Net increase in net assets resulting from operations ............ 112,317
Net increase from shares of beneficial
interest transactions-- Note 6 ................................ 273,414
---------
Total increase .............................................. 385,731
Net Assets
Beginning of period ........................................... --
---------
End of period ................................................. $ 385,731
=========
Undistributed net investment income (accumulated loss) ........ $ (1,119)
=========
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
F-7
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
June 30, 1995
- --------------------------------------------------------------------------------
NOTE 1 -- General:
The Alger American Fund (the "Fund") is a diversified, open-end registered
investment company organized as an unincorporated business trust under the laws
of the Commonwealth of Massachusetts. The Fund operates as a series company
currently issuing six classes of shares of beneficial interest: American Growth
Portfolio, American Small Capitalization Portfolio, American Income and Growth
Portfolio, American Balanced Portfolio, American MidCap Growth Portfolio and
American Leveraged AllCap Portfolio (collectively "the Portfolios"). Shares of
the Portfolios are available and are being marketed exclusively as a pooled
funding vehicle for life insurance companies writing all types of variable
annuity contracts and variable life insurance policies. These financial
statements include only the American Leveraged AllCap Portfolio (the
"Portfolio").
NOTE 2--Significant Accounting Policies:
(a) Investment Valuation: Investments of the Portfolio are valued at 4:00 p.m.
Eastern time on each day the New York Stock Exchange is open. Listed and
unlisted securities for which such information is regularly reported are valued
at the last reported sales price or, in the absence of reported sales, at the
mean between the bid and the 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.
Securities for which market quotations are not readily available are valued
according to procedures established by the Board of Trustees to determine fair
value in good faith.
Securities having a remaining maturity of sixty days or less are valued at
amortized cost which approximates market value.
(b) Security Transactions and Investment Income: Security transactions are
recorded on a trade date basis. Resulting receivables and payables are carried
at amounts which approximate fair value. Realized gains and losses from security
transactions are recorded on the identified cost basis. Dividend income is
recognized on the ex-dividend date and interest income is recognized on the
accrual basis.
(c) Repurchase Agreements: The Portfolio enters into re-purchase agreements with
approved institutions, primarily U.S. Government securities dealers, and are
collateralized by U.S. Government securities. Such collateral is verified by the
investment manager as being either received and held in physical possession by
the custodian or as having been received by such custodian in book-entry form
through the Federal Reserve book-entry system. The investment manager monitors
the value of the collateral at the time the repurchase agreement is entered into
and on a daily basis during the term of the agreement to ensure that its value
equals or exceeds the agreed-upon repurchase price to be repaid to the
Portfolio. Additional collateral is obtained when necessary.
(d) Lending of Portfolio Securities: The Portfolio lends its securities to
financial institutions, including an affiliate of the custodian, provided that
the market value of securities loaned will not at any time exceed one-third of
th Portfolio's total assets. In order to protect against the risk of failure by
the borrower to return the securities loaned or any delay in the delivery of
such securities, the investment manager insures that the loan is collateralized
by cash, letters of credit or U.S. Government securities that are maintained at
all times in an amount equal to at least 100 percent of the current market value
of the loaned securities. At June 30, 1995, the value of securities loaned and
cash collateral received thereon were $19,389 and $19,999, respectively.
The Portfolio invests the cash collateral and rebates a portion of the interest
earned to the borrower of the securities. During the period ended June 30, 1995,
the Portfolio received $71 of stock loan fees, net of rebates paid. Such net
fees are included in interest income in the accompanying Statement of
Operations.
F-8
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED) (Cont'd)
June 30, 1995
- --------------------------------------------------------------------------------
(e) Dividends to Shareholders: Dividends payable to shareholders are recorded by
the Portfolio on the ex-dividend date.
Dividends from net investment income of the Portfolio are declared and paid
annually.
Dividends from net realized gains, offset by any loss carry forward, are
declared and paid annually after the end of the fiscal year in which earned.
(f) Federal Income Taxes: It is the Portfolio's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of the taxable income to its shareholders.
Therefore, no federal income tax provision is required. The Portfolio is treated
as a separate entity for the purpose of determining such compliance.
(g) Expenses: The Fund accounts separately for the assets, liabilities and
operations of each of the Portfolios. Expenses directly attributable to the
Portfolio are charged to the Portfolio's operations; expenses which are
applicable to all Portfolios are allocated among them.
NOTE 3--Investment Management Fees and Other Transactions with Affiliates:
(a) Investment Management Fees: Fees incurred by the Portfolio, pursuant to the
provisions of the Investment Management Agreement (the "Agreement") with Fred
Alger Management, Inc. ("Alger Management"), are payable monthly and computed
based on the average daily net assets of the Portfolio at the annual rate of
.85%.
The Agreement further provides that if in any fiscal year the aggregate
expenses, excluding interest, taxes, brokerage commissions, and extraordinary
expenses, of the Portfolio exceed 1.50% of the average daily net assets of the
Portfolio, Alger Management will reimburse the Portfolio for the excess
expenses. For the period ended June 30, 1995, Alger Management reimbursed the
Portfolio $8,408.
(b) Brokerage Commissions: During the six months ended June 30, 1995, the
Portfolio paid Fred Alger & Company, Incorporated ("Alger Inc.") $495 in
connection with securities transactions.
(c) Transfer Agency Fees: The Portfolio has entered into a transfer agency
agreement with Alger Shareholder Services, Inc. ("Services"), whereby Services
will act as transfer agent for the Portfolio for a fee of $2,500 per year plus
out-of-pocket expenses.
(d) Other Transactions With Affiliates: Certain trustees and officers of the
Portfolio are directors and officers of Alger Management, Alger Inc. and
Services. At June 30, 1995, Alger Inc. and affiliates owned 24,501 shares of the
Portfolio.
NOTE 4--Securities Transactions:
During the period ended June 30, 1995, purchases and sales of securities, other
than short-term securities, were $625,493 and $351,054, respectively.
NOTE 5--Short-Term Borrowings:
The Portfolio has a line of credit with a bank whereby it may borrow up to 1/3
of its assets, as defined, up to a maximum of $25,000,000. Such borrowings have
a variable interest rate and are payable on demand. For the period ended June
30, 1995, the Portfolio had borrowings which averaged $13,748 at a weighted
average interest rate of 9.00%.
NOTE 6--Share Capital:
The Portfolio has an unlimited number of authorized shares of beneficial
interest of $.001 par value.
During the period ended June 30, 1995, transactions of shares of beneficial
interest were as follow:
Shares Amount
------ -------
Shares sold................... 26,591 $ 273,414
Shares redeemed............... -- --
------ ---------
Net increase................ 26,591 $ 273,414
====== =========
F-9
<PAGE>
January 26, 1995
FELLOW SHAREHOLDERS:
1994 IN REVIEW
The end of the Cold War marked the beginning of a global economic boom. The
number of consumers in free-market economies quadrupled from one to four billion
following the collapse of the Communist regimes in Europe and the adoption of
macroeconomic reforms in many emerging markets. The enactment of the North
American Free Trade Agreement (NAFTA) and now the General Agreement on Tariffs
and Trade (GATT) will promote global economic growth in the years ahead through
the continuing expansion in world trade.
In 1994 the global economic expansion gained momentum as the economies in Europe
and Japan emerged from their lengthy recessions. The accelerating pace of
economic growth pushed up consumption. Companies in the industrialized world
increased production to meet growing demand in both domestic and overseas
markets. Massive restructurings and huge investments in new technologies, as
well as the decline of the dollar, put U.S. manufacturing at the forefront in
terms of both price and quality. The steady growth in U.S. exports in each of
the last five years demonstrates the competitive vibrancy of American business.
While rising consumption will continue to dominate the world economy for the
rest of the decade, we will see a pullback in 1995 as a consequence of the
devaluation of the Mexican peso. The loan guarantee program that the U.S.
government is preparing to assist Mexico should help restore investor confidence
that Mexico's near-term financial obligations will be met and the country's
liquidity problem should ease. For the intermediate term, however, the free fall
in the peso has been a severe blow to the Mexican economy. Domestic consumption
will drop, reducing Mexico's demand for imported goods in 1995. However, if the
economic program outlined by the Mexican government succeeds in preventing the
devaluation from turning into a destructive hyperinflationary wage-price spiral,
the Mexican economy will be able to recover from this setback.
The peso crisis has caused investors to rethink their assumptions about all
countries with large current deficits. It has produced a heavy wave of
indiscriminate selling in many emerging markets and especially those in Latin
America. Even the currencies of Canada, Italy, Spain and Sweden have been
subject to selling pressures in recent weeks. The downward pressures should ease
as confidence in Mexico's ability to meet its obligations is restored. Still, we
expect investors will reduce the amount of capital they are willing to commit to
many countries with high-risk profiles. Countries which rely on foreign capital
to finance capital investments and consumption could be compelled to reduce
their demand for imports by slowing domestic economic activity. This
retrenchment will likely reduce the expansion of world trade in 1995. Since a
growing share of U.S. exports is directed to developing countries, the pace of
U.S. exports should slow. Even though demand in Europe and Japan for
American-made goods and services is likely to expand in 1995 and make up for the
slowdown in other markets, the outlook for U.S. exports is not as favorable as
we had originally anticipated.
INFLATION WILL REMAIN MODERATE IN THE DECADE AHEAD. . .
In a free market economy, higher prices are the normal mechanism to attract the
funds needed to expand production. The price increases for
F-10
<PAGE>
raw commodities in 1994, as measured by the raw industrial spot price index,
reflected a rise in real demand. Since these price increases will gradually work
their way through the chain of production, the rate of inflation for finished
goods could show a mild increase in 1995. However, labor costs remain controlled
despite sizable gains in employment. Employers lengthened the workweek, added to
overtime, and made greater use of temporary workers in an effort to control
labor costs. Price stress on the U.S. economy will ease in 1995 as demand
moderates. Not only will growth in exports slow, but there are also signs that
the series of rate hikes engineered by the Federal Reserve in 1994 are beginning
to restrain consumer spending.
Through the balance of this decade, inflation will be far less corrosive and
entirely unlike the inflation that plagued the 1970's. The U.S. has developed
into a service-based economy. Price trends in the service sector now have a
significant impact on the overall cost of living. Service sector inflation is
decelerating. In fact, the rate of inflation in the service sector in 1994 was
at its lowest level since 1965. Also, consumers and businesses alike have become
extremely price-sensitive. The competition at the finished goods level is
intense, and it remains difficult to pass along higher costs in the form of
higher prices.
Since expectations determine individual behavior and often become
self-fulfilling, the importance of psychology should not be underestimated. The
breakdown of Bretton Woods in 1971, followed by the "dirty float" beginning in
January 1973, produced a dramatic change in psychology and attitudes about
inflation. Commodity markets, which respond quickly to extreme changes in
psychology, viewed the break in the linkage between the dollar and gold as a
highly inflationary event and reacted immediately. For example, the price of
margarine nearly tripled even though production and, therefore, supplies,
actually increased. We have called this "psychological inflation."
The psychological inflation in the 1970's was not a response to a vibrant
growing economy. People came to expect prices to rise and they acted
accordingly. Businesses built up inventories in anticipation of the next round
of price increases. Inflation-induced profits inflated corporate earnings, so
managers did not focus on maximizing operations. Consumers bought early to avoid
price hikes. The growing inclusion of cost-of-living-adjustments (COLA's) in
union contracts is a prime example of how people adjusted to the specter of
rising prices.
This inflation psychology and the behavior pattern it produced was firmly
entrenched by the end of the 1970's and it took almost a full decade to
eliminate. Beginning in 1979, the Federal Reserve, under Chairman Paul Volcker,
began the task of eradicating inflation. The severe economic downturns in the
early 1980's slowed inflation, but it took several more years of moderate
inflation before attitudes began to change and the psychology shifted from one
characterized by acting on the expectation of higher prices to one in which
consumers and businesses expect price stability.
Attempts already underway at the local and Federal government level to rein in
government spending will reinforce this shift in psychology. The Republican
victory in the November election increases the likelihood that efforts to
curtail government spending will gain momentum. By reversing the trend toward
more entitlement programs, the Republicans could cut spending and carry out
their promise of balancing the Federal government budget. Limiting growth in
spending to 3 percent a year, for example, could bring the budget in line by
2004. We do not believe that the size of the government deficit
F-11
<PAGE>
has any meaningful effect on the real economy, but a balanced budget would send
a decidedly positive message to the financial markets both here and abroad. Of
greater importance, in our view, would be the radical change in thinking that
this "revolution" would engender. Instead of encouraging Americans to ask for
more from their government, Americans would learn to expect less and take more
responsibility for their own actions. The change in expectations, we believe,
would alter the way people behave.
THE STOCK MARKET SHOULD PERFORM WELL IN 1995. . .
The psychological inflation of the 1970's had a profoundly negative impact on
financial markets. In the 1970's, illusory inventory profits distorted reported
earnings. The stock market saw the deteriorating quality of earnings and price
earnings ratios eroded. Therefore, despite the rise in reported earnings, the
stock market did not advance during the decade. The fixed-income markets only
adjusted with a long lag to rising inflation and produced years of low total
returns. The disinflation and gradual eradication of the inflation-psychology in
the 1980's was positive for both stocks and bonds. For the bond market,
investors became more confident that future returns would not be eaten up by
inflation; nominal and real interest rates declined. For the stock market, the
quality of earnings improved and price earnings ratios increased.
We anticipate a modest rally in the bond market in 1995 as inflation worries
recede. Although price earnings ratios have become progressively less sensitive
to interest rates, a stronger bond market would still be favorable for the stock
market. Moreover, our study of the ratio between the price-earnings reciprocal
and long-term interest rates suggests that the stock market is undervalued. The
ratio between the market multiple on estimated 1995 earnings and long-term
interest rates currently is 0.80, which is well below the 0.67 average for the
past 7 years and, in fact, closer to levels last seen in 1989. Furthermore, we
think it is likely that some of the capital which would have otherwise been
invested in overseas markets will remain in the U.S. Companies whose earnings
depend on a rapidly expanding economy may not meet projected earnings gains if
the economic growth moderates as we expect. On the other hand, growth stocks
which can produce rising earnings even in a slowing economy should continue to
report earnings gains in line with or even ahead of expectations. According to
our analysis which ranks companies by the growth and predictability of earnings,
financial strength and market position, quality growth companies command only a
small premium to the market. We would, therefore, expect the premium paid for
growth stocks to expand as the year progresses and growth stocks should
outperform the market as a whole.
PORTFOLIO MATTERS
THE ALGER AMERICAN GROWTH PORTFOLIO
The Alger American Growth Portfolio continued to do well in relation to the S&P
500. While it out-performed the S&P 500 by only a modest degree, 1.45% to 1.32%,
we view this as a moral victory in a very difficult market for growth stocks. As
was the case during the past several years, larger capitalization stocks fared
better than smaller capitalization stocks.
THE ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
For the second year in a row the Alger American Small Capitalization Portfolio
under-performed the Wilshire Small Company Growth Index. Our portfolio was down
4.38% versus an increase of .55% for the Wilshire. Most of this
under-performance occurred in the first two quarters of the year which was very
much an
F-12
<PAGE>
extension of the severe contradiction of growth stock multiples which we saw
last year. While it is true that the index to which we are compared includes
growth stocks, our growth stocks are faster growing and as a result are more
volatile. This year, however, we expect a subsequent rebound in results.
THE AMERICAN INCOME AND GROWTH PORTFOLIO
The Alger American Income and Growth Portfolio declined 8.28% versus an increase
of 1.32% for the S&P 500. This was the most disappointing of all our Portfolios.
At midyear, we realized that our strategy, which included a portfolio of
electric utilities, was not effective. We changed directions, investing the
portfolio in more industrial type companies. While this helped somewhat, it was
not sufficient to defray our losses. We are extremely unhappy with the results
of this Portfolio and will continue to look to improve performance.
THE ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
The Alger American MidCap Growth Portfolio did very well against its comparative
index, declining 1.54% versus a decline of 3.58% for the S&P MidCap 400 Index.
We view this performance as very good given the difficult nature of the market
and the volatility of midcap stocks in general. This Portfolio, like many of our
Portfolios, was down significantly more at mid-year and we believe we have
achieved a good result by bringing it close to break-even at year end.
THE ALGER AMERICAN BALANCED PORTFOLIO
The Alger American Balanced Portfolio was down 4.27%, below both the S&P 500 and
the Lehman Government/Corporate Bond Index which were respectively up 1.32% and
down 3.51%. Generally, this would have to be considered a disappointing result
and probably derived from the equity portion of investments in growth stocks
which performed far worse than the stock market in general.
Again, 1994 was a difficult year for growth stock investing and we expect better
results in 1995.
Respectfully submitted,
David D. Alger
President
Fred Alger Management, Inc.
F-13
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
Alger American Growth Portfolio:
Portfolio Review.................................................................... 6
Schedule of Investments............................................................. 7-8
Financial Highlights................................................................ 9
Alger American Small Capitalization Portfolio:
Portfolio Review.................................................................... 10
Schedule of Investments............................................................. 11-12
Financial Highlights................................................................ 13
Alger American Income and Growth Portfolio:
Portfolio Review.................................................................... 14
Schedule of Investments............................................................. 15-16
Financial Highlights................................................................ 17
Alger American Balanced Portfolio:
Portfolio Review.................................................................... 18
Schedule of Investments............................................................. 19-20
Financial Highlights................................................................ 21
Alger American MidCap Growth Portfolio:
Portfolio Review.................................................................... 22
Schedule of Investments............................................................. 23-24
Financial Highlights................................................................ 25
Statements of Assets and Liabilities..................................................... 26
Statements of Operations................................................................. 27
Statements of Cash Flows................................................................. 28
Statements of Changes in Net Assets...................................................... 29-30
Notes to Financial Statements............................................................ 31-34
Report of Independent Public Accountants................................................. 35
</TABLE>
F-14
<PAGE>
<TABLE>
<S> <C>
ALGER AMERICAN PORTFOLIO REVIEW
GROWTH (Unaudited)
PORTFOLIO
</TABLE>
ALGER AMERICAN GROWTH PORTFOLIO
VS. S&P 500 INDEX
<TABLE>
<CAPTION>
ALGER AMERI-
MEASUREMENT PERIOD CAN GROWTH
(FISCAL YEAR COVERED) PORTFOLIO S&P 500
<S> <C> <C>
09-JAN-89 10.000 10.000
31-DEC-89 12.410 13.012
31-DEC-90 12.923 12.598
31-DEC-91 18.143 16.436
31-DEC-92 20.389 17.684
31-DEC-93 24.971 19.459
31-DEC-94 25.330 19.717
</TABLE>
The chart above shows the growth in value of hypothetical $10,000 investments
made in Alger American Growth Portfolio and the S&P 500 on January 9, 1989.
Figures for the Portfolio and the S&P 500, an unmanaged index of common stocks,
include reinvestment of dividends.
AVERAGE ANNUAL TOTAL RETURNS THROUGH 12/31/94*
- ---------------------------------------------------------
<TABLE>
<CAPTION>
1 5 SINCE
YEAR YEARS INCEPTION
<S> <C> <C> <C>
AMERICAN GROWTH 1.45% 15.34% 16.82%
S&P 500 1.32% 8.70% 12.03%
</TABLE>
* Performance figures do not reflect deduction of insurance charges against
assets or annuities. If these charges were deducted, the total return figures
would be lower. Past performance does not guarantee future results.
INVESTMENT OBJECTIVE
- ---------------------------------------------------------
Seeks long-term capital appreciation by investing in a diversified, actively
managed portfolio of equity securities, primarily of companies with total market
capitalization of $1 billion or greater.
TOP FIVE INDUSTRY GROUPS AS OF 12/31/94
- ---------------------------------------------------------
1. Communications
2. Computer Related & Business Equipment
3. Health Care
4. Automotive
5. Semi-Conductors
TOP TEN HOLDINGS AS OF 12/31/94
- ---------------------------------------------------------
1. Chrysler Corporation
2. Xerox Corporation
3. Motorola Inc.
4. Int'l Business Machines Corp.
5. LSI Logic Corp.
6. Charles Schwab Corp.
7. Telephone and Data Systems, Inc.
8. Century Telephone Enterprises, Inc.
9. DSC Communications Corporation
10. Dow Chemical Company
PORTFOLIO INFORMATION
- ---------------------------------------------------------
<TABLE>
<S> <C>
Total Net Assets as of
12/31/94: $150.4 million
Inception Date: 1/9/89
Distribution Schedule: Annually
Security Weightings
as of 12/31/94: Common Stock 89.1%
Preferred Stock 1.7%
Cash Equivalents 9.2%
</TABLE>
F-15
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ------- ------------
<S> <C> <C>
COMMON STOCKS -- 89.1%
AUTOMOTIVE -- 7.5%
97,500 Chrysler Corporation.............. $ 4,777,500
81,400 Cooper Tire & Rubber Co.+......... 1,923,075
34,000 Harley-Davidson Inc. ............. 952,000
98,500 Varity Corp.*..................... 3,570,625
------------
11,223,200
------------
CHEMICALS -- 2.4%
54,700 Dow Chemical Company.............. 3,678,575
------------
COMMUNICATIONS -- 20.3%
29,500 ADC Telecommunications Inc.*...... 1,475,000
97,000 AirTouch Communications Inc.*..... 2,825,125
60,500 Andrew Corp.*..................... 3,161,125
131,600 Century Telephone Enterprises,
Inc. ........................... 3,882,200
103,000 DSC Communications Corporation*... 3,695,125
34,000 ECI Telecom Ltd. ................. 463,250
80,000 Motorola Inc. .................... 4,630,000
84,700 Telephone and Data Systems,
Inc. ........................... 3,906,788
59,100 Tellabs, Inc.*.................... 3,294,825
96,000 Vodafone Group ADR................ 3,228,000
------------
30,561,438
------------
COMPUTER RELATED &
BUSINESS EQUIPMENT -- 15.7%
64,500 Bay Networks Inc.*................ 1,902,750
48,000 Cabletron Systems, Inc.*.......... 2,232,000
45,000 Chipcom Corporation*+............. 2,250,000
13,600 Cisco Systems Inc.*............... 477,700
84,000 Compaq Computer Corporation*...... 3,318,000
60,000 International Business Machines
Corp. .......................... 4,410,000
39,700 Seagate Technology Corp.*......... 952,800
65,000 3 Com Corp.*...................... 3,351,595
48,100 Xerox Corporation................. 4,761,900
------------
23,656,745
------------
COMPUTER SOFTWARE -- 1.8%
50,000 Informix Corp.*................... 1,606,250
18,000 Microsoft Corp.*.................. 1,100,250
------------
2,706,500
------------
COMPUTER TECHNOLOGY -- 2.1%
100,000 Silicon Graphics Inc.*............ 3,100,000
------------
DEFENSE -- 3.1%
24,000 Lockheed Corp. ................... 1,743,000
78,700 Loral Corp. ...................... 2,980,763
------------
4,723,763
------------
<CAPTION>
SHARES VALUE
- ------- ------------
<S> <C> <C>
ENERGY & ENERGY SERVICES -- 2.1%
10,000 Coflexip ADS...................... $ 232,500
100,000 Tosco Corp. ...................... 2,912,500
------------
3,145,000
------------
FINANCIAL SERVICES -- 4.3%
70,000 Merrill Lynch & Co., Inc. ........ 2,502,500
113,000 Charles Schwab Corp.+............. 3,940,875
------------
6,443,375
------------
HEALTH CARE -- 11.3%
60,000 Amgen Inc.*....................... 3,540,000
19,000 Cardinal Health Inc.+............. 881,125
61,860 Columbia/HCA Healthcare Corp. .... 2,257,890
50,000 Medtronic Inc. ................... 2,781,250
49,000 Merck & Co., Inc. ................ 1,868,125
21,700 Pfizer Inc. ...................... 1,676,325
67,000 United Healthcare Corp.+ ......... 3,023,375
13,600 Warner-Lambert Company............ 1,047,200
------------
17,075,290
------------
LEISURE & ENTERTAINMENT -- 2.1%
40,000 Carnival Corporation Class A...... 850,000
96,800 Circus Circus Enterprises Inc.*... 2,250,600
------------
3,100,600
------------
MANUFACTURING -- 1.5%
14,000 Thermo Electron Corp.*............ 628,250
32,000 Whirlpool Corp. .................. 1,608,000
------------
2,236,250
------------
PAPER PACKAGING &
FOREST PRODUCTS -- 3.5%
25,000 Alco Standard Corp.+.............. 1,568,750
48,400 International Paper Co.+.......... 3,648,150
------------
5,216,900
------------
RESTAURANTS & LODGING -- 2.1%
170,000 Cracker Barrel Old Country Stores,
Inc. ........................... 3,145,000
------------
</TABLE>
F-16
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS (CONT'D)
DECEMBER 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- ------- ------------
<S> <C> <C>
COMMON STOCKS (CONT'D)
RETAILING -- 4.1%
30,000 Nordstrom Inc.+................... $ 1,260,000
105,000 OfficeMax Inc.*................... 2,782,500
27,500 Tandy Corporation................. 1,378,438
23,000 Toys 'R' Us, Inc.*................ 701,500
------------
6,122,438
------------
SEMI-CONDUCTORS -- 5.2%
65,000 Adaptec Inc.*..................... 1,535,625
31,000 Intel Corp. ...................... 1,980,125
103,000 LSI Logic Corp.*.................. 4,158,625
6,000 SGS-Thomson Microelectronics*..... 136,500
------------
7,810,875
------------
TOTAL COMMON STOCKS
(COST $123,530,257)............. 133,945,949
------------
PREFERRED STOCK -- 1.7%
COMMUNICATIONS
35,000 Nokia Corporation, ADR+
(COST $2,315,397)............... 2,625,000
------------
</TABLE>
<TABLE>
<CAPTION>
WARRANTS
- -------
<S> <C> <C>
WARRANTS
1 Windmere Corp. Warrants, expires
1/19/98 (COST $1)............... 0
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ------- ------------
<S> <C> <C>
SHORT-TERM
INVESTMENTS -- 21.8%
SHORT-TERM CORPORATE
NOTES -- 12.6%
$4,000,000 Cargill, Inc.,
5.55%, 1/3/95................... $ 3,998,767
6,000,000 Country Wide Funding Corp.,
5.95%, 1/5/95................... 5,996,033
4,000,000 GTE Northwest Inc.,
5.88%, 1/13/95.................. 3,992,160
5,000,000 Student Loan Corp.,
6.00%, 1/3/95................... 4,998,332
------------
TOTAL SHORT-TERM CORPORATE NOTES
(COST $18,985,292).............. 18,985,292
------------
SECURITIES HELD UNDER
REPURCHASE
AGREEMENTS -- 9.2%
Securities Held Under Repurchase
Agreements, 5.60% - 6.125%,
1/3/95, with Bear, Stearns & Co.
Inc., dtd 12/30/94, repurchase
price $13,740,354;
collateralized by U.S. Treasury
Notes (par
value $13,350,000,
8.875% - 9.25%, due
1/15/96 - 5/15/99).............. 13,731,285
------------
TOTAL SHORT-TERM INVESTMENTS
(COST $32,716,577).............. 32,716,577
------------
TOTAL INVESTMENTS
(COST $158,562,232)(A)............. 112.6% 169,287,526
Liabilities in Excess of Other
Assets............................. (12.6) (18,897,050)
---- -----------
NET ASSETS........................... 100.0% $150,390,476
---- -----------
---- -----------
</TABLE>
- --------------------------------------------------------------------------------
* Non-income producing security.
+ Securities partially or fully on loan.
(a) At December 31, 1994, the net unrealized appreciation on investments, based
on cost for federal income tax purposes of $158,834,040, amounted to
$10,453,486 which consisted of aggregate gross unrealized appreciation of
$14,206,439 and aggregate gross unrealized depreciation of $3,752,953.
See Notes to Financial Statements.
F-17
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------
1994 1993 1992 1991 1990
-------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year................ $ 24.67 $ 20.17 $ 18.00 $ 12.86 $12.41
-------- ------- ------- ------- ------
Net investment income............................. 0.07 0.03 0.03 0.08(i) 0.07
Net realized and unrealized gain on investments... 0.15 4.50 2.19 5.11 .44
-------- ------- ------- ------- ------
Total from investment operations........ 0.22 4.53 2.22 5.19 .51
-------- ------- ------- ------- ------
Dividends from net investment income.............. (0.03) (0.03) (0.03) (0.05) (0.06)
Distributions from net realized gains............. (1.73) -- (0.02) -- --
-------- ------- ------- ------- ------
Total Distributions..................... (1.76) (0.03) (0.05) (0.05) (0.06)
-------- ------- ------- ------- ------
Net asset value, end of year...................... $ 23.13 $ 24.67 $ 20.17 $ 18.00 $12.86
======== ======= ======= ======= ======
Total Return...................................... 1.45% 22.47% 12.38% 40.39% 4.14%
======== ======= ======= ======= ======
Ratios and Supplemental Data:
Net assets, end of year (000's omitted)......... $150,390 $74,878 $30,316 $10,094 $1,228
======== ======= ======= ======= ======
Ratio of expenses to average net assets......... .86% .97% .99% 1.29% 1.50%
======== ======= ======= ======= ======
Decrease reflected in above expense ratio due to
expense reimbursements....................... -- -- -- -- 2.31%
======== ======= ======= ======= ======
Ratio of net investment income to average net
assets....................................... 0.48% 0.25% 0.33% 0.52% 1.69%
======== ======= ======= ======= ======
Portfolio Turnover Rate......................... 111.76% 112.64% 63.91% 58.95% 86.77%
======== ======= ======= ======= ======
</TABLE>
- --------------------------------------------------------------------------------
(i) Amount was computed based on average shares outstanding during the period.
See Notes to Financial Statements.
F-18
<PAGE>
<TABLE>
<S> <C>
ALGER AMERICAN PORTFOLIO REVIEW
SMALL CAPITALIZATION (Unaudited)
PORTFOLIO
</TABLE>
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
VS. WILSHIRE SMALL COMPANY GROWTH INDEX
<TABLE>
<CAPTION>
ALGER AMERI-
CAN SMALL WILSHIRE
CAPITALIZA- SMALL COM-
MEASUREMENT PERIOD TION PANY GROWTH
(FISCAL YEAR COVERED) PORTFOLIO INDEX
<S> <C> <C>
21-SEP-88 10.000 10.000
31-DEC-88 9.665 10.062
31-DEC-89 15.896 11.964
31-DEC-90 17.281 9.689
31-DEC-91 27.225 15.192
31-DEC-92 28.191 17.197
31-DEC-93 31.935 20.289
31-DEC-94 30.541 20.401
</TABLE>
The chart above shows the growth in value of hypothetical $10,000 investments
made in Alger American Small Capitalization Portfolio and the Wilshire Small
Company Growth Index on September 21, 1988. Figures for the Portfolio and the
Wilshire Small Company Growth Index, an unmanaged index of common stocks,
include reinvestment of dividends.
AVERAGE ANNUAL TOTAL RETURNS THROUGH 12/31/94*
- ---------------------------------------------------------
<TABLE>
<CAPTION>
5 SINCE
1 YEAR YEARS INCEPTION
<S> <C> <C> <C>
AMERICAN SMALL
CAPITALIZATION -4.38% 13.95% 19.46%
Wilshire Small Co.
Growth Index 0.55% 11.26% 12.02%
</TABLE>
* Performance figures do not reflect deduction of insurance charges against
assets or annuities. If these charges were deducted, the total return figures
would be lower. Past performance does not guarantee future results.
INVESTMENT OBJECTIVE
- ---------------------------------------------------------
Seeks long-term capital appreciation by investing in a diversified, actively
managed portfolio of equity securities, primarily of companies with total market
capitalization of less than $1 billion.
TOP FIVE INDUSTRY GROUPS AS OF 12/31/94
- ---------------------------------------------------------
1. Semi-Conductors
2. Communications
3. Retailing
4. Computer Related & Business Equipment
5. Restaurants & Lodging
TOP TEN HOLDINGS AS OF 12/31/94
- ---------------------------------------------------------
1. Altera Corp.
2. Maxim Integrated Products, Inc.
3. Adaptec, Inc.
4. Informix Corp.
5. Tellabs, Inc.
6. Linear Technology Corp.
7. Callaway Golf Co.
8. Landry's Seafood Restaurants, Inc.
9. Lone Star Steakhouse and Saloon, Inc.
10. Dollar General Corp.
PORTFOLIO INFORMATION
- ---------------------------------------------------------
<TABLE>
<S> <C>
Total Net Assets as of
12/31/94: $397.0 million
Inception Date: 9/21/88
Distribution Schedule: Annually
Security Weightings
as of 12/31/94: Common Stock 88.6%
Cash Equivalents 11.4%
</TABLE>
F-19
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- --------- ------------
<S> <C> <C>
COMMON STOCKS -- 88.6%
APPAREL -- 1.2%
68,100 AnnTaylor Stores Corporation*... $ 2,340,938
44,500 Mens Wearhouse Inc.*............ 1,001,250
29,300 Tommy Hilfiger Corporation*+.... 1,322,163
------------
4,664,351
------------
BUILDING & CONSTRUCTION -- .2%
206,000 National Home Centers Inc.*..... 643,750
------------
COMMUNICATIONS -- 13.2%
48,700 ADC Telecommunications Inc.*.... 2,435,000
233,700 Century Telephone Enterprises,
Inc. ........................... 6,894,150
155,000 DSC Communications
Corporation*.................... 5,560,625
115,800 Glenayre Technologies Inc.*+.... 6,687,450
171,500 Mobile Telecommunications
Technologies Corp.*+............ 3,344,250
251,400 Network Equipment Technologies
Inc.*+.......................... 6,033,600
266,800 QUALCOMM Inc.*+................. 6,403,200
143,000 Telephone and Data Systems,
Inc............................. 6,595,875
152,700 Tellabs, Inc.*+................. 8,513,025
------------
52,467,175
------------
COMPUTER RELATED &
BUSINESS EQUIPMENT -- 9.1%
176,100 Bay Networks Inc.*.............. 5,194,950
115,500 Chipcom Corporation*+........... 5,775,000
77,500 Dell Computer Corp.*+........... 3,177,500
200,000 Electronics For Imaging
Inc.*+.......................... 5,500,000
160,800 International Imaging Inc.*+.... 5,226,000
198,300 Tech Data Corp.*................ 3,371,100
30,000 3 Com Corp.*.................... 1,546,890
375,000 Western Digital Corp.*.......... 6,281,250
------------
36,072,690
------------
COMPUTER SOFTWARE -- 5.6%
388,000 Cheyenne Software Inc.*......... 5,141,000
276,000 Informix Corp.*+................ 8,866,500
105,000 Pinnacle Systems Inc.*+......... 1,575,000
135,000 S3 Inc.*+....................... 2,126,250
133,000 Wonderware Corp.*............... 4,488,750
------------
22,197,500
------------
COMPUTER TECHNOLOGY -- 2.1%
145,000 ADFlex Solutions Inc.*.......... 2,428,750
7,500 Digital Microwave Corp.*+....... 154,688
196,500 Merix Corporation*+............. 4,986,188
50,000 Videonics Inc.*+................ 637,500
------------
8,207,126
------------
<CAPTION>
SHARES VALUE
- --------- ------------
<S> <C> <C>
ENERGY & ENERGY
SERVICES -- .4%
16,773 International Pedco Energy
Corp.*.......................... $ 19,725
104,700 Vintage Petroleum Inc. ......... 1,766,813
------------
1,786,538
------------
FINANCIAL SERVICES -- 4.2%
21,000 Advanta Corp., Class B+......... 530,250
167,000 Cole Taylor Financial Group+.... 3,507,000
155,800 Charles Schwab Corp.+........... 5,433,525
74,000 Insurance Auto Auctions
Inc.*+.......................... 2,261,662
105,000 Oxford Resources Corp. Cl.
A*+............................. 1,260,000
200,000 Storage Trust Realty............ 3,575,000
------------
16,567,437
------------
FREIGHT -- 1.7%
157,300 Landstar Systems Inc.*.......... 5,151,575
67,500 M.S. Carriers Inc.*+............ 1,468,125
------------
6,619,700
------------
HEALTHCARE -- 4.7%
127,100 Health Management Associates
Inc.
Cl. A*.......................... 3,177,500
172,300 Integrated Health Services
Inc.+........................... 6,805,850
60,500 Omnicare Inc.+.................. 2,654,438
103,200 PhyCor Inc.*+................... 2,760,600
15,000 Quantum Health Resources
Inc.*+.......................... 431,250
79,300 Sybron International Corp.*+.... 2,735,850
------------
18,565,488
------------
LEISURE & ENTERTAINMENT -- 5.0%
128,250 Arctco Inc.+.................... 2,484,844
242,000 Callaway Golf Corp.+............ 8,016,250
213,000 Graff Pay-Per-View*............. 2,396,250
219,300 Players International Inc.*..... 4,934,250
87,000 Regal Cinemas Inc.*............. 2,218,500
------------
20,050,094
------------
MANUFACTURING -- .6%
75,000 ITI Technologies Inc.*+......... 1,701,600
103,000 Repap Enterprises Inc.*......... 527,875
------------
2,229,475
------------
POLLUTION CONTROL -- 1.7%
153,000 United Waste Systems Inc.*...... 3,825,000
256,500 USA Waste Services Inc.*........ 2,917,688
------------
6,742,688
------------
</TABLE>
F-20
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
SCHEDULE OF INVESTMENTS (CONT'D)
DECEMBER 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- --------- ------------
<S> <C> <C>
COMMON STOCKS (CONT'D)
RESTAURANTS & LODGING -- 8.9%
114,500 Au Bon Pain Co., Inc. Class
A*+............................. $ 1,832,000
312,000 Cracker Barrel Old Country
Stores, Inc..................... 5,772,000
279,200 Landrys Seafood Restaurants
Inc.*+.......................... 7,922,300
367,400 Lone Star Steakhouse and Saloon,
Inc.*+........................ 7,348,000
237,000 O'Charley's Inc.*............... 2,607,000
211,000 Outback Steakhouse Inc.*+....... 4,958,500
211,500 Pollo Tropical Inc.*+........... 2,035,688
145,000 Rock Bottom Restaurants
Inc.*+.......................... 2,972,500
------------
35,447,988
------------
RETAILING -- 9.8%
137,000 Books-A-Million Inc.*+.......... 2,311,875
242,500 Dollar General Corp. ........... 7,275,000
192,500 Fabri-Centers Of America
Inc.*........................... 3,416,875
106,500 Guest Supply Inc.*+............. 2,023,500
239,300 OfficeMax Inc.*................. 6,341,450
240,350 Sports & Recreation Inc.*+...... 6,189,013
100,800 The Sports Authority*+.......... 2,116,800
76,100 Tiffany & Co. .................. 2,967,900
207,000 Viking Office Products Inc.*.... 6,339,375
------------
38,981,788
------------
SEMI-CONDUCTORS -- 19.2%
385,000 Adaptec Inc.*................... 9,095,625
96,000 Alliance Semiconductor
Corp.*+......................... 3,000,000
244,500 Altera Corp.*+.................. 10,238,438
187,000 Atmel Corp.*+................... 6,264,500
59,500 Electroglas, Inc.*.............. 1,985,813
107,000 Fusion Systems Corporation*..... 2,808,750
55,500 Lam Research Corp.*............. 2,067,375
162,500 Linear Technology
Corporation .................... 8,043,750
274,000 Maxim Integrated Products
Inc.*+.......................... 9,590,000
311,000 Micro Linear Corporation*....... 2,643,500
159,625 Microchip Technologies Inc.*+... 4,389,688
190,000 Orbit Semiconductor, Inc.*...... 1,401,250
230,000 Quad Systems Corp.*............. 2,932,500
169,500 Sanmina Corp.*+................. 4,618,875
75,000 Tencor Instruments*............. 2,887,500
69,800 Xilinx Inc.*+................... 4,135,650
------------
76,103,214
------------
<CAPTION>
SHARES VALUE
- --------- ------------
<S> <C> <C>
MISCELLANEOUS -- 1.1%
165,000 Loewen Group Inc. .............. $ 4,372,500
------------
TOTAL COMMON STOCK
(COST $306,283,320)............. 351,719,502
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
- ----------
<S> <C> <C>
SHORT-TERM
INVESTMENTS -- 38.1%
SHORT-TERM
CORPORATE NOTES -- 17.0%
$12,464,000 Allomon Funding Corp.,
6.10%, 1/4/95(a)............... 12,457,664
15,000,000 American Honda Finance Corp.,
5.95%, 1/12/95................. 14,972,729
15,000,000 Exxon Asset Management Co.,
5.87%, 1/4/95.................. 14,992,663
15,000,000 ITT Financial Corp.,
5.85%, 1/5/95.................. 14,990,250
10,000,000 Student Loan Corp.,
6.00%, 1/3/95.................. 9,996,667
------------
TOTAL SHORT-TERM CORPORATE
NOTES
(COST $67,409,973)............. 67,409,973
------------
SECURITIES HELD UNDER
REPURCHASE AGREEMENTS -- 21.1%
Securities Held Under
Repurchase Agreements,
5.60% - 6.125%, 1/3/95, with
Bear, Stearns & Co. Inc., dtd
12/30/94, repurchase price
$83,971,630; collateralized
by U.S. Treasury Notes and
U.S. Treasury Strips (par
value $333,335,000,
6.00% - 7.875%, due
7/15/96 - 2/15/19)........... 83,914,783
------------
TOTAL SHORT-TERM INVESTMENTS
(COST $151,324,756)............ 151,324,756
------------
TOTAL INVESTMENTS
(COST $457,608,076)(B)........... 126.7% 503,044,258
Liabilities in Excess of Other
Assets........................... (26.7) (106,007,160)
----- -------------
NET ASSETS......................... 100.0% $ 397,037,098
===== ============
</TABLE>
- --------------------------------------------------------------------------------
* Non-income producing security.
+ Securities partially or fully on loan.
(a) Pursuant to Securities and Exchange Commission Rule 144A, these securities
may be sold prior to their maturity only to qualified institutional buyers.
(b) At December 31, 1994, the net unrealized appreciation on investments, based
on cost for federal income tax purposes of $458,013,962, amounted to
$45,030,296 which consisted of aggregate gross unrealized appreciation of
$54,897,160 and aggregate gross unrealized depreciation of $9,866,864.
See Notes to Financial Statements.
F-21
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year........... $ 30.88 $ 27.26 $ 26.79 $ 17.02 $ 15.79
-------- -------- -------- -------- --------
Net investment income (loss)................. (0.03)(i) (0.05) (0.06) (0.03) 0.02
Net realized and unrealized gain (loss) on
investments................................ (1.45) 3.67 0.91 9.82 1.35
-------- -------- -------- -------- --------
Total from investment operations... (1.48) 3.62 0.85 9.79 1.37
-------- -------- -------- -------- --------
Dividends from net investment income......... -- -- -- (0.02) (0.01)
Distributions from net realized gains........ (2.09) -- (0.38) -- (0.13)
-------- -------- -------- -------- --------
Total Distributions................ (2.09) -- (0.38) (0.02) (0.14)
-------- -------- -------- -------- --------
Net asset value, end of year................. $ 27.31 $ 30.88 $ 27.26 $ 26.79 $ 17.02
======== ======== ======== ======== ========
Total Return................................. (4.38%) 13.28% 3.55% 57.54% 8.71%
======== ======== ======== ======== ========
Ratios and Supplemental Data:
Net assets, end of year (000's omitted).... $397,037 $238,850 $135,718 $ 56,798 $ 7,149
======== ======== ======== ======== ========
Ratio of expenses to average net assets.... 0.96% 1.03% .98% 1.06% 1.50%
======== ======== ======== ======== ========
Decrease reflected in above expense ratio
due to expense reimbursements........... -- -- -- -- 0.33%
======== ======== ======== ======== ========
Ratio of net investment income (loss) to
average net assets...................... (0.10%) (0.35%) (0.37%) (0.12%) 0.50%
======== ======== ======== ======== ========
Portfolio Turnover Rate.................... 117.61% 148.07% 108.06% 125.90% 132.46%
======== ======== ======== ======== ========
</TABLE>
- --------------------------------------------------------------------------------
(i) Amount was computed based on average shares outstanding during the period.
See Notes to Financial Statements.
F-22
<PAGE>
<TABLE>
<S> <C>
ALGER AMERICAN PORTFOLIO REVIEW
INCOME AND GROWTH (Unaudited)
PORTFOLIO
</TABLE>
ALGER AMERICAN INCOME AND GROWTH PORTFOLIO
VS. S&P 500
<TABLE>
<CAPTION>
ALGER AMERI-
CAN INCOME
MEASUREMENT PERIOD AND GROWTH
(FISCAL YEAR COVERED) PORTFOLIO S&P 500
<S> <C> <C>
15-NOV-88 10.000 10.000
31-DEC-88 10.095 10.422
31-DEC-89 10.842 13.715
31-DEC-90 10.872 13.279
31-DEC-91 13.428 17.325
31-DEC-92 14.588 18.640
31-DEC-93 16.097 20.511
31-DEC-94 14.765 20.783
</TABLE>
The chart above shows the growth in value of hypothetical $10,000 investments
made in Alger American Income and Growth Portfolio and the S&P 500 on November
15, 1988. Figures for the Portfolio and the S&P 500, an unmanaged index of
common stocks, include reinvestment of dividends.
AVERAGE ANNUAL TOTAL RETURNS THROUGH 12/31/94*
- ---------------------------------------------------------
<TABLE>
<CAPTION>
5 SINCE
1 YEAR YEARS INCEPTION
<S> <C> <C> <C>
AMERICAN INCOME AND
GROWTH -8.28% 6.37% 6.56%
S&P 500 1.32% 8.70% 12.68%
</TABLE>
* Performance figures do not reflect deduction of insurance charges against
assets or annuities. If these charges were deducted, the total return figures
would be lower. Past performance does not guarantee future results.
INVESTMENT OBJECTIVE
- ---------------------------------------------------------
Seeks a high level of dividend income consistent with prudent investment
management by investing in dividend paying equity securities. Capital
appreciation is a secondary objective of the Portfolio.
TOP FIVE INDUSTRY GROUPS AS OF 12/31/94
- ---------------------------------------------------------
1. Communications
2. Health Care
3. Automotive
4. Computer Related & Business Equipment
5. Manufacturing
TOP TEN HOLDINGS AS OF 12/31/94
- ---------------------------------------------------------
1. United Healthcare Corp.
2. Royal Dutch Petroleum Corp.
3. Tellabs, Inc.
4. DSC Communications Corp.
5. Compaq Computer Corporation
6. Chrysler Corporation
7. General Electric Company
8. TNT Freightways Corp.
9. Texas Instruments, Inc.
10. Cracker Barrel Old Country Store, Inc.
PORTFOLIO INFORMATION
- ---------------------------------------------------------
<TABLE>
<S> <C>
Total Net Assets as of
12/31/94: $29.1 million
Inception Date: 11/15/88
Distribution Schedule: Quarterly
Security Weightings
as of 12/31/94: Common Stock 91.4%
Preferred Stock 2.3%
Cash Equivalents 6.3%
</TABLE>
F-23
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN INCOME AND GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- --------- ----------
<S> <C> <C>
COMMON STOCKS -- 91.4%
AUTOMOTIVE -- 9.2%
22,200 Chrysler Corporation............... $1,087,800
33,000 Cooper Tire & Rubber Co. .......... 779,625
28,900 Harley-Davidson Inc. .............. 809,200
----------
2,676,625
----------
CHEMICALS -- 1.4%
5,900 Dow Chemical Company............... 396,775
----------
COMMUNICATIONS -- 18.8%
20,000 Century Telephone Enterprises,
Inc. ............................ 590,000
33,000 DSC Communications Corporation*.... 1,183,875
10,000 Glenayre Technologies Inc.*+....... 577,500
14,000 Motorola Inc. ..................... 810,250
10,000 Telephone and Data Systems,
Inc. ............................ 461,250
22,500 Tellabs, Inc.*..................... 1,254,375
18,000 Vodafone Group ADR................. 605,250
----------
5,482,500
----------
COMPUTER RELATED &
BUSINESS EQUIPMENT -- 9.1%
14,000 Bay Networks Inc.*................. 413,000
28,200 Compaq Computer Corporation*....... 1,113,900
8,000 International Business Machines
Corp. ........................... 588,000
5,500 Xerox Corporation ................. 544,500
----------
2,659,400
----------
CONGLOMERATE -- 3.4%
19,200 General Electric Company........... 979,200
----------
FREIGHT -- 3.2%
36,500 TNT Freightways, Corp. ............ 935,313
----------
HEALTH CARE -- 10.6%
6,000 Cardinal Health Inc. .............. 278,250
7,000 Columbia/HCA Healthcare Corp. ..... 255,500
10,000 Merck & Co., Inc. ................. 381,250
6,000 Pfizer Inc. ....................... 463,500
31,200 United Healthcare Corp.+........... 1,407,900
3,800 Warner-Lambert Company............. 292,600
----------
3,079,000
----------
LEISURE &
ENTERTAINMENT -- 2.4%
32,600 Carnival Corporation Class A....... 692,750
----------
<CAPTION>
SHARES VALUE
- --------- ----------
<S> <C> <C>
MANUFACTURING -- 7.4%
10,200 Dover Corp. ....................... $ 526,575
13,400 Millipore Corp. ................... 648,225
15,450 Precision Castparts Corp. ......... 312,863
8,800 Titan Wheel International, Inc.+... 244,200
8,500 Whirlpool Corp. ................... 427,125
----------
2,158,988
----------
METALS -- 3.4%
12,200 Inland Steel Industries, Inc.*..... 428,525
23,000 Kennametal, Inc. .................. 563,500
----------
992,025
----------
OIL & GAS -- 4.5%
12,200 Royal Dutch Petroleum Corp. ....... 1,311,500
----------
PAPER PACKAGING & FOREST
PRODUCTS -- 2.3%
9,000 International Paper Co.+........... 678,375
----------
REAL ESTATE -- 2.6%
34,700 Gables Residential Trust........... 746,050
----------
RESTAURANTS & LODGING -- 5.6%
45,000 Cracker Barrel Old Country Stores,
Inc. ............................ 832,500
40,100 Lone Star Steakhouse and Saloon,
Inc.*+........................... 802,000
----------
1,634,500
----------
RETAILING -- 2.4%
10,000 Dollar General Corp. .............. 300,000
8,000 Tandy Corporation.................. 401,000
----------
701,000
----------
SEMI-CONDUCTORS -- 5.1%
5,000 Intel Corp. ....................... 319,375
6,000 Linear Technology Corporation ..... 297,000
11,800 Texas Instruments Incorporated..... 883,525
----------
1,499,900
----------
TOTAL COMMON STOCKS
(COST $26,021,186)............... 26,623,901
----------
PREFERRED STOCKS -- 2.3%
COMMUNICATIONS
9,000 Nokia Corporation, ADR+
(COST $591,667).................... 675,000
----------
</TABLE>
F-24
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN INCOME AND GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS (CONT'D)
DECEMBER 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- --------- -----------
<S> <C> <C>
SHORT-TERM INVESTMENTS -- 20.5%
SHORT-TERM CORPORATE
NOTES -- 11.6%
$ 800,000 GTE Northwest Inc.,
5.88%, 1/13/95............... $ 798,432
1,300,000 ITT Financial Corp.,
5.85%, 1/5/95................ 1,299,155
1,300,000 Prudential Funding Corp.,
5.50%, 1/6/95................ 1,299,006
-----------
TOTAL SHORT-TERM CORPORATE
NOTES (COST $3,396,593)...... 3,396,593
-----------
<CAPTION>
VALUE
-----------
<S> <C> <C>
SECURITIES HELD UNDER
REPURCHASE
AGREEMENTS -- 8.9%
Securities Held Under
Repurchase
Agreements, 5.60% - 6.125%,
1/3/95, with Bear, Stearns &
Co. Inc., dtd 12/30/94,
repurchase price $2,584,206;
collateralized by U.S.
Treasury Notes (par value
$2,520,000, 7.875% - 9.125%,
due 7/15/96 - 5/15/99)....... $ 2,582,460
-----------
TOTAL SHORT-TERM INVESTMENTS
(COST $5,979,053)............ 5,979,053
-----------
TOTAL INVESTMENTS
(COST $32,591,906)(A)............... 114.2% 33,277,954
Liabilities in Excess of Other
Assets.............................. (14.2) (4,143,055)
----- ----------
NET ASSETS............................ 100.0% $29,134,899
===== ==========
</TABLE>
- --------------------------------------------------------------------------------
* Non-income producing security.
+ Securities partially or fully on loan.
(a) At December 31, 1994, the net unrealized appreciation on investments, based
on cost for federal income tax purposes of $32,591,906, amounted to $686,048
which consisted of aggregate gross unrealized appreciation of $2,049,191 and
aggregate gross unrealized depreciation of $1,363,143.
See Notes to Financial Statements.
F-25
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN INCOME AND GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1994 1993 1992 1991 1990
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.................. $ 15.31 $ 13.93 $ 13.08 $ 10.67 $ 10.74
------- ------- ------- ------- -------
Net investment income............................... 0.17 0.07 0.08 0.09 0.11
Net realized and unrealized gain (loss) on
investments....................................... (1.47) 1.37 1.02 2.41 (0.08)
------- ------- ------- ------- -------
Total from investment operations.......... (1.30) 1.44 1.10 2.50 0.03
------- ------- ------- ------- -------
Dividends from net investment income................ (0.15) (0.06) (0.12) (0.09) (0.10)
Distributions from net realized gains............... (0.56) -- (0.13) -- --
------- ------- ------- ------- -------
Total Distributions....................... (0.71) (0.06) (0.25) (0.09) (0.10)
------- ------- ------- ------- -------
Net asset value, end of year........................ $ 13.30 $ 15.31 $ 13.93 $ 13.08 $ 10.67
======= ======= ======= ======= =======
Total Return........................................ (8.28%) 10.34% 8.64% 23.51% .28%
======= ======= ======= ======= =======
Ratios and Supplemental Data:
Net assets, end of year (000's omitted)........... $29,135 $31,895 $ 8,671 $ 2,663 $ 436
======= ======= ======= ======= =======
Ratio of expenses to average net assets........... .75% .97% 1.25% 1.25% 1.25%
======= ======= ======= ======= =======
Decrease reflected in above expense ratios due to
expense reimbursements......................... -- -- 0.01% 0.66% 5.41%
======= ======= ======= ======= =======
Ratio of net investment income to average net
assets......................................... 1.22% 1.51% 1.62% 2.54% 3.61%
======= ======= ======= ======= =======
Portfolio Turnover Rate........................... 177.97% 105.80% 100.62% 61.11% 56.90%
======= ======= ======= ======= =======
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
F-26
<PAGE>
<TABLE>
<S> <C>
ALGER AMERICAN PORTFOLIO REVIEW
BALANCED (Unaudited)
PORTFOLIO
</TABLE>
ALGER AMERICAN BALANCED PORTFOLIO VS. S&P 500
AND LEHMAN GOV'T/CORP. BOND INDEX
<TABLE>
<CAPTION>
ALGER AMERI- LEHMAN
MEASUREMENT PERIOD CAN BALANCED GOV'T/CORP.
(FISCAL YEAR COVERED) PORTFOLIO S&P 500 BOND INDEX
<S> <C> <C> <C>
05-SEP-89 10.000 10.000 10.000
31-DEC-89 10.265 10.170 10.399
31-DEC-90 10.933 9.846 11.261
31-DEC-91 11.447 12.846 13.077
31-DEC-92 12.534 13.821 14.067
31-DEC-93 13.511 15.209 15.623
31-DEC-94 12.935 15.410 15.075
</TABLE>
The chart above shows the growth in value of hypothetical $10,000 investments
made in Alger American Balanced Portfolio, the S&P 500 and the Lehman
Government/Corporate Bond Index on September 5, 1989. Figures for the Portfolio,
the S&P 500 (an unmanaged index of common stocks) and the Lehman
Government/Corporate Bond Index (an unmanaged index of government and corporate
bonds) include reinvestment of dividends and/or interest.
AVERAGE ANNUAL TOTAL RETURNS THROUGH 12/31/94*
- ---------------------------------------------------------
<TABLE>
<CAPTION>
5 SINCE
1 YEAR YEARS INCEPTION
<S> <C> <C> <C>
AMERICAN BALANCED -4.27% 4.73% 4.95%
S&P 500 1.32% 8.70% 8.46%
Lehman Gov't/Corp.
Bond Index -3.51% 7.71% 8.02%
</TABLE>
* Performance figures do not reflect deduction of insurance charges against
assets or annuities. If these charges were deducted, the total return figures
would be lower. Past performance does not guarantee future results.
INVESTMENT OBJECTIVE
- ---------------------------------------------------------
Seeks current income and long-term capital appreciation by investing in common
stocks and fixed income securities, with emphasis on income-producing securities
which appear to have some potential for capital appreciation.
TOP FIVE EQUITY INDUSTRY GROUPS AS OF 12/31/94
- ---------------------------------------------------------
1. Communications
2. Health Care
3. Computer Related & Business Equipment
4. Automotive
5. Leisure & Entertainment
TOP BOND INDUSTRY GROUPS AS OF 12/31/94
- ---------------------------------------------------------
1. U.S. Government and Agencies
2. Automotive
3. Insurance
TOP TEN EQUITY HOLDINGS AS OF 12/31/94
- ---------------------------------------------------------
1. Telephone and Data Systems, Inc.
2. Tellabs, Inc.
3. Intel Corp.
4. Charles Schwab Corp.
5. Lone Star Steakhouse and Saloon, Inc.
6. Varity Corp.
7. Royal Dutch Petroleum Corp.
8. Compaq Computer Corporation
9. United Healthcare Corp.
10. Chrysler Corporation
PORTFOLIO INFORMATION
- ---------------------------------------------------------
<TABLE>
<S> <C>
Total Net Assets
as of 12/31/94: $10.4 million
Inception Date: 9/5/89
Distribution
Schedule: Annually
Security Weightings
as of 12/31/94: Common Stock 46.0%
Corporate Bonds 7.2%
U.S. Gov't Obligations 13.6%
Cash Equivalents 33.2%
</TABLE>
F-27
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- -------- ----------
<S> <C> <C>
COMMON STOCKS -- 46.0%
APPAREL -- .4%
1,000 Tommy Hilfiger Corporation*........ $ 45,125
----------
AUTOMOTIVE -- 3.4%
2,700 Chrysler Corporation............... 132,300
1,000 Harley-Davidson Inc................ 28,000
1,700 Pep Boys-Manny, Moe & Jack......... 52,700
4,000 Varity Corp.*...................... 145,000
----------
358,000
----------
CHEMICALS -- .7%
1,000 Dow Chemical Company............... 67,250
----------
COMMUNICATIONS -- 7.8%
4,500 AirTouch Communications Inc.*...... 131,063
2,500 Century Telephone Enterprises,
Inc.............................. 73,750
2,200 ECI Telecom Ltd. .................. 29,975
1,700 Glenayre Technologies Inc.*+....... 98,175
2,000 Motorola Inc. ..................... 115,750
4,300 Telephone and Data Systems,
Inc. ............................ 198,338
3,000 Tellabs, Inc.*..................... 167,250
----------
814,301
----------
COMPUTER RELATED &
BUSINESS EQUIPMENT -- 4.0%
1,800 Bay Networks Inc.*................. 53,100
2,500 Cabletron Systems, Inc.*........... 116,250
3,500 Compaq Computer Corporation*....... 138,250
1,500 International Business Machines
Corp. ........................... 110,250
----------
417,850
----------
COMPUTER SOFTWARE -- 2.1%
3,700 Informix Corp.*+................... 118,863
2,900 Parametric Technology Corp.*....... 100,050
----------
218,913
----------
COMPUTER TECHNOLOGY -- .9%
3,000 Silicon Graphics Inc.*............. 93,000
----------
DEFENSE -- 2.2%
700 Lockheed Corp. .................... 50,838
2,600 Loral Corp......................... 98,475
1,700 Martin Marietta Corp. ............. 75,438
----------
224,751
----------
FINANCIAL SERVICES -- 2.9%
3,000 Lehman Brothers Holdings Inc. ..... 44,250
2,000 Merrill Lynch & Co., Inc. ......... 71,500
500 Morgan Stanley Group Inc. ......... 29,500
4,300 Charles Schwab Corp.+.............. 149,963
----------
295,213
----------
<CAPTION>
SHARES VALUE
- -------- ----------
<S> <C> <C>
HEALTH CARE -- 5.9%
1,000 Cardinal Health Inc. .............. $ 46,375
1,500 Columbia/HCA Healthcare Corp....... 54,750
3,000 Integrated Health Services Inc.+... 118,500
2,000 Merck & Co., Inc. ................. 76,250
1,400 Pfizer Inc. ....................... 108,150
2,000 Sybron International Corp.*+....... 69,000
3,000 United Healthcare Corp.+........... 135,375
----------
608,400
----------
LEISURE & ENTERTAINMENT -- 3.4%
1,300 Callaway Golf Corp.+............... 43,063
6,000 Carnival Corporation Class A....... 127,500
5,450 Circus Circus Enterprises Inc.*.... 126,713
2,550 Mirage Resorts Inc.*+.............. 52,275
----------
349,551
----------
MANUFACTURING -- .5%
1,200 Thermo Electron Corp.*............. 53,850
----------
OIL & GAS -- 1.3%
1,300 Royal Dutch Petroleum Corp. ....... 139,750
----------
PAPER PACKAGING & FOREST PRODUCTS -- 1.2%
2,000 Alco Standard Corp. ............... 125,500
----------
RESTAURANTS & LODGING -- 2.4%
5,700 Cracker Barrel Old Country Stores,
Inc. ............................ 105,450
7,300 Lone Star Steakhouse and Saloon,
Inc.*+........................... 146,000
----------
251,450
----------
RETAILING -- 2.7%
250 Dollar General Corp. .............. 7,500
1,100 Nordstrom Inc...................... 46,200
3,750 Sports & Recreation Inc.*.......... 96,563
2,500 The Sports Authority*+............. 52,500
1,500 Tandy Corporation.................. 75,188
----------
277,951
----------
SEMI-CONDUCTORS -- 3.2%
500 Altera Corp.*...................... 20,938
2,500 Intel Corp. ....................... 159,688
2,500 LSI Logic Corp.*................... 100,938
1,000 Linear Technology Corporation...... 49,500
----------
331,064
----------
</TABLE>
F-28
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS (CONT'D)
DECEMBER 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- -------- ----------
<S> <C> <C>
COMMON STOCKS (CONT'D)
TOBACCO -- .5%
900 Philip Morris Companies Inc.+...... $ 51,750
----------
MISCELLANEOUS -- .5%
2,000 Loewen Group Inc................... 53,000
----------
TOTAL COMMON STOCK
(COST $4,478,064)................ 4,776,669
----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
- --------
<S> <C> <C>
CORPORATE BONDS -- 7.2%
AUTOMOTIVE -- 3.7%
$400,000 Ford Motor Credit Corp.,
7.75%, 11/15/02+................. 381,712
----------
INSURANCE -- 3.5%
200,000 Aetna Life & Casualty Co.,
6.375%, 8/15/03.................. 171,910
200,000 Travelers Inc.,
7.75%, 6/15/99................... 194,816
----------
366,726
----------
TOTAL CORPORATE BONDS
(COST $811,530).................. 748,438
----------
U.S. GOVERNMENT AND AGENCY OBLIGATIONS -- 13.6%
200,000 U.S. Treasury Notes, 7.50%,
10/31/99......................... 197,126
200,000 U.S. Treasury Notes, 6.375%,
1/15/00.......................... 188,032
400,000 U.S. Treasury Notes, 7.50%,
5/15/02.......................... 391,812
300,000 U.S. Treasury Bonds, 7.625%,
11/15/22......................... 289,407
200,000 Federal Home Loan Mortgage Corp.,
4.75%, 9/20/00................... 176,250
200,000 Federal Home Loan Mortgage Corp.,
6.50%, 6/10/03................... 174,626
----------
TOTAL U.S. GOVERNMENT AND AGENCY
OBLIGATIONS (COST $1,498,596).... 1,417,253
----------
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- -------- ----------
<S> <C> <C>
SHORT-TERM INVESTMENTS -- 40.9%
SHORT-TERM CORPORATE NOTES -- 22.1%
$400,000 Cargill Inc.,
5.55%, 1/3/95.................... $ 399,877
400,000 GTE Northwest Inc.,
5.88%, 1/13/95................... 399,216
500,000 ITT Financial Corp.,
5.85%, 1/5/95.................... 499,675
500,000 Prudential Funding Corp.,
5.50%, 1/6/95.................... 499,618
500,000 Student Loan Corp.,
6.00%, 1/3/95.................... 499,833
----------
TOTAL SHORT-TERM CORPORATE NOTES
(COST $2,298,219)................ 2,298,219
----------
SHORT-TERM U.S. GOVERNMENT OBLIGATIONS -- 10.5%
900,000 U.S. Treasury Bills, 4.93%,
2/16/95.......................... 894,330
200,000 U.S. Treasury Bills, 5.36%,
2/16/95.......................... 198,630
----------
TOTAL SHORT-TERM U.S. GOVERNMENT
OBLIGATIONS (COST $1,092,960).... 1,092,960
----------
SECURITIES HELD UNDER REPURCHASE
AGREEMENTS -- 8.3%
Securities Held Under Repurchase
Agreements, 5.60% - 6.125%,
1/3/95, with Bear, Stearns & Co.
Inc., dtd 12/30/94, repurchase
price $862,835; collateralized by
U.S. Treasury Strips (par value
$4,350,000, due 2/15/15)......... 862,248
----------
TOTAL SHORT-TERM INVESTMENTS
(COST $4,253,427).................. 4,253,427
----------
TOTAL INVESTMENTS
(COST $11,041,617)(A)............... 107.7% 11,195,787
Liabilities in Excess of Other
Assets.............................. (7.7) (801,300)
----- -----------
NET ASSETS............................ 100.0% $10,394,487
===== ==========
</TABLE>
- --------------------------------------------------------------------------------
* Non-income producing security.
+ Securities partially or fully on loan.
(a) At December 31, 1994, the net unrealized appreciation on investments, based
on cost for federal income tax purposes of $11,041,617, amounted to $154,170
which consisted of aggregate gross unrealized appreciation of $523,793 and
aggregate gross unrealized depreciation of $369,623.
See Notes to Financial Statements.
F-29
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN BALANCED PORTFOLIO (i)
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1994 1993 1992 1991 1990
------- ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year.................... $ 11.58 $10.77 $10.02 $10.01 $ 10.04
------- ------ ------ ------ -------
Net investment income................................. 0.20 0.15 0.22 0.45 0.66
Net realized and unrealized gain (loss) on
investments......................................... (0.70) 0.69 0.72 0.01 (0.03)
------- ------ ------ ------ -------
Total from investment operations............ (0.50) 0.84 0.94 0.46 0.63
------- ------ ------ ------ -------
Dividends from net investment income.................. (0.13) (0.03) (0.19) (0.45) (0.66)
Distributions from net realized gains................. (0.15) -- -- -- --
------- ------ ------ ------ -------
Total Distributions......................... (0.28) (0.03) (0.19) (0.45) (0.66)
------- ------ ------ ------ -------
Net asset value, end of year.......................... $ 10.80 $11.58 $10.77 $10.02 $ 10.01
======= ====== ====== ====== =======
Total Return.......................................... (4.27%) 7.79% 9.48% 4.70% 6.53%
======= ====== ====== ====== =======
Ratios and Supplemental Data:
Net assets, end of year (000's omitted)............. $10,394 $7,848 $4,009 $1,487 $ 365
======= ====== ====== ====== =======
Ratio of expenses to average net assets............. 1.08% 1.25% 1.25% 1.25% 1.25%
======= ====== ====== ====== =======
Decrease reflected in above expense ratios due to
expense reimbursements........................... -- 0.19% 0.42% 1.37% 4.81%
======= ====== ====== ====== =======
Ratio of net investment income to average net
assets........................................... 2.30% 2.05% 1.99% 4.22% 6.60%
======= ====== ====== ====== =======
Portfolio Turnover Rate............................. 78.80% 85.46% 15.27% -- 132.55%
======= ====== ====== ====== =======
</TABLE>
- --------------------------------------------------------------------------------
(i) Prior to October 1, 1992, the American Balanced Portfolio was the American
Fixed Income Portfolio.
See Notes to Financial Statements.
F-30
<PAGE>
<TABLE>
<S> <C>
ALGER AMERICAN PORTFOLIO REVIEW
MIDCAP GROWTH (Unaudited)
PORTFOLIO
</TABLE>
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
VS. S&P MIDCAP 400
<TABLE>
<CAPTION>
ALGER AMERI-
CAN MIDCAP
MEASUREMENT PERIOD GROWTH PORT- S&P MIDCAP
(FISCAL YEAR COVERED) FOLIO 400 INDEX
<S> <C> <C>
03-MAY-93 10.000 10.000
31-DEC-93 13.867 11.297
31-DEC-94 13.653 10.893
</TABLE>
The chart above shows the growth in value of hypothetical $10,000 investments
made in Alger American MidCap Growth Portfolio and the S&P MidCap 400 Index on
May 3, 1993. Figures for the Portfolio and the S&P MidCap 400, an unmanaged
index of common stocks, include reinvestment of dividends.
AVERAGE ANNUAL TOTAL RETURNS THROUGH 12/31/94*
- ---------------------------------------------------------
<TABLE>
<CAPTION>
SINCE
1 YEAR INCEPTION
<S> <C> <C>
AMERICAN MIDCAP GROWTH -1.54% 20.55%
S&P MidCap 400 Index -3.58% 5.27%
</TABLE>
* Performance figures do not reflect deduction of insurance charges against
assets or annuities. If these charges were deducted, the total return figures
would be lower. Past performance does not guarantee future results.
INVESTMENT OBJECTIVE
- ---------------------------------------------------------
Seeks long-term capital appreciation by investing in a diversified, actively
managed portfolio of equity securities, primarily of companies with total market
capitalization between $750 million and $3.5 billion.
TOP FIVE INDUSTRY GROUPS AS OF 12/31/94
- ---------------------------------------------------------
1. Communications
2. Semi-Conductors
3. Retailing
4. Health Care
5. Computer Related & Business Equipment
TOP TEN HOLDINGS AS OF 12/31/94
- ---------------------------------------------------------
1. Tellabs, Inc.
2. Office Max, Inc.
3. LSI Logic Corp.
4. Informix Corporation
5. Altera, Corp.
6. DSC Communications Corp.
7. Charles Schwab Corp.
8. United Healthcare Corp.
9. Tandy Corporation
10. 3Com Corp.
PORTFOLIO INFORMATION
- ---------------------------------------------------------
<TABLE>
<S> <C>
Total Net Assets as of
12/31/94: $62.2 million
Inception Date: 5/3/93
Distribution Schedule: Annually
Security Weightings
as of 12/31/94: Common Stock 87.5%
Preferred Stock 1.8%
Cash Equivalents 10.7%
</TABLE>
F-31
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- --------- ----------
<S> <C> <C>
COMMON STOCKS -- 87.5%
APPAREL -- 2.2%
24,000 AnnTaylor Stores Corporation*... $ 825,000
12,200 Tommy Hilfiger Corporation*+.... 550,525
----------
1,375,525
----------
AUTOMOTIVE -- 6.3%
42,000 Cooper Tire & Rubber Co. ....... 992,250
46,000 Harley-Davidson Inc. ........... 1,288,000
17,900 Pep Boys-Manny, Moe & Jack...... 554,900
30,000 Varity Corp.*................... 1,087,500
----------
3,922,650
----------
COMMUNICATIONS -- 15.1%
11,500 ADC Telecommunications Inc.*.... 575,000
17,500 Andrew Corp.*................... 914,375
50,000 Century Telephone Enterprises,
Inc........................... 1,475,000
45,800 DSC Communications
Corporation*.................. 1,643,075
21,200 ECI Telecom Ltd. ............... 288,850
17,800 Glenayre Technologies Inc.*+.... 1,027,950
14,000 QUALCOMM Inc.*+................. 336,000
29,000 Telephone and Data Systems,
Inc........................... 1,337,625
32,000 Tellabs, Inc.*.................. 1,784,000
----------
9,381,875
----------
COMPUTER RELATED &
BUSINESS EQUIPMENT -- 6.7%
34,900 Bay Networks Inc.*.............. 1,029,550
16,000 Cisco Systems Inc.*............. 562,000
14,600 Seagate Technology Corp.*....... 350,400
30,000 3Com Corp.*..................... 1,546,890
41,000 Western Digital Corp.*.......... 686,750
----------
4,175,590
----------
COMPUTER SOFTWARE -- 2.7%
52,000 Informix Corp.*+................ 1,670,500
----------
DEFENSE -- 1.8%
30,000 Loral Corp. .................... 1,136,250
----------
ENERGY & ENERGY SERVICES -- 1.9%
40,000 Tosco Corp. New................. 1,165,000
----------
FINANCIAL SERVICES -- 3.8%
29,950 Advanta Corp., Class B+......... 756,238
46,000 Charles Schwab Corp.+........... 1,604,250
----------
2,360,488
----------
<CAPTION>
SHARES VALUE
- --------- ----------
<S> <C> <C>
HEALTH CARE -- 8.0%
12,000 Cardinal Health Inc.+........... $ 556,500
22,500 Health Management Associates
Inc. Class A*................. 562,500
25,000 Integrated Health Services
Inc.+......................... 987,500
38,000 Sybron International Corp.*+.... 1,311,000
35,000 United Healthcare Corp.+........ 1,579,375
----------
4,996,875
----------
LEISURE & ENTERTAINMENT -- 3.3%
45,000 Callaway Golf Corp.+............ 1,490,625
27,000 Mirage Resorts Inc.*+........... 553,500
----------
2,044,125
----------
MANUFACTURING -- .7%
10,000 Thermo Electron Corp.*.......... 448,750
----------
RESTAURANTS & LODGING -- 6.2%
66,000 Cracker Barrel Old Country
Stores, Inc................... 1,221,000
67,700 Lone Star Steakhouse and Saloon,
Inc.*+........................ 1,354,000
53,500 Outback Steakhouse Inc.*+....... 1,257,250
----------
3,832,250
----------
RETAILING -- 13.3%
39,531 Dollar General Corp. ........... 1,185,930
18,700 Nordstrom Inc. ................. 785,400
66,800 OfficeMax, Inc.*................ 1,770,200
68,000 The Sports Authority, Inc.*+.... 1,428,000
31,500 Tandy Corporation............... 1,578,938
50,400 Viking Office Products Inc.*.... 1,543,500
----------
8,291,968
----------
SEMI-CONDUCTORS -- 14.2%
60,000 Adaptec Inc.*................... 1,417,500
39,600 Altera Corp.*................... 1,658,250
41,000 Atmel Corp.*+................... 1,373,500
30,000 Lam Research Corp.*............. 1,117,500
41,500 LSI Logic Corp.*................ 1,675,563
20,000 Linear Technology
Corporation .................. 990,000
40,000 Micrel, Inc.*+.................. 580,000
----------
8,812,313
----------
MISCELLANEOUS -- 1.3%
30,000 Loewen Group Inc. .............. 795,000
----------
TOTAL COMMON STOCKS
(COST $49,586,589)............ 54,409,159
----------
</TABLE>
F-32
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS (CONT'D)
DECEMBER 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
- --------- ----------
<S> <C> <C>
PREFERRED STOCK -- 1.8%
COMMUNICATIONS
14,600 Nokia Corporation, ADR+
(COST $962,943).............. $1,095,000
----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
- ---------
<S> <C> <C>
SHORT-TERM INVESTMENTS -- 31.8%
SHORT-TERM CORPORATE
NOTES -- 16.5%
$2,400,000 Cargill Inc.,
5.55%, 1/3/95................ 2,399,260
2,400,000 GTE Northwest Inc.,
5.88%, 1/13/95............... 2,395,296
2,750,000 ITT Financial Corp.,
5.85%, 1/5/95................ 2,748,213
2,750,000 Prudential Funding Corp.,
5.50%, 1/6/95................ 2,747,899
----------
TOTAL SHORT-TERM CORPORATE
NOTES (COST $10,290,668)..... 10,290,668
----------
</TABLE>
<TABLE>
<CAPTION>
VALUE
----------
<S> <C> <C>
SECURITIES HELD UNDER
REPURCHASE
AGREEMENTS -- 15.3%
Securities Held Under
Repurchase Agreements,
5.60% - 6.125%, 1/3/95, with
Bear, Stearns & Co. Inc., dtd
12/30/94, repurchase price
$9,511,756; collateralized by
U.S. Treasury Strips (par
value $68,895,000, due
2/15/15 - 8/15/22)........... $9,505,342
----------
TOTAL SHORT-TERM INVESTMENTS
(COST $19,796,010)........... 19,796,010
----------
TOTAL INVESTMENTS
(COST $70,345,542)(A).......... 121.1% 75,300,169
Liabilities in Excess of Other
Assets......................... (21.1) (13,122,533)
---- ----------
NET ASSETS....................... 100.0% $62,177,636
===== ==========
</TABLE>
- --------------------------------------------------------------------------------
* Non-income producing security.
+ Securities partially or fully on loan.
(a) At December 31, 1994, the net unrealized appreciation on investments based
on cost for federal income tax purposes of $70,405,889, amounted to
$4,894,280 which consisted of aggregate gross unrealized appreciation of
$6,394,492 and aggregate gross unrealized depreciation of $1,500,212.
See Notes to Financial Statements.
F-33
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR FROM MAY 3, 1993
ENDED (COMMENCEMENT OF
DECEMBER 31, OPERATIONS)
1994 TO DECEMBER 31, 1993(I)
------------ -----------------------
<S> <C> <C>
Net asset value, beginning of year.............................. $ 13.72 $ 10.00
------- -------
Net investment income (loss).................................... 0.00(ii) (0.02)
Net realized and unrealized gain (loss) on investments.......... (0.21) 3.88
------- -------
Total from investment operations...................... (0.21) 3.86
Distributions from net realized gains........................... (0.05) (0.14)
------- -------
Net asset value, end of year.................................... $ 13.46 $ 13.72
======= =======
Total Return.................................................... (1.54%) 38.67%
======= =======
Ratios and Supplemental Data:
Net assets, end of year (000's omitted)....................... $62,178 $21,301
======= =======
Ratio of expenses to average net assets....................... 0.97% 1.50%
======= =======
Decrease reflected in above expense ratio due to expense
reimbursements............................................. -- 0.03%
======= =======
Ratio of net investment income (loss) to average net assets... 0.03% (0.58%)
======= =======
Portfolio Turnover Rate....................................... 83.96% 67.22%
======= =======
</TABLE>
- --------------------------------------------------------------------------------
(i) Ratios have been annualized; total return has not been annualized.
(ii) Amount was computed based on average shares outstanding during the period.
See Notes to Financial Statements.
F-34
<PAGE>
THE ALGER AMERICAN FUND
STATEMENTS OF ASSETS
AND LIABILITIES
DECEMBER 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERICAN AMERICAN AMERICAN
AMERICAN SMALL INCOME AND AMERICAN MIDCAP
GROWTH CAPITALIZATION GROWTH BALANCED GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS:
Investments in securities, at
value (identified
cost*) -- see accompanying
schedules of investments.... $169,287,526 $503,044,258 $33,277,954 $11,195,787 $75,300,169
Receivable for investment
securities sold............. -- 1,900,100 364,733 209,420 650,966
Receivable for shares of
beneficial interest sold.... 236,332 664,934 19,707 14,371 306,154
Interest and dividends
receivable.................. 188,967 99,331 65,517 36,764 20,900
Other assets................... 4,964 12,871 1,602 832 2,490
------------ ------------ ----------- ----------- -----------
Total Assets.............. 169,717,789 505,721,494 33,729,513 11,457,174 76,280,679
------------ ------------ ----------- ----------- -----------
LIABILITIES:
Payable for securities
loaned...................... 9,016,827 79,875,544 2,389,114 784,482 8,592,913
Payable for investment
securities purchased........ 10,155,549 23,774,744 1,748,723 247,870 5,384,063
Payable for shares of
beneficial interest
redeemed.................... 20,405 4,659,248 430,938 14,833 60,047
Accrued investment management
fees........................ 81,530 249,975 14,976 6,526 36,739
Accrued expenses............... 53,002 124,885 10,863 8,976 29,281
------------ ------------ ----------- ----------- -----------
Total Liabilities......... 19,327,313 108,684,396 4,594,614 1,062,687 14,103,043
------------ ------------ ----------- ----------- -----------
NET ASSETS....................... $150,390,476 $397,037,098 $29,134,899 $10,394,487 $62,177,636
=========== =========== ========== ========== ==========
NET ASSETS CONSIST OF:
Paid-in capital................ $138,492,981 $369,774,445 $30,519,516 $10,280,506 $59,551,254
Undistributed net investment
income (accumulated loss)... 482,192 (1,212,211) 363,594 216,631 (18,141)
Undistributed net realized gain
(accumulated loss).......... 690,009 (16,961,318) (2,434,259) (256,820) (2,310,104)
Net unrealized appreciation.... 10,725,294 45,436,182 686,048 154,170 4,954,627
------------ ------------ ----------- ----------- -----------
NET ASSETS....................... $150,390,476 $397,037,098 $29,134,899 $10,394,487 $62,177,636
=========== =========== ========== ========== ==========
Shares of beneficial interest
outstanding -- Note 5.......... 6,501,654 14,537,803 2,190,885 962,043 4,620,425
=========== =========== ========== ========== ==========
NET ASSET VALUE PER SHARE........ $ 23.13 $ 27.31 $ 13.30 $ 10.80 $ 13.46
=========== =========== ========== ========== ==========
*Identified cost................. $158,562,232 $457,608,076 $32,591,906 $11,041,617 $70,345,542
=========== =========== ========== ========== ==========
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
F-35
<PAGE>
THE ALGER AMERICAN FUND
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERICAN AMERICAN AMERICAN
AMERICAN SMALL INCOME AND AMERICAN MIDCAP
GROWTH CAPITALIZATION GROWTH BALANCED GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
---------- ------------ ----------- --------- -----------
<S> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Income:
Interest...................... $ 606,253 $ 1,984,940 $ 139,680 $ 283,151 $ 300,799
Dividends..................... 747,096 394,993 449,793 36,574 88,232
---------- ------------ ----------- --------- -----------
Total Income............. 1,353,349 2,379,933 589,473 319,725 389,031
---------- ------------ ----------- --------- -----------
Expenses:
Management fees -- Note
3(a)........................ 756,637 2,366,780 187,051 70,976 311,831
Custodian fees................ 34,868 112,145 14,573 12,770 20,705
Transfer Agent fees........... 13,771 32,066 7,015 3,633 5,909
Professional fees............. 19,405 47,011 6,713 4,756 12,453
Trustees' fees................ 4,800 4,800 4,800 4,800 4,800
Miscellaneous................. 40,481 97,998 5,423 5,077 21,172
---------- ------------ ----------- --------- -----------
Total Expenses........... 869,962 2,660,800 225,575 102,012 376,870
---------- ------------ ----------- --------- -----------
NET INVESTMENT INCOME (LOSS)....... 483,387 (280,867) 363,898 217,713 12,161
---------- ------------ ----------- --------- -----------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss) on
investments................. 705,938 (17,564,040) (2,087,625) (256,903) (2,319,155)
Net change in unrealized
appreciation (depreciation)
on investments.............. 1,040,130 14,069,231 (1,210,449) (332,427) 2,842,601
---------- ------------ ----------- --------- -----------
Net realized and
unrealized gain (loss)
on investments......... 1,746,068 (3,494,809) (3,298,074) (589,330) 523,446
---------- ------------ ----------- --------- -----------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM
OPERATIONS....................... $2,229,455 $ (3,775,676) $(2,934,176) $(371,617) $ 535,607
========= =========== ========== ========= ==========
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
F-36
<PAGE>
THE ALGER AMERICAN FUND
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERICAN AMERICAN AMERICAN
AMERICAN SMALL INCOME AND AMERICAN MIDCAP
GROWTH CAPITALIZATION GROWTH BALANCED GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
INCREASE (DECREASE) IN CASH
Cash flows from operating
activities:
Interest received............... $ 590,470 $ 1,962,905 $ 141,174 $ 284,166 $ 290,337
Dividends received.............. 611,029 365,329 447,556 34,176 82,456
Operating expenses paid......... (817,331) (2,510,973) (244,482) (106,543) (346,046)
Purchase of short-term
securities, net.............. (12,975,076) (70,326,955) 1,091,632 (1,906,981) (15,005,614)
Purchase of portfolio
securities................... (165,226,341) (431,964,186) (49,997,932) (6,978,394) (59,785,609)
Proceeds from disposition of
portfolio securities......... 102,111,858 291,714,350 48,646,023 5,352,368 28,140,360
Other........................... (3,181) (7,055) (748) (657) (2,368)
------------ ------------- ------------ ----------- ------------
Net cash (used for)
provided by operating
activities............ (75,708,572) (210,766,585) 83,223 (3,321,865) (46,626,484)
------------ ------------- ------------ ----------- ------------
Cash flows from financing
activities:
Dividends paid.................. (6,532,029) (18,316,556) (1,437,286) (233,614) (122,328)
Proceeds from shares sold and
dividends reinvested......... 131,207,364 353,621,952 10,971,991 4,815,887 51,230,011
Payments on shares redeemed..... (51,229,384) (168,901,272) (8,903,818) (1,618,563) (10,964,573)
Increase (decrease) in cash
collateral received on
securities loaned............ 2,262,621 44,362,461 (714,110) 358,155 6,483,374
------------ ------------- ------------ ----------- ------------
Net cash provided by
(used for) financing
activities............ 75,708,572 210,766,585 (83,223) 3,321,865 46,626,484
------------ ------------- ------------ ----------- ------------
Net increase in cash.............. 0 0 0 0 0
Cash -- beginning of year......... 0 0 0 0 0
------------ ------------- ------------ ----------- ------------
Cash -- end of year............... $ 0 $ 0 $ 0 $ 0 $ 0
=========== ============ =========== ========== ===========
RECONCILIATION OF NET INCREASE
(DECREASE) IN NET ASSETS TO NET
CASH (USED FOR) PROVIDED BY
OPERATING ACTIVITIES:
Net increase (decrease) in net
assets resulting from
operations...................... $ 2,229,455 $ (3,775,676) $ (2,934,176) $ (371,617) $ 535,607
(Increase) in investments......... (85,895,633) (226,069,476) (633,218) (3,262,737) (50,536,528)
(Increase) decrease in receivable
for investments sold............ 1,162,417 26,719 398,659 (100,076) (406,407)
(Increase) in interest and
dividends receivable............ (151,850) (51,699) (743) (1,383) (16,238)
Increase (decrease) in payable for
investments purchased........... 8,643,660 15,465,964 (25,721) (170,196) 4,292,070
Net realized (gain) loss.......... (705,938) 17,564,040 2,087,625 256,903 2,319,155
Net (increase) decrease in
unrealized appreciation......... (1,040,130) (14,069,231) 1,210,449 332,427 (2,842,601)
Increase (decrease) in accrued
expenses........................ 52,593 149,827 (18,907) (8,355) 30,824
Net (increase) decrease in other
assets.......................... (3,146) (7,053) (745) 3,169 (2,366)
------------ ------------- ------------ ----------- ------------
Net cash (used for) provided by
operating activities............ $(75,708,572) $(210,766,585) $ 83,223 $(3,321,865) $(46,626,484)
=========== ============ =========== ========== ===========
</TABLE>
See Notes to Financial Statements.
F-37
<PAGE>
THE ALGER AMERICAN FUND
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERICAN AMERICAN AMERICAN
AMERICAN SMALL INCOME AND AMERICAN MIDCAP
GROWTH CAPITALIZATION GROWTH BALANCED GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
------------ ------------ ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net investment income (loss)... $ 483,387 $ (280,867) $ 363,898 $ 217,713 $ 12,161
Net realized gain (loss) on
investments.................. 705,938 (17,564,040) (2,087,625) (256,903) (2,319,155)
Net change in unrealized
appreciation (depreciation)
on investments............... 1,040,130 14,069,231 (1,210,449) (332,427) 2,842,601
------------ ------------ ----------- ----------- -----------
Net increase (decrease) in net
assets resulting from
operations................... 2,229,455 (3,775,676) (2,934,176) (371,617) 535,607
Dividends to shareholders:
Net investment income........ (122,545) -- (296,743) (109,638) --
Net realized gains........... (6,409,484) (18,316,556) (1,140,543) (123,976) (122,328)
Net increase from shares of
beneficial interest
transactions -- Note 5....... 79,815,236 180,279,205 1,611,518 3,151,811 40,463,768
------------ ------------ ----------- ----------- -----------
Total increase
(decrease)......... 75,512,662 158,186,973 (2,759,944) 2,546,580 40,877,047
Net Assets
Beginning of year............ 74,877,814 238,850,125 31,894,843 7,847,907 21,300,589
------------ ------------ ----------- ----------- -----------
End of year.................. $150,390,476 $397,037,098 $29,134,899 $10,394,487 $62,177,636
=========== =========== ========== ========== ==========
Undistributed net investment
income (accumulated
loss)..................... $ 482,192 $ (1,212,211) $ 363,594 $ 216,631 $ (18,141)
=========== =========== ========== ========== ==========
</TABLE>
- --------------------------------------------------------------------------------
See Notes to Financial Statements.
F-38
<PAGE>
THE ALGER AMERICAN FUND
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERICAN AMERICAN
AMERICAN AMERICAN SMALL INCOME AND AMERICAN MIDCAP
GROWTH CAPITALIZATION GROWTH BALANCED GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO(*)
----------- -------------- ----------- ---------- ------------
<S> <C> <C> <C> <C> <C>
Net investment income (loss)....... $ 122,278 $ (586,996) $ 296,376 $ 108,887 $ (30,302)
Net realized gain on investments... 6,815,068 24,938,463 845,957 131,520 347,798
Net change in unrealized
appreciation on investments...... 4,411,266 3,127,791 958,124 227,673 2,112,026
----------- -------------- ----------- ---------- ------------
Net increase in net assets
resulting from operations........ 11,348,612 27,479,258 2,100,457 468,080 2,429,522
Dividends to shareholders:
Net investment income............ (57,621) -- (79,052) (12,644) --
Net realized gains............... -- -- -- -- (216,419)
Net increase from shares of
beneficial interest
transactions -- Note 5........... 33,270,498 75,653,294 21,202,462 3,383,020 19,087,486
----------- -------------- ----------- ---------- ------------
Total increase........... 44,561,489 103,132,552 23,223,867 3,838,456 21,300,589
Net Assets
Beginning of year................ 30,316,325 135,717,573 8,670,976 4,009,451 --
----------- -------------- ----------- ---------- ------------
End of year...................... $74,877,814 $ 238,850,125 $31,894,843 $7,847,907 $ 21,300,589
========== =========== ========== ========= ==========
Undistributed net investment
income (accumulated loss)..... $ 121,350 $ (931,344) $ 296,439 $ 108,556 $ (30,302)
========== =========== ========== ========= ==========
</TABLE>
- --------------------------------------------------------------------------------
(*) Commenced operations May 3, 1993.
See Notes to Financial Statements.
F-39
<PAGE>
THE ALGER AMERICAN FUND
NOTES TO
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1 -- GENERAL:
The Alger American Fund (the "Fund") is a diversified, open-end registered
investment company organized as an unincorporated business trust under the laws
of the Commonwealth of Massachusetts. The Fund operates as a series company
currently issuing five classes of shares of beneficial interest: American Growth
Portfolio, American Small Capitalization Portfolio, American Income and Growth
Portfolio, American Balanced Portfolio and American MidCap Growth Portfolio
(collectively "the Portfolios"). Shares of the Portfolios are available and are
being marketed exclusively as a pooled funding vehicle for life insurance
companies writing all types of variable annuity contracts and variable life
insurance policies.
A sixth series of shares, American Leveraged AllCap Portfolio, is currently
available for sale but had not commenced operations as of December 31, 1994.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES:
(a) Investment Valuation: Investments of the Portfolios are valued at 4:00 p.m.
Eastern time on each day the New York Stock Exchange is open. Listed and
unlisted securities for which such information is regularly reported are valued
at the last reported sales price or, in the absence of reported sales, at the
mean between the bid and asked price, or, in the absence of a recent bid or
asked price, the equivalent as obtained from one or more of the major market
makers for the securities to be valued.
Securities for which market quotations are not readily available are valued
according to procedures established by the Board of Trustees to determine fair
value in good faith.
Securities having a remaining maturity of sixty days or less are valued at
amortized cost which approximates market value.
(b) Security Transactions and Investment Income: Security transactions are
recorded on a trade date basis. Resulting receivables and payables are carried
at amounts which approximate fair value. Realized gains and losses from security
transactions are recorded on the identified cost basis. Dividend income is
recognized on the ex-dividend date and interest income is recognized on the
accrual basis.
(c) Repurchase Agreements: The Portfolios enter into repurchase agreements with
approved institutions, primarily U.S. Government securities dealers, and are
collateralized by U.S. Government securities. Such collateral is verified by the
investment manager as being either received and held in physical possession by
the custodian or as having been received by such custodian in book-entry form
through the Federal Reserve book-entry system. The investment manager monitors
the value of the collateral at the time the repurchase agreement is entered into
and on a daily basis during the term of the agreement to ensure that its value
equals or exceeds the agreed-upon repurchase price to be repaid to the
Portfolio. Additional collateral is obtained when necessary.
(d) Lending of Portfolio Securities: The Portfolios lend their securities to
financial institutions, including an affiliate of the custodian, provided that
the market value of securities loaned will not at any time exceed one-third of
the Portfolio's total assets. In order to protect against the risk of failure by
the borrower to return the securities loaned or any delay in the delivery of
such securities, the investment manager insures that the loan is collateralized
by cash, letters of credit or U.S. Government securities that are maintained at
all times in an amount equal to at least 100 percent of the current market value
of the loaned securities. At
F-40
<PAGE>
THE ALGER AMERICAN FUND
NOTES TO
FINANCIAL STATEMENTS (CONT'D)
- --------------------------------------------------------------------------------
December 31, 1994, the value of securities loaned and cash collateral received
thereon were as follows:
<TABLE>
<CAPTION>
VALUE OF CASH
SECURITIES COLLATERAL
LOANED RECEIVED
----------- -----------
<S> <C> <C>
American Growth
Portfolio.......... $ 8,727,854 $ 9,016,827
American Small
Capitalization
Portfolio.......... 76,546,124 79,875,544
American Income and
Growth Portfolio... 2,315,329 2,389,114
American Balanced
Portfolio.......... 752,729 784,482
American MidCap
Growth Portfolio... 8,249,525 8,592,913
</TABLE>
The Portfolios invest the cash collateral and rebate a portion of the interest
earned to the borrower of the securities. During the year ended December 31,
1994, the American Growth Portfolio, the American Small Capitalization
Portfolio, the American Income and Growth Portfolio, the American Balanced
Portfolio and the American MidCap Growth Portfolio received $25,031, $166,461,
$10,276, $1,283 and $16,589, respectively, of stock loan fees, net of rebates
paid. Such net fees are included in interest income in the accompanying
Statements of Operations.
(e) Dividends to Shareholders: Dividends payable to shareholders are recorded
by the Fund on the ex-dividend date.
The American Income and Growth Portfolio will generally declare and pay
dividends from net investment income quarterly, while the dividends from net
investment income of the American Growth Portfolio, the American Small
Capitalization Portfolio, the American Balanced Portfolio and the American
MidCap Growth Portfolio, are declared and paid annually.
With respect to all Portfolios, dividends from net realized gains, offset by any
loss carry forward, are declared and paid annually after the end of the fiscal
year in which earned.
(f) Federal Income Taxes: It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of the taxable income of each Portfolio to its
respective shareholders. Therefore, no federal income tax provision is required.
Each Portfolio is treated as a separate entity for the purpose of determining
such compliance. At December 31, 1994, the net capital loss carryforwards of the
American Small Capitalization Portfolio, American Income and Growth Portfolio,
American Balanced Portfolio and American MidCap Growth Portfolio, which may be
used to offset future net realized gains, were approximately $14,557,000,
$2,397,000, $159,000 and $2,076,000, respectively, and expire in 2002.
(g) Expenses: The Fund accounts separately for the assets, liabilities and
operations of each Portfolio. Expenses directly attributable to each Portfolio
are charged to that Portfolio's operations; expenses which are applicable to all
Portfolios are allocated among them.
NOTE 3 -- INVESTMENT MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES:
(a) Investment Management Fees: Fees incurred by each Portfolio, pursuant to
the provisions of the Investment Management Agreements (the "Agreements") with
Fred Alger Management, Inc. ("Alger Management"), are payable monthly and
computed based on the average daily net assets of each Portfolio at the
following annual rates:
<TABLE>
<S> <C>
American Growth Portfolio.............. .750%
American Small Capitalization
Portfolio............................ .850
American Income and Growth Portfolio... .625
American Balanced Portfolio............ .750
American MidCap Growth Portfolio....... .800
</TABLE>
The Agreements further provide that if in any fiscal year the aggregate
expenses, excluding interest, taxes, brokerage commissions, and extraordinary
expenses, of
F-41
<PAGE>
THE ALGER AMERICAN FUND
NOTES TO
FINANCIAL STATEMENTS (CONT'D)
- --------------------------------------------------------------------------------
the American Growth Portfolio exceed 1.50%; the American Small Capitalization
Portfolio exceed 1.50%; the American Income and Growth Portfolio exceed 1.25%;
the American Balanced Portfolio exceed 1.25%; and the American MidCap Growth
Portfolio exceed 1.50% of the average daily net assets of the applicable
Portfolio, Alger Management will reimburse that Portfolio for the excess
expenses. For the year ended December 31, 1994, no reimbursement was required.
(b) Brokerage Commissions: During the year ended December 31, 1994, the
American Growth Portfolio, American Small Capitalization Portfolio, American
Income and Growth Portfolio, American Balanced Portfolio and American MidCap
Growth Portfolio paid Fred Alger & Company, Incorporated ("Alger Inc.")
$369,617, $499,021, $158,701, $13,161 and $117,108, respectively, in connection
with securities transactions.
(c) Transfer Agency Fees: The Fund has entered into a transfer agency agreement
with Alger Shareholder Services, Inc. ("Services"), whereby Services will act as
transfer agent for the Fund for a fee of $2,500 per year per Portfolio plus
out-of-pocket expenses.
(d) Other Transactions With Affiliates: Certain trustees and officers of the
Fund are directors and officers of Alger Management, Alger Inc. and Services. At
December 31, 1994, Alger Inc. and affiliates owned 35,316 shares, 22,119 shares,
1,110 shares, 1,437 shares, 1 share and 1 share of the American Growth
Portfolio, American Small Capitalization Portfolio, American Income and Growth
Portfolio, American Balanced Portfolio, American MidCap Growth Portfolio and
American Leveraged AllCap Portfolio, respectively.
NOTE 4 -- SECURITIES TRANSACTIONS:
Purchases and sales of securities, other than short-term securities, for the
year ended December 31, 1994, were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
------------ ------------
<S> <C> <C>
American Growth
Portfolio........ $173,870,001 $100,944,095
American Small
Capitalization
Portfolio........ 447,430,150 291,500,470
American Income and
Growth
Portfolio........ 49,972,211 48,246,528
American Balanced
Portfolio........ 6,808,198 5,450,822
American MidCap
Growth
Portfolio........ 64,077,679 28,544,375
</TABLE>
NOTE 5 -- SHARE CAPITAL:
The Fund has an unlimited number of authorized shares of beneficial interest of
$.001 par value.
During the year ended December 31, 1994, transactions of shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
SHARES AMOUNT
---------- ------------
<S> <C> <C>
American Growth
Portfolio:
Shares sold....... 5,373,649 $124,532,301
Dividends
reinvested...... 304,524 6,532,029
---------- ------------
5,678,173 131,064,330
Shares redeemed... (2,211,790) (51,249,094)
---------- ------------
Net
increase... 3,466,383 $ 79,815,236
========= ===========
</TABLE>
<TABLE>
<CAPTION>
SHARES AMOUNT
---------- ------------
<S> <C> <C>
American Small
Capitalization
Portfolio:
Shares sold....... 12,403,211 $335,183,769
Dividend
reinvested...... 711,599 18,316,556
---------- ------------
13,114,810 353,500,325
Shares redeemed... (6,312,212) (173,221,120)
---------- ------------
Net
increase... 6,802,598 $180,279,205
========= ===========
</TABLE>
F-42
<PAGE>
THE ALGER AMERICAN FUND
NOTES TO
FINANCIAL STATEMENTS (CONT'D)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES AMOUNT
---------- ------------
<S> <C> <C>
American Income and
Growth Portfolio:
Shares sold........ 682,155 $ 9,507,480
Dividends
reinvested....... 112,640 1,437,286
---------- ------------
794,795 10,944,766
Shares redeemed.... (686,690) (9,333,248)
---------- ------------
Net
increase.... 108,105 $ 1,611,518
========= ===========
</TABLE>
<TABLE>
<CAPTION>
SHARES AMOUNT
---------- ------------
<S> <C> <C>
American Balanced
Portfolio:
Shares sold........ 413,116 $ 4,551,206
Dividends
reinvested....... 22,313 233,615
---------- ------------
435,429 4,784,821
Shares redeemed.... (151,358) (1,633,010)
---------- ------------
Net
increase.... 284,071 $ 3,151,811
========= ===========
</TABLE>
<TABLE>
<CAPTION>
SHARES AMOUNT
---------- ------------
<S> <C> <C>
American MidCap Growth
Portfolio:
Shares sold........ 3,901,955 $ 51,365,282
Dividends
reinvested....... 9,794 122,329
---------- ------------
3,911,749 51,487,611
Shares redeemed.... (843,779) (11,023,843)
---------- ------------
Net
increase.... 3,067,970 $ 40,463,768
========= ===========
</TABLE>
During the year ended December 31, 1993, transactions of shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
SHARES AMOUNT
---------- ------------
<S> <C> <C>
American Growth
Portfolio:
Shares sold........ 4,145,682 $ 88,973,836
Dividends
reinvested....... 2,935 57,621
---------- ------------
4,148,617 89,031,457
Shares redeemed.... (2,616,069) (55,760,959)
---------- ------------
Net
increase.... 1,532,548 $ 33,270,498
========= ===========
</TABLE>
<TABLE>
<CAPTION>
SHARES AMOUNT
---------- ------------
<S> <C> <C>
American Small
Capitalization
Portfolio:
Shares sold....... 9,000,007 $244,244,343
Shares redeemed... (6,243,088) (168,591,049)
---------- ------------
Net
increase... 2,756,919 $ 75,653,294
========= ===========
</TABLE>
<TABLE>
<CAPTION>
SHARES AMOUNT
---------- ------------
<S> <C> <C>
American Income and
Growth Portfolio:
Shares sold....... 2,221,487 $ 32,177,496
Dividends
reinvested...... 5,671 79,052
---------- ------------
2,227,158 32,256,548
Shares redeemed... (766,821) (11,054,086)
---------- ------------
Net
increase... 1,460,337 $ 21,202,462
========= ===========
</TABLE>
<TABLE>
<CAPTION>
SHARES AMOUNT
---------- ------------
<S> <C> <C>
American Balanced
Portfolio:
Shares sold....... 477,857 $ 5,265,555
Dividends
reinvested...... 1,219 12,645
---------- ------------
479,076 5,278,200
Shares redeemed... (173,239) (1,895,180)
---------- ------------
Net
increase... 305,837 $ 3,383,020
========= ===========
</TABLE>
<TABLE>
<CAPTION>
SHARES AMOUNT
---------- ------------
<S> <C> <C>
American MidCap Growth
Portfolio:
Shares sold....... 1,859,284 $ 22,859,768
Dividends
reinvested...... 16,091 216,419
---------- ------------
1,875,375 23,076,187
Shares redeemed... (322,920) (3,988,701)
---------- ------------
Net
increase... 1,552,455 $ 19,087,486
========= ===========
</TABLE>
F-43
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and
Board of Trustees of The Alger American Fund:
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of The Alger American Fund (a Massachusetts
business trust comprising, respectively, the Alger American Growth Portfolio,
Alger American Small Capitalization Portfolio, Alger American Income and Growth
Portfolio, Alger American Balanced Portfolio and Alger American MidCap Growth
Portfolio) as of December 31, 1994, and the related statements of operations and
cash flows for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended and the financial highlights for
each of the five years in the period then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1994, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective portfolios constituting The Alger American Fund as of December
31, 1994, the results of their operations and cash flows for the year then
ended, the changes in their net assets for each of the two years in the period
then ended, and the financial highlights for each of the five years in the
period then ended in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
New York, New York
February 2, 1995
F-44
<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 in 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
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 A 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-rated 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 AAA bond is a showing
A-1
<PAGE>
APPENDIX
(continued
of earnings several times or many times interest requirements, with such
stability of applicable earnings that safety is beyond reasonable question
whatever changes occur in conditions. Bonds rated AA by Fitch are judged by
Fitch to be of safety virtually beyond question and are readily salable, whose
merits are not unlike those of the AAA class, but whose margin of safety is less
strikingly broad. The issue may be the obligation of a small company, strongly
secured but influenced as to rating by the lesser financial power of the
enterprise and more local type of market.
Bonds rated Duff-1 are judged by Duff and Phelps, Inc. ("Duff") to be of the
highest credit quality with negligible risk factors; only slightly more than
U.S. Treasury debt. Bonds rated Duff-2, 3 and 4 are judged by Duff to be of high
credit quality with strong protection factors. Risk is modest but may vary
slightly from time to time because of economic conditions.
Commercial Paper Ratings
Moody's Commercial Paper ratings are opinions of the ability of issuers to
repay punctually promissory obligations not having an original maturity in
excess of nine months. The rating Prime-1 is the highest commercial paper rating
assigned by Moody's. Issuers rated Prime-1, or related supporting institutions,
are considered to have a superior capacity for repayment of short-term
promissory obligations. Issuers rated Prime-2, or related supporting
institutions, are considered to have a strong capacity for repayment of
short-term promissory obligations. This will normally be evidenced by many of
the characteristics of issuers rated Prime-1, 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-l is the highest commercial paper rating assigned by Duff.
Paper rated Duff-l is regarded as having very high certainty of timely payment
with excellent liquidity factors which are supported by ample asset protection.
Risk factors are minor. Paper rated Duff-2 is regarded as having good certainty
of timely payment, good access to capital markets and sound liquidity factors
and company fundamentals. Risk factors are small.
A-2
<PAGE>
Investment Manager:
Fred Alger Management, Inc.
75 Maiden Lane
New York, New York 10038
- --------------------------------------------------------------------------------
Distributor:
Fred Alger & Company, Incorporated
30 Montgomery Street
Jersey City, New Jersey 07302
- --------------------------------------------------------------------------------
Custodian:
Custodial Trust Company
101 Carnegie Center
Princeton, New Jersey 08540-6231
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
================================================================================
THE
ALGER Meeting the challenge
AMERICAN of investing
FUND
Statement
of Additional July 31, 1995
Information
================================================================================
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
(l) Financial Statements included in Part A:
Condensed Financial Information
(2) Financial Statements included in Part B:
(i) Report of Independent Accountants;
(ii) Financial Statements as of December 31, 1994 and for the
period then ended;
(iii) Financial Statements as of June 30, l995 for the Alger
American Leveraged AllCap (unaudited).
(b) Exhibits:
Exhibit No. Description of Exhibit
- ----------- ----------------------
l(a) Agreement and Declaration of Trust (l)
l(b) Written Consent of the Sole Trustee of the Trust amending the
Agreement and Declaration of Trust (1)
1(c) Amendment to Registrant's Agreement and Declaration of Trust to
establish the Alger American Fixed Income Portfolio (3)
l(d) Certificate of Designation relating to the Alger American MidCap
Growth Portfolio (5)
1(e) Certificate of Designation relating to the Alger American Leveraged
AllCap Portfolio (6)
2 By-laws of Registrant (l)
3 Not applicable
C-1
<PAGE>
Exhibit No. Description of Exhibit
- ----------- ----------------------
4(a) Specimen certificate for shares of beneficial interest in the Alger
American Money Market Portfolio, the Alger American Income and
Growth Portfolio, the Alger American Small Capitalization Portfolio
and the Alger American Growth Portfolio (2)
4(b) Specimen certificate for shares of beneficial interest in the Alger
American Fixed Income Portfolio (3)
4(c) Specimen certificate for shares of beneficial interest in the Alger
American Balanced Portfolio (4)
4(d) Specimen certificate for shares of beneficial interest in the Alger
American MidCap Growth Portfolio (5)
4(e) Specimen certificate for shares of beneficial interest in the Alger
American Leveraged AllCap Portfolio (6)
5 Investment Management Agreements (3)
5(a) Investment Management Agreement for the Alger American Balanced
Portfolio (4)
5(b) Investment Management Agreement for the Alger American MidCap Growth
Portfolio (5)
5(c) Investment Management Agreement for the Alger American Leveraged
AllCap Portfolio (6)
6 Distribution Agreement (3)
7 Not applicable
8(a) Form of Custody Agreement (2)
8(b) Form of Supplement to Custody Agreement relating to the Alger
American Fixed Income Portfolio (3)
9 Not applicable
10 Opinions of Counsel (3)
l0(a) Opinions of Sullivan & Worcester
C-2
<PAGE>
11 Consent of Arthur Andersen LLP
12 Not applicable
13(a) Purchase Agreement relative to the shares of the Alger American
Money Market, Income and Growth, Small Capitalization and Growth
Portfolios (2)
13(b) Purchase Agreement relative to the shares of the Alger American
Fixed Income Portfolio (3)
13(c) Purchase Agreement relative to the shares of the Alger American
MidCap Growth Portfolio (5)
13(d) Purchase Agreement relative to the shares of the Alger American
Leveraged AllCap Portfolio (6)
14 Not applicable
15 Not applicable
16 Schedule for computation of performance quotations provided in the
Statement of Additional Information
- ----------
(1) Incorporated by reference to Registrant's Registration Statement (the
"Registration Statement") filed with the Securities and Exchange Commission
(the "SEC") on May 6, 1988.
(2) Incorporated by reference to Pre-Effective Amendment No. 2 to the
Registration Statement ("Pre-Effective Amendment No. 2") filed with the SEC
on July 22, 1988.
(3) Incorporated by reference to Post-Effective Amendment No. 1 to the
Registration Statement ("Post-Effective Amendment No. 1") filed with the
SEC on January 23, 1989.
(4) Incorporated by reference to Post-Effective Amendment No. 5 to the
Registration Statement ("Post-Effective Amendment No. 5") filed with the
SEC on August 3, 1992.
(5) Incorporated by reference to Post-Effective Amendment No. 7 to the
Registration Statement ("Post-Effective Amendment No. 7") filed with the
SEC on March 5, 1993.
(6) Incorporated by reference to Post-Effective Amendment No. 9 to the
Registration Statement ("Post-Effective Amendment No. 9") filed with the
SEC on March 2, 1994.
C-3
<PAGE>
Item 25. Persons Controlled by or Under Common Control with Registrant
None.
Item 26. Number of Holders of Securities
Set forth below is information regarding the number of record holders of
each class of Registrant's securities as of April 14, 1995.
Title or Class Number of Record Holders
-------------- ------------------------
Alger American Income and Growth Portfolio 5
Alger American Small Capitalization Portfolio 15
Alger American Growth Portfolio 18
Alger American Balanced Portfolio 5
Alger American MidCap Growth Portfolio 11
Alger American Leveraged AllCap Portfolio 6
Item 27. Indemnification
Under Section 8.4 of Registrant's Agreement and Declaration of Trust any
past or present Trustee or officer of Registrant (including persons who serve at
Registrant's request as directors, officers or trustees of another organization
in which Registrant has any interest as a shareholder, creditor or otherwise
[hereinafter referred to as a "Covered Person"]) is indemnified to the fullest
extent permitted by law against liability and all expenses reasonably incurred
by him in connection with any action, suit or proceeding to which he may be a
party or otherwise involved by reason of his being or having been a Covered
Person. This provision does not authorize indemnification when it is determined,
in the manner specified in the Agreement and Declaration of Trust, that such
Covered Person has not acted in good faith in the reasonable belief that his
actions were in or not opposed to the best interests of Registrant. Moreover,
this provision does not authorize indemnification when it is determined, in the
manner specified in the Agreement and Declaration of Trust, that such Covered
Person would otherwise be liable to Registrant or its shareholders by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of his
duties. Expenses may be paid by Registrant in advance of the final disposition
of any action, suit or proceeding upon receipt of an undertaking by such Covered
Person to repay such expenses to Registrant in the event that it is ultimately
determined that indemnification of such expenses is not
C-4
<PAGE>
authorized under the Agreement and Declaration of Trust and either (i) the
Covered Person provides security for such undertaking, (ii) Registrant is
insured against losses from such advances or (iii) the disinterested Trustees or
independent legal counsel determines, in the manner specified in the Agreement
and Declaration of Trust, that there is reason to believe the Covered Person
will be found to be entitled to indemnification.
Insofar as indemnification for liability arising under the Securities Act
of 1933 (the "Securities Act"), may be permitted to Trustees, officers and
controlling persons of Registrant pursuant to the foregoing provisions, or
otherwise, Registrant has been advised that in the opinion of the Securities and
Exchange Commission (the "SEC") such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by Registrant of expenses incurred or paid by a Trustee, officer or
controlling person of Registrant in the successful defense of any action, suit
or proceeding) is asserted by such Trustee, officer or controlling person in
connection with the securities being registered, Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
Item 28. Business and Other Connections of Investment Adviser
Alger Management, which serves as investment manager to Registrant, is
generally engaged in rendering investment advisory services to institutions and,
to a lesser extent, individuals. Alger Management presently serves as investment
adviser to two closed-end investment companies and to another open-end
investment company. The list required by this Item 28 regarding any other
business, profession, vocation or employment of a substantial nature engaged in
by officers and directors of Alger Management during the past two years is
incorporated by reference to Schedules A and D of Form ADV filed by Alger
Management pursuant to the Investment Advisers Act of 1940 (SEC File No.
801-06709).
Item 29. Principal Underwriter
(a) Alger Inc. acts as principal underwriter for Registrant and The Alger
Fund and has acted as subscription agent for Castle Convertible Fund, Inc. and
Spectra Fund, Inc.
(b) The information required by this Item 29 with respect to each director,
officer or partner of Alger Inc. is incorporated by reference to Schedule A of
Form BD filed by Alger Inc. pursuant to the Securities Exchange Act of 1934 (SEC
File No. 8-6423).
(c) Not applicable.
C-5
<PAGE>
Item 30. Location of Accounts and Records
All accounts and records of Registrant are maintained by Mr. Gregory
S. Duch, Fred Alger & Company, Incorporated, 30 Montgomery Street, Jersey
City, NJ 07302.
Item 31. Management Services
Not applicable.
Item 32. Undertakings
(a) Not applicable
(b) Not applicable
(c) Registrant hereby undertakes to provide its annual report without
charge to any recipient of its Prospectus who requests the
information.
C-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, and the
Investment Company Act of 1940, as amended, Registrant certified that this
Registration Statement meets all of the requirements for effectiveness pursuant
to Rule 485(b) under the Securities Act of 1933 and has duly caused this
Amendment to be signed on its behalf by the undersigned, thereto duly
authorized, in the City of New York and State of New York on the 24 day of July,
1995.
THE ALGER AMERICAN FUND
By: /s/ David D. Alger
--------------------------------
David D. Alger, President
ATTEST: /s/ Gregory S. Duch
-------------------------------
Gregory S. Duch, Treasurer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
has been signed below by the following persons in the capacities and on the
dates indicated:
Signature Title Date
--------- ----- ----
/s/ Fred M. Alger III* Chairman of the Board July 24, 1995
- --------------------------------
Fred M. Alger III
/s/ David D. Alger President and Trustee July 24, 1995
- -------------------------------- (Chief Executive Officer)
David D. Alger
/s/ Gregory S. Duch Treasurer July 24, 1995
- -------------------------------- (Chief Financial and Accounting
Gregory S. Duch Officer)
/s/ Nathan E. Saint-Amand* Trustee July 24, 1995
- --------------------------------
Nathan E. Saint-Amand
/s/ Stephen E. O'Neil* Trustee July 24, 1995
- --------------------------------
Stephen E. O'Neil
/s/ Arthur M. Dubow* Trustee July 24, 1995
- --------------------------------
Arthur M. Dubow
/s/ John T. Sargent* Trustee July 24, 1995
- --------------------------------
John T. Sargent
C-7
ARTHUR ANDERSEN LLP
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report dated February 2, 1995 on the financial statements of The Alger American
Fund for the period ended December 31, 1994 and to all references to our Firm
included in or made a part of the registration statement of The Alger American
Fund filed on Form N-1A (Amendment No.13), Investment Company Act File No.
811-6880 with the Securities and Exchange Commission.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
New York, New
York July 27, 1995
Exhibit 16
AVERAGE ANNUAL RETURN COMPUTATION
The Average Annual Return for each Portfolio
was computed according to the following formula:
FORMULA: P(1+T)^n =ERV
Where: P = a hypothetical investment of $1,000
T = average annual total return
n = number of years
ERV = Ending Redeemable Value of a
hypothetical $1,000 payment made at
the beginning of the 1, 5, or 10
year (or other) periods at the end
of the 1, 5, or 10 year (or other)
periods (or fractional portion
thereof)
<TABLE>
<CAPTION>
ENDING AVERAGE
PERIOD REDEEMABLE ANNUAL RATE
PORTFOLIO COVERED VALUE OF RETURN FORMULA *
--------- ------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
ALGER AMERICAN
INCOME & GROWTH: 11/15/88 (commencement
of operations)
through 12/31/94** 1,476.47 6.56% @RATE(1476.47,1000,6.13)
5 YEARS ENDED 12/31/94 1,361.77 6.37% @RATE(1361.77,1000,5)
YEAR ENDED 12/31/94 917.19 -8.28% @RATE(917.19,1000,1)
ALGER AMERICAN SMALL
CAPITALIZATION: 9/21/88 (commencement
of operations)
through 12/31/94*** 3,054.10 19.46% @RATE(3054.10,1000,6.28)
5 YEARS ENDED 12/31/94 1,921.18 13.95% @RATE(1921.18,1000,5)
YEAR ENDED 12/31/94 956.23 -4.38% @RATE(956.23,1000,1)
ALGER AMERICAN GROWTH: 1/9/89 (commencement
of operations)
through 12/31/94**** 2,533.04 16.82% @RATE(2533.04,1000,5.98)
5 YEARS ENDED 12/31/94 2,041.11 15.34% @RATE(2041.11,1000,5)
YEAR ENDED 12/31/94 1,014.46 1.45% @RATE(1014.46,1000,1)
ALGER AMERICAN
BALANCED: 9/5/89 (commencement
of operations)
through 12/31/94***** 1,293.55 4.95% @RATE(1293.55,1000,5.32)
5 YEARS ENDED 12/31/94 1,260.11 4.73% @RATE(1260.11,1000,5)
YEAR ENDED 12/31/94 957.32 -4.27% @RATE(957.32,1000,1)
ALGER AMERICAN
MIDCAP GROWTH: 5/3/93 (commencement
of operations)
through 12/31/94****** 1,365.32 20.55% @RATE(1365.32,1000,1.67)
YEAR ENDED 12/31/94 984.59 -1.54% @RATE(984.59,1000,1)
* LOTUS 123 @RATE FUNCTION:
@RATE(FV,PV,TERM) The periodic interest rate necessary for
present value "pv", to grow to future value "fv",
over the number of compounding periods in "term".
** Period equals 6.13 years.
*** Period equals 6.28 years.
**** Period equals 5.98 years.
***** Period equals 5.32 years.
****** Period equals 1.67 years.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 382,711
<INVESTMENTS-AT-VALUE> 429,953
<RECEIVABLES> 14,161
<ASSETS-OTHER> 3
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 444,117
<PAYABLE-FOR-SECURITIES> 34,401
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 23,985
<TOTAL-LIABILITIES> 58,386
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 293,414
<SHARES-COMMON-STOCK> 26,591
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 1,119
<ACCUMULATED-NET-GAINS> 66,194
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 47,242
<NET-ASSETS> 385,731
<DIVIDEND-INCOME> 740
<INTEREST-INCOME> 531
<OTHER-INCOME> 0
<EXPENSES-NET> 2,390
<NET-INVESTMENT-INCOME> (1,119)
<REALIZED-GAINS-CURRENT> 66,194
<APPREC-INCREASE-CURRENT> 47,242
<NET-CHANGE-FROM-OPS> 112,317
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 26,591
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 385,731
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,047
<INTEREST-EXPENSE> 543
<GROSS-EXPENSE> 10,798
<AVERAGE-NET-ASSETS> 293,380
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> (0.04)
<PER-SHARE-GAIN-APPREC> 4.55
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 14.51
<EXPENSE-RATIO> 1.94
<AVG-DEBT-OUTSTANDING> 13,748
<AVG-DEBT-PER-SHARE> 0.56
</TABLE>
