As filed with the Securities and Exchange Commission
on May 1 1996
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. l2 __X__
and/or
_____
Registration Statement Under The Investment Company Act of 1940 _____
_____
Amendment No. 14 __X__
(Check appropriate box or boxes)
THE ALGER AMERICAN FUND
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(Exact Name of Registrant as Specified in Charter)
75 Maiden Lane
New York, New York 10038
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: 212-806-8800
Mr. Gregory S. Duch
Fred Alger Management, Inc.
75 Maiden Lane
New York, NY 10038
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(Name and Address of Agent for Service)
Page 1 of _____ Pages
Exhibit Index at Page _____
<PAGE>
It is proposed that this filing will become effective (check appropriate box):
_____
_____ immediately upon filing pursuant to paragraph (b), or
_____
_____ on [date] pursuant to paragraph (b), or
_____
__X__ 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, 1995 will be filed on or
about March 8, 1996.
<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 May 1, 1996 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 |
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRE-
SENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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MAY 1, 1996
<PAGE>
- --------------------------------------------------------------------------------
CONTENTS
<TABLE>
<CAPTION>
Page Page
---- ----
<S> <C> <C> <C>
Portfolio Expenses............................ iii Alger American MidCap Growth
Financial Highlights.......................... iv Portfolio.......................... 2
The Portfolios................................ 1 Alger American Leveraged AllCap
Participating Insurance Companies and Plans... 1 Portfolio........................... 2
Investment Objectives and Policies............ 1 Investment Practices................... 3
Alger American Balanced Portfolio........... 1 Management of the Fund................. 5
Alger American Income and Growth Net Asset Value........................ 7
Portfolio................................. 2 Purchases and Redemptions.............. 7
Alger American Small Capitalization Dividends and Distributions............ 7
Portfolio................................. 2 Taxes.................................. 7
Alger American Growth Portfolio............. 2 Performance............................ 8
Investor and Shareholder Information... 8
</TABLE>
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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:
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>
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iii
<PAGE>
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FINANCIAL HIGHLIGHTS
The Financial Highlights for the years ended December 31, 1990 through 1995
have been audited by Arthur Andersen LLP, the Fund's independent public
accountants, as indicated in their report dated February 5, 1996 on the Fund's
financial statements as of December 31, 1995 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,
---------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989(ii)
-------- -------- ------- ------- ------- ------- -------
<S> <C> <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>
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THE ALGER AMERICAN FUND
SMALL CAPITALIZATION PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988(iii)
-------- -------- ------- ------- ------- ------- ------ ------
<S> <C> <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
INCOME AND GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------------------------------------------
1995 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% -- --
======= ======= ======= ======= ======= ===== ===== =====
</TABLE>
(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.
- --------------------------------------------------------------------------------
vi
<PAGE>
- --------------------------------------------------------------------------------
THE ALGER AMERICAN FUND
BALANCED PORTFOLIO (i)
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989(ii)
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year........... $ 00.00 $ 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% --
======= ======= ======= ======= ====== ====== =======
</TABLE>
(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.
- --------------------------------------------------------------------------------
vii
<PAGE>
- --------------------------------------------------------------------------------
THE ALGER AMERICAN FUND
MIDCAP GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
From May 3, 1993
(commencement of
Year Ended December 31, operations)
1995 1994 to December 31, 1993(i)
<S> <C> <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.
- --------------------------------------------------------------------------------
viii
<PAGE>
- --------------------------------------------------------------------------------
THE ALGER AMERICAN FUND
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
From January 25, 1995
(commencement of
operations)
to June 30, 1995(i)
---------------------
<S> <C>
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
=======
</TABLE>
(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.
1
<PAGE>
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 -- within the range of
companies included in the Russell 2000 Growth Index, updated quarterly. The
Russell 2000 Growth Index is designed to track the performance of small
capitalization companies. As of December 31, 1995, the range of market
capitalization of these companies was $20 million to $2.2 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 outside the range of
companies included in the Russell 2000 Growth Index 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 within the range of
companies included in the S&P MidCap 400 Index, updated quarterly. The S&P
MidCap 400 Index is designed to track the performance of medium capitalization
companies. As of December 31, 1995, the range of market capitalization of these
companies was $118 million to $7.5 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 outside the range of companies
included in the S&P MidCap 400 Index and in excess of that amount (up to 100% of
its assets) during temporary defensive periods.
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
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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
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.
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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.
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
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"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
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, 1995, had approximately $4.8 billion
under management, $3.0 billion in mutual fund accounts and $1.8 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 , 1996, those persons and companies may also be deemed to
control the Alger American Leveraged AllCap Portfolio.
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PORTFOLIO MANAGERS
David D. Alger, Seilai Khoo and Ronald Tartaro are primarily responsible for
the day-to-day management of the Portfolios of the Fund. Mr. Alger has been
employed by Alger Management as Executive Vice President and Director of
Research since 1971 and as President since 1995. Ms Khoo has been employed by
Alger Management as a senior research analyst since 1989 and as a Senior Vice
President since 1995. Mr. Tartaro has been employed by Alger Management as a
senior research analyst since 1990 and as a Senior Vice President since 1995.
Mr. Alger, Ms. Khoo and Mr. Tartaro also serve as portfolio managers for other
mutual funds and investment accounts managed by Alger Management. Steven R.
Thumm serves as co-manager of the Alger American Balanced Portfolio. He has been
employed by Alger Management as a fixed income analyst since 1991 and prior to
that he was employed by Marine Midland Bank as Assistant Vice President.
Alger Management personnel ("Access Persons") are permitted to engage in
personal securities transactions subject to the restrictions and procedures of
the Fund's Code of Ethics. Pursuant to the Code of Ethics, Access Persons
generally must preclear all personal securities transactions prior to trading
and are subject to certain prohibitions on personal trading. You can get a copy
of the Fund's Code of Ethics by calling the Fund toll-free at (800) 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.
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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.
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 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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<PAGE>
No person has been authorized to give THE |
any information or to make any ALGER | Meeting the challenge
representations other than those AMERICAN | of investing
contained in this Prospectus or the FUND |
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. Alger American
75 Maiden Lane Balanced Portfolio
New York, New York 10038
Alger American
Distributor: Income and Growth Portfolio
Fred Alger & Company, Incorporated
30 Montgomery Street Alger American
Jersey City, New Jersey 07302 Small Capitalization Portfolio
Transfer Agent: Alger American
Alger Shareholder Services, Inc. Growth Portfolio
30 Montgomery Street
Box 2001 Alger American
Jersey City, New Jersey 07302 MidCap Growth Portfolio
Independent Public Accountants: Alger American
Arthur Andersen LLP Leveraged AllCap Portfolio
1345 Avenue of the Americas
New York, New York 10105
PROSPECTUS | May 1, 1996
<PAGE>
PROSPECTUS
- ----------
THE
ALGER 75 MAIDEN LANE
AMERICAN NEW YORK, NEW YORK 10038
FUND (800) 992-FUND (992-363)
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
May 1, 1996 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.
- --------------------------------------------------------------------------------
May 1, 1996
<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.............. 2
Alger American MidCap Growth
Portfolio.................................. 2
Page
-----
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" 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%
</TABLE>
<TABLE>
<CAPTION>
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>
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 1995
have been audited by Arthur Andersen LLP, the Fund's independent public
accountants, as indicated in their report dated February 5, 1996 on the Fund's
financial statements as of December 31, 1995 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,
-------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989(ii)
------ -------- ------- ------- ------- ------ ---------
<S> <C> <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>
<TABLE>
<CAPTION>
THE ALGER AMERICAN FUND
SMALL CAPITALIZATION PORTFOLIO
Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
Year Ended December 31,
--------------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988(ii)
------ -------- -------- -------- ------- ------- ------- -------
<S> <C> <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
(commencement of
Year Ended December 31, operations)
-----------------------
1995 1994 to December 31, 1993(i)
-------- -------- -----------------------
<S> <C> <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 ighlights
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--within the range of
companies included in the Russell 2000 Growth Index, updated quarterly. The
Russell 2000 Growth Index is designed to track the performance of small
capitalization companies. As of December 31, 1995, the range of market
capitalization of these companies was $20 million to $2.2 billion. The Portfolio
may invest up to 35% of its total assets in equity securities of companies that,
1
<PAGE>
at the time of purchase, have total market capitalization outside the range of
companies included in the Russell 2000 Growth Index 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 within the range of
companies included in the S&P MidCap 400 Index, updated quarterly. The S&P
MidCap 400 Index is designed to track the performance of medium capitalization
companies. As of December 31, 1995, the range of market capitalization of these
companies was $118 million to $7.5 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 outside the range of companies
included in the S&P MidCap 400 Index and in excess of that amount (up to 100% of
its assets) during temporary defensive periods. 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.
2
<PAGE>
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. ("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
3
<PAGE>
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 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.
4
<PAGE>
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
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, 1995, had approximately $4.8 billion
under management, $3.0 billion in mutual fund accounts and $1.8 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, Seilai Khoo and Ronald Tartaro are primarily responsible
for the day-to-day management of the Portfolios of the Fund. Mr. Alger has been
employed by Alger Management as Executive Vice President and Director of
Research since 1971 and as President since 1995. Ms. Khoo has been employed by
Alger Management as a senior research analyst since 1989 and as a Senior Vice
President since 1995. Mr. Tartaro has been employed by Alger Management as a
senior research analyst since 1990 and as a Senior Vice President since 1995.
Mr. Alger, Ms. Khoo and Mr. Tartaro also serve as portfolio managers for other
mutual funds and investment accounts managed by Alger Management.
Alger Management personnel ("Access Persons") are permitted to engage in
personal securities transactions subject to the restrictions and procedures of
the Fund's Code of Ethics. Pursuant to the Code of Ethics, Access Persons
generally must preclear all personal securities transactions prior to trading
and are subject to certain prohibitions on personal trading. You can get a copy
of the Fund's Code of Ethics by calling the Fund toll-free at (800) 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
5
<PAGE>
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 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
6
<PAGE>
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.
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.
7
<PAGE>
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 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
[LOGO]
ALGER AMERICAN
SMALL CAPITALIZATION PORTFOLIO
ALGER AMERICAN
GROWTH PORTFOLIO
ALGER AMERICAN
MIDCAP GROWTH PORTFOLIO
ALGER AMERICAN
LEVERAGED ALLCAP PORTFOLIO
|
PROSPECTUS | May 1, 1996
|
<PAGE>
PROSPECTUS
- ----------
THE |
ALGER | 75 Maiden Lane
AMERICAN | New York, NY 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 within the range of
companies included in the Russell 2000 Growth Index.
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 May 1, 1996 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.
- --------------------------------------------------------------------------------
May 1, 1996
<PAGE>
- --------------------------------------------------------------------------------
CONTENTS
Page
----
Portfolio Expenses .................................. iii
Financial Highlights ................................ iv
The Alger American Small Capitalization
Portfolio ......................................... 1
Participating Insurance Companies and Plans ......... 1
Investment Objectives and Policies .................. 1
Investment Practices ................................ 2
Page
----
Management of the Fund .............................. 3
Net Asset Value ..................................... 4
Purchases and Redemptions ........................... 4
Dividends and Distributions ......................... 5
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 1995
have been audited by Arthur Andersen LLP, the Fund's independent public
accountants, as indicated in their report dated February 5, 1996 on the Fund's
financial statements as of December 31, 1995 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
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994 1993 1992 1991 1990 1989 1988(iii)
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <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--within the range of
companies included in the Russell 2000 Growth Index, updated quarterly. The
Russell 2000 Growth Index is designed to track the performance of small
capitalization companies. As of December 31, 1995, the range of market
capitalization of these companies was $20 million to $2.2 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 outside the range of
companies included in the Russell 2000 Growth Index 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
1
<PAGE>
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.
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.
2
<PAGE>
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
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, 1995, had approximately $4.8 billion
under management, $3.0 billion in mutual fund accounts and $1.8 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, Seilai Khoo and Ronald Tartaro are primarily responsible for
the day-to-day management of the Portfolios of the Fund. Mr. Alger has been
employed by Alger Management as Executive Vice President and Director of
Research since 1971 and as President since 1995. Ms. Khoo has been employed by
Alger Management as a senior research analyst since 1989 and as a Senior Vice
President since 1995. Mr. Tartaro has been employed by Alger Management as a
senior research analyst since 1990 and as a Senior Vice President since 1995.
Mr. Alger, Ms. Khoo and Mr. Tartaro also serve as portfolio managers for other
mutual funds and investment accounts managed by Alger Management.
3
<PAGE>
Alger Management personnel ("Access Persons") are permitted to engage in
personal securities transactions subject to the restrictions and procedures of
the Fund's Code of Ethics. Pursuant to the Code of Ethics, Access Persons
generally must preclear all personal securities transactions prior to trading
and are subject to certain prohibitions on personal trading. You can get a copy
of the Fund's Code of Ethics by calling the Fund toll-free at (800) 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.
4
<PAGE>
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.
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 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
[LOGO]
ALGER AMERICAN SMALL
CAPITALIZATION PORTFOLIO
|
PROSPECTUS | May 1, 1996
|
================================================================================
<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 May 1, 1996 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.
- --------------------------------------------------------------------------------
MAY 1, 1996
<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 1995 have been audited by Arthur Andersen LLP, the Fund's
independent public accountants, as indicated in their report dated
February 5, 1996 on the Fund's financial statements as of December 31,
1995 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
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989(ii)
-------- -------- -------- -------- -------- -------- --------
<S> <C> <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, Seilai Khoo and Ronald Tartaro are primarily responsible for
the day-to-day management of the Portfolios of the Fund. Mr. Alger has been
employed by Alger Management as Executive Vice President and Director of
Research since 1971 and as President since 1995. Ms. Khoo has been employed by
Alger Management as a senior research analyst since 1989 and as a Senior Vice
President since 1995. Mr. Tartaro has been employed by Alger Management as a
senior research analyst since 1990 and as a Senior Vice President since 1995.
Mr. Alger, Ms. Khoo and Mr. Tartaro also serve as portfolio managers for other
mutual funds and investment accounts managed by Alger Management.
Alger Management personnel ("Access Persons") are permitted to engage in
personal securities transactions subject to the restrictions and procedures of
the Fund's Code of Ethics. Pursuant to the Code of Ethics, Access Persons
generally must preclear all personal securities transactions prior to trading
and are subject to certain prohibitions on personal trading. You can get a copy
of the Fund's Code of Ethics by calling the Fund toll-free at (800) 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
up to .30% of the net asset value of shares held by those customers depending on
3
<PAGE>
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
4
<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 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 THE |
TO GIVE ANY INFORMATION OR TO MAKE ALGER | Meeting the challenge
ANY REPRESENTATIONS OTHER THAN THOSE AMERICAN | of investing
CONTAINED IN THIS PROSPECTUS OR THE FUND |
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 ALGER AMERICAN GROWTH
30 Montgomery Street PORTFOLIO
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
|
|
|
|
PROSPECTUS | May 1, 1996
|
|
|
|
==================================== ======================================
<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 within the range of companies
included in the S&P MidCap 400 Index.
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 May 1, 1996 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.
================================================================================
MAY 1, 1996
<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 ............................................. 2
Page
----
Management of the Fund ........................................... 3
Net Asset Value .................................................. 4
Purchases and Redemptions ........................................ 4
Dividends and Distributions ...................................... 5
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 ....................................................... .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
- --------------------------------------------------------------------------------
iii
<PAGE>
FINANCIAL HIGHLIGHTS
The Financial Highlights for the periods ended December 31, 1993 through
1995 have been audited by Arthur Andersen LLP, the Fund's independent public
accountants, as indicated in their report dated February 5, 1996 on the Fund's
financial statements as of December 31, 1995 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
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
From May 3, 1993
Year Ended December 31, (commencement of
----------------------- operations)
1995 1994 to December 31, 1993(i)
------------------- -----------------------
<S> <C> <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.
- --------------------------------------------------------------------------------
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--within the range of
companies included in the S&P MidCap 400 Index, updated quarterly. The S&P
MidCap 400 Index is designed to track the performance of medium capitalization
companies. As of December 31, 1995, the range of market capitalization of these
companies was $118 million to $7.5 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 outside the range of companies
included in the S&P MidCap 400 Index 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
1
<PAGE>
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.
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.
2
<PAGE>
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
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, 1995, had approximately $4.8 billion
under management, $3.0 billion in mutual fund accounts and $1.8 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, Seilai Khoo and Ronald Tartaro are primarily responsible
for the day-to-day management of the Portfolios of the Fund. Mr. Alger has been
employed by Alger Management as Executive Vice President and Director of
Research since 1971 and as President since 1995. Ms. Khoo has been employed by
Alger Management as a senior research analyst since 1989 and as a Senior Vice
President since 1995. Mr. Tartaro has been employed by Alger Management as a
senior research analyst since 1990 and as a Senior Vice President since 1995.
Mr. Alger, Ms. Khoo and Mr. Tartaro also serve as portfolio managers for other
mutual funds and investment accounts managed by Alger Management.
3
<PAGE>
Alger Management personnel ("Access Persons") are permitted to engage in
personal securities transactions subject to the restrictions and procedures of
the Fund's Code of Ethics. Pursuant to the Code of Ethics, Access Persons
generally must preclear all personal securities transactions prior to trading
and are subject to certain prohibitions on personal trading. You can get a copy
of the Fund's Code of Ethics by calling the Fund toll-free at (800) 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
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
4
<PAGE>
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.
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 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 | May 1, 1996
|
================================================================================
<PAGE>
PROSPECTUS
- ----------
THE
ALGER 75 MAIDEN LANE
AMERICAN NEW YORK, NEW YORK 10038
FUND (800) 992-FUND (992-363)
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 May 1, 1996 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.
================================================================================
MAY 1, 1996
<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 ............................... 2
Page
----
Management of the Fund ............................. 3
Net Asset Value .................................... 5
Purchases and Redemptions .......................... 5
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
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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, 1995, had approximately $4.8 billion
under management, $3.0 billion in mutual fund accounts and $1.8 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 ________, 1996, those persons and companies may also be
deemed to control the Portfolio.
PORTFOLIO MANAGERS
David D. Alger, Seilai Khoo and Ronald Tartaro are primarily responsible for the
day-to-day management of the Portfolios of the Fund. Mr. Alger has been employed
by Alger Management as Executive Vice President and Director of Research since
1971 and as President since 1995. Ms. Khoo has been employed by Alger Management
as a senior research analyst since 1989 and as a Senior Vice President since
1995. Mr. Tartaro has been employed by Alger Management as a senior research
analyst since 1990 and as a Senior Vice President since 1995. Mr. Alger, Ms.
Khoo and Mr. Tartaro also serve as portfolio managers for other mutual funds and
investment accounts managed by Alger Management.
Alger Management personnel ("Access Persons") are permitted to engage in
personal securities transactions subject to the restrictions and procedures of
the Fund's Code of Ethics. Pursuant to the Code of Ethics, Access Persons
generally must preclear all personal securities transactions prior to trading
and are subject to certain prohibitions on personal trading. You can get a copy
of the Fund's Code of Ethics by calling the Fund toll-free at (800) 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
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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
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.
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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 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 | May 1, 1996
<PAGE>
================================================================================
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
STATEMENT |
OF ADDITIONAL | May 1, 1996
INFORMATION |
================================================================================
<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"):
* 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
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 May 1, 1996. 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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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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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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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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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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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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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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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 year ended December 31,
1993, the Fund paid an aggregate of approximately $590,712 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. During the fiscal year
ended December 31, 1995, the Fund paid an aggregate of approximately $2,023,563
in commissions to broker-dealers in connection with portfolio transactions, 100%
of which was paid to Alger Inc. Alger Inc. does not engage in principal
transactions with the Fund and, accordingly, received no compensation in
connection with securities purchased or sold in that manner, which include
securities traded in the over-the-counter markets, money market investments and
most debt securities.
NET ASSET VALUE
The Prospectus discusses the time at which the net asset 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
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or more of the major market makers for the securities to be valued. Bonds and
other fixed income securities may be valued on the basis of prices provided by a
pricing service when the Fund's Board of Trustees believes that these prices
reflect the fair market value of the securities. Other investments and other
assets, including restricted securities and securities for which market
quotations are not readily available, are valued at fair value under procedures
approved by the Fund's Board of Trustees. Short-term securities with maturities
of 60 days or less are valued at amortized cost, 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"), a registered closed- end investment company, and The Alger Fund, The
Alger Defined Contribution Trust and Spectra Fund, 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.
10
<PAGE>
NAME, POSITION WITH
THE FUND AND ADDRESS PRINCIPAL OCCUPATIONS
Fred M. Alger III Chairman of the Board of Alger
Chairman of the Board Associates, Inc. ("Associates"), Alger
Inc., 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,
President and Trustee Alger Management, Alger Inc., Properties,
Services and Agency. Executive Vice
President and Director of ARI.
Gregory S. Duch Executive Vice President, Treasurer and
Treasurer Director of Alger Management and
Properties; Executive Vice President and
Treasurer of Associates, Alger Inc. ARI,
Services and Agency.
Frederick A. Blum Senior Vice President of Associates,
Assistant Secretary Alger Management, Alger Inc., Properties,
ARI, Services and Agency.
Arthur M. Dubow President of Fourth Estate, Inc.; private
Trustee investor since 1985; Director of Coolidge
P.O. Box 969 Investment Corporation; formerly Chairman
Wainscott, NY 11975 of the Board of Institutional Shareholder
Services, Inc.
Stephen E. O'Neil Of counsel to the law firm of Baker,
Trustee Nelson, Mishkin & Kohler; private
460 Park Avenue investor since 1981; Director of Nova
New York, NY 10021 Care, Inc., Syntro Corporation and
Brown-Forman Distillers Corporation;
formerly 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
Trustee River Bank America and Atlantic Mutual
5 Beekman Place Insurance Co.
New York, NY 10022
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, 1995. The following table provides
compensation amounts paid to Disinterested Trustees of the Fund for the fiscal
year ended December 31, 1995.
11
<PAGE>
<TABLE>
<CAPTION>
COMPENSATION TABLE
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, 1993, 1994 and 1995, Alger Management
earned under the terms of the Management Agreements $122,834, $187,051 and
$235,434, respectively, in respect of the Alger American Income and Growth
Portfolio; $1,445,487, $2,366,780 and $5,628,002, respectively, in respect of
the Alger American Small Capitalization Portfolio; $372,682, $756,637 and
$1,894,223, respectively, in respect of the Alger American Growth Portfolio;
$39,843, $70,976 and $96,391, 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 years ended December 31, 1994 and
1995, Alger Management earned $42,051, $311,831 and $900,673, respectively,
under the terms of the Management Agreement in respect of the Alger American
MidCap Growth Portfolio. For the period from January 25, 1995 (commencement of
operations) through December 31, 1995, Alger Management earned $9,604 under the
terms of the Management Agreement. 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
12
<PAGE>
of securities held for less than three months; and (c) meet certain quarterly
diversification tests.
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 , 1996 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:
n
P (1+T) =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
12/31/95 12/31/95 12/31/95
-------- -------- --------
Alger American Balanced
(formerly the Alger
American Fixed Income) % % %
Alger American Income &
Growth % % %
Alger American Small % % %
Capitalization
Alger American Growth % % %
Alger American MidCap
Growth % %
Alger American Leveraged
AllCap Portfolio % %
* The Alger American Balanced Portfolio, the Alger American Income & Growth
Portfolio, the Alger American Small Capitalization Portfolio, the Alger
American Growth Portfolio, the Alger American MidCap Growth Portfolio and the
Alger American Leveraged AllCap Portfolio commenced operations on September
5, 1989, November 15, 1988, September 21, 1988, January 9, 1989, May 3, 1993
and January 25, 1995, respectively.
15
<PAGE>
B. Yield--a Portfolio's net annualized yield described in the Prospectus is
computed according to the following formula:
a-b 6
YIELD = 2[(----- + 1) - 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 Russell 2000
Growth Index, 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 | Meeting the challenge
AMERICAN | of investing
FUND |
ALGER AMERICAN
GROWTH PORTFOLIO
ALGER AMERICAN
SMALL CAPITALIZATION PORTFOLIO
ALGER AMERICAN
INCOME AND GROWTH PORTFOLIO
ALGER AMERICAN
BALANCED PORTFOLIO
ALGER AMERICAN
MIDCAP GROWTH PORTFOLIO
ALGER AMERICAN
LEVERAGED ALLCAP PORTFOLIO
|
ANNUAL | DECEMBER 31, 1995
REPORT |
|
<PAGE>
FELLOW SHAREHOLDERS: FEBRUARY 2, 1996
Unlike France in the 1790's, which Dickens described in the TALE OF TWO CITIES
as the "best of times and the worst of times," the late 1990's in the American
financial markets are purely the best of times. While all periods provide some
room for concern, the current period is more promising than almost any other in
recent history. While the daily news is dominated by disturbing, unconnected
events--the budget battle, horrific blizzards and lack of government statistics,
it is important to recognize that by June most of the upsetting issues
concerning the market will be behind us. I believe the budget battle will be
over, the snow will have melted and the economy will be rebounding driven by
lower rates.
1995 IN REVIEW
It is a matter of record that the stock market and the bond market both did
exceptionally well this past year. As expected, the economy slowed substantially
but the quarters reflected this in an erratic pattern. As 1995 dawned, the key
questions facing the markets concerned the need for future tightening of rates
by the Federal Reserve, the possible onset of inflation and the excessive
strength of the economy, all of which are naturally interrelated. It soon became
evident, however, that 1995 would be a year where the main concern was whether
the economy was growing too slowly. Some are now openly considering whether or
not we will have a recession in 1996.
As early as late 1994, we forecasted that the economy would slow and that there
would be a "soft landing." Thus far, this has been a correct forecast. There is
one main element which has contributed to this slowdown in business--consumer
spending, which constitutes 69% of the Gross Domestic Product (GDP). All four
components of consumer spending--housing, autos, consumer durables and
apparel--have slowed significantly. This slowdown in consumer spending was
sufficient to create the "soft landing" in the economy in 1995. Remember, a
"soft landing" implies a significant slowdown. The December 1994 quarter GDP
rate was up 5.1%. The rate of GDP growth DESIRED by the Federal Reserve is
2.5%-3%; this is a substantial reduction in growth. Overall the economy probably
grew in line with the Fed target at 2%-2.5%. Despite the gyrations and uneven
quarters, Federal Reserve Board Chairman Alan Greenspan should be commended,
like a quarterback he put the ball right on the numbers.
Recently, economic data suggests that a continuing slowdown is taking place.
Nevertheless, certainly any fears of "hard landing" or recession have now been
dispelled, if not by the recent data, then by the fact that the Fed has recently
taken action to lower rates. Whether they continue to lower rates is an open
question, but most believe they will. After all, inflation appears benign.
THE ECONOMY IN 1996
While the lack of timely economic statistics makes any projections tentative, we
are predicting that the economy will continue to grow through 1996. The rate of
growth in the first quarter could appear weak because of both the government
shutdown and severe winter weather. The exceptionally weak holiday season will
likely produce additional store closings and more bankruptcies. Since inventory
levels are still too high relative to the current rate of sales, manufacturers
will continue to cut back on production to bring inventories back in line. If
the economy does slow in the first quarter, the favorable outlook for inflation
should allow the Federal Reserve to lower short-term interest rates in small
increments.
We remain optimistic that economic activity will pick up in the second half. The
current expansion is already long-lived, but economic expansions do not simply
die of old age. Imbalances such as production bottlenecks, accelerating
inflation, rising interest rates, and excessive use of credit typically doom an
expansion. We do not believe that these conditions exist.
We expect that the economy will continue to generate new jobs. The rate of
increase should be in line with the growth in the labor force, so we do not
foresee a decline in the rate of unemployment. Wage gains will not accelerate,
in our view. Consumer confidence is still high, but we do not expect consumers
to abandon their cautious spending pattern. Consequently, the rate of increase
in personal income should remain modest, but enough to support continued limited
gains in consumer spending.
Businesses will continue to invest heavily to meet competitive pressures from
domestic and foreign rivals. Therefore, although the rate of growth in capital
spending will likely slow, we expect that capital spending will still be one of
the strong points for the U.S. economy.
The outlook for American exports seems cloudy. It is possible that export growth
could slow. The lower foreign exchange value of the dollar versus the Japanese
yen together with more aggressive marketing efforts by American corporations
resulted in a surge in growth of U.S. exports to Japan. A stronger Japanese
economy should solidify these gains in 1996. However, economic conditions appear
to have worsened in Germany and France, so U.S. exports to Europe may experience
a modest slowdown. We expect little or no improvement in U.S. exports to Mexico
or Canada, two of the largest markets for U.S. exporters.
PORTFOLIO MATTERS
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
The Alger American Small Capitalization Portfolio recorded excellent results for
the year ended December 31, 1995, with a total return of 44.3%. The Portfolio's
strong returns were due primarily to a calculated over commitment to the
technology sector throughout most of 1995. During the fourth quarter, the
technology sector was subject to extreme negative volatility. As a result of the
timely decision to scale back on select technology related holdings during this
period, the negative impact of the fourth quarter was lessened, and the
Portfolio was able to finish the year with returns significantly higher than
F-1
<PAGE>
those of the Wilshire Small Company Growth Index, which returned 35.2% and the
Russell 2000 Growth Index, which returned 31.0%. At present, the Portfolio is
well diversified, with Health Care, Communications and Computer Related and
Business Equipment representing the top three industry groups.
ALGER AMERICAN GROWTH PORTFOLIO
The Alger American Growth Portfolio generated a total return for the year ended
December 31, 1995 of 36.37%, which was slightly below that of the S&P 500, which
returned 37.6%. The Portfolio was negatively impacted by the volatility which
existed in the market during the fourth quarter. In general, growth stocks,
which had peaked at around 1.7 times the market multiples in September-October,
fell dramatically as investors took profits and rotated into defensive stocks,
sending the averages higher but depressing growth stocks. The decision by the
Federal Reserve to lower rates in December helped eliminate some of this
negativity, and the Portfolio regained its lost momentum.
ALGER AMERICAN INCOME & GROWTH PORTFOLIO
The Alger American Income & Growth Portfolio had a total return for 1995 of
35.1% compared to 37.6% for the S&P 500. The Portfolio's strategy is to invest
in growth stocks of different market capitalization sizes that provide current
income through dividends. Therefore, although the Portfolio will have many of
the characteristics of the Growth and Small Capitalization Portfolios, it is
more conservative and performance can be expected to be somewhat less.
Nevertheless, the Portfolio posted impressive returns for the year,
underperforming the S&P 500 by only a small margin.
ALGER AMERICAN BALANCED PORTFOLIO
The Alger American Balanced Portfolio's total return for the year ended December
31, 1995 was 28.6% compared to 37.6% for the S&P 500 and 19.2% for the Lehman
Government/Corporate Bond. The Portfolio's holdings are a hybrid of stocks and
bonds, typically investing 50-60% in common stocks and 40-50% in bonds. As such,
the 28.6% total return was on target relative to the stock and bond benchmark
weightings. The driving force behind the strong overall performance was the
return generated in the more aggressive equity portion of the Portfolio,
although investments in long-term high quality bonds were also a contributing
factor.
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
We are pleased to report that the Alger American MidCap Growth Portfolio posted
exceptional returns in 1995, gaining 44.5%. This compares very favorably to the
relative benchmark, the S&P MidCap 400, which had a return of 31.0% for the same
period. Although many of the same factors which resulted in the strong
performance returns for the Small Capitalization Portfolio were present in the
MidCap Growth Portfolio, the Portfolio had the added benefit of being invested
primarily in midcap stocks. Possibly the most exciting and yet to be recognized
sector of the equities market, midcap stocks have many of the upside
characteristics of small cap stocks without the attendant volatility
attributable to a lack of liquidity.
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
The Alger American Leveraged AllCap Portfolio has only been in existence since
January 25, 1995. We are very happy to report that the results for the period
ended December 31, 1995 have been extraordinary. During this period the
Portfolio's total return was a staggering 74.3% compared to the 34.9% which the
S&P 500 returned over the same time frame. Our newest portfolio, the Leveraged
AllCap Portfolio employs an "allcap" (small, medium and large capitalizations)
portfolio management strategy which has been utilized by Fred Alger Management
for more than 32 years. In addition, the Portfolio may employ a management
technique known as leveraging, that is borrowing money for investment purposes,
in order to increase the Portfolio's holdings and, therefore, its exposure to
the stock market. It was through the careful use and precise timing of this
technique that the Portfolio was able to realize returns in excess of twice
those posted by the relative benchmark.
LOOKING AHEAD
Despite the strong gains in the stock market in 1995, we believe that the market
remains undervalued when measured against both long-term and short-term interest
rates. The ratio between earnings yield on the S&P Industrials and long-term
interest rates expresses the effect interest rates have on stock market
valuations. The most recent reading was well above the average of the last seven
years and indicates that the stock market is very undervalued. Our proprietary
model for the stock market valuation relative to short-term interest rates also
indicates that the market has room to advance.
Quality growth stocks typically trade at 1.5 to 2.5 times the market multiples.
When we analyze company multiples, we rank a sample of our universe of followed
companies by the rate of growth and predictability of earnings, credit quality
and market position. At the start of 1996, high quality growth companies traded
at only a modest premium. In general, to get back to traditional valuations, we
believe growth stocks could rise 50% relative to the market based on
estimated1996 earnings per share.
The inescapable conclusion for us is that the market has more going for it over
the next twelve months than at almost any other period in history:
1. The economy is moving ahead at a slow and hesitant rate, but nevertheless,
the weight of evidence points to the fact that it is still moving ahead.
2. Corporations have never been as profitable as they are now. Overall , return
on equity is at 20%, a new record. Consolidation and margin expansion have
put corporate America in a wonderful position. The strong stock market and
low interest rates have provided opportunities for financing so corporate
balance sheets are in excellent shape.
3. Interest rates are low and may go lower, especially at the short end of the
yield curve.
F-2
<PAGE>
4. There is modest inflation.
5. In an absolute sense and relative to debt, stocks
are undervalued.
6. Relative to the market as a whole, growth stocks are
undervalued.
Lastly, America's future is exciting and bright internationally. We lead in most
aspects of technology, our comparative costs of manufacturing are very low, and
our national deficit as a percentage of GDP is among the lowest in the world.
In conclusion, these are the best of times.
Respectfully submitted,
/s/ David D. Alger
David D. Alger
President
F-3
<PAGE>
TABLE OF CONTENTS
Alger American Growth Portfolio:
Portfolio Highlights .................................. F-5
Schedule of Investments ............................... F-6-7
Financial Highlights .................................. F-8
Alger American Small Capitalization Portfolio:
Portfolio Highlights .................................. F-9
Schedule of Investments ............................... F-10-12
Financial Highlights .................................. F-13
Alger American Income and Growth Portfolio:
Portfolio Highlights .................................. F-14
Schedule of Investments ............................... F-15
Financial Highlights .................................. F-16
Alger American Balanced Portfolio:
Portfolio Highlights .................................. F-17
Schedule of Investments ............................... F-18-19
Financial Highlights .................................. F-20
Alger American MidCap Growth Portfolio:
Portfolio Highlights .................................. F-21
Schedule of Investments ............................... F-22-23
Financial Highlights .................................. F-24
Alger American Leveraged AllCap Portfolio:
Portfolio Highlights .................................. F-25
Schedule of Investments ............................... F-26-27
Financial Highlights .................................. F-28
Statements of Assets and Liabilities ........................ F-29
Statements of Operations .................................... F-30
Statements of Cash Flows .................................... F-31
Statements of Changes in Net Assets ......................... F-32-33
Notes to Financial Statements ............................... F-34-36
Report of Independent Public Accountants .................... F-37
F-4
<PAGE>
- --------------------------------------------------------------------------------
ALGER AMERICAN GROWTH PORTFOLIO
PORTFOLIO HIGHLIGHTS THROUGH DECEMBER 31, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
The Alger American Growth Portfolio invests in companies which generally
have broader product lines, markets, financial resources and depth of
management than smaller, newer companies.
- --------------------------------------------------------------------------------
$10,000 HYPOTHETICAL INVESTMENT SINCE INCEPTION January 9, 1989
- --------------------------------------------------------------------------------
[The following table represents a chart in the printed piece]
Alger
American
Growth S&P 500
-------- -------
01/09/89 10,000 10,000
12/31/89 12,410 13,012
12/31/90 12,924 12,598
12/31/91 18,144 16,437
12/31/92 20,390 17,684
12/31/93 24,971 19,460
12/31/94 25,330 19,717
12/31/95 34,542 27,127
The chart above illustrates the growth in value of a hypothetical $10,000
investment made in the Alger American Growth Portfolio and the S&P 500 on
January 9, 1989, the inception date of the Alger American Growth Portfolio.
The figures for both the Alger American Growth Portfolio and the S&P 500, an
unmanaged index of common stocks, include reinvestment of dividends.
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON THROUGH December 31, 1995
- --------------------------------------------------------------------------------
Average Annual Total Returns
1 Year 5 Years Since Inception
---------------------------------------------
ALGER AMERICAN GROWTH PORTFOLIO 36.37% 21.73% 19.44%
S&P 500 37.58% 16.59% 15.38%
---------------------------------------------
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.
F-5
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1995
- --------------------------------------------------------------------------------
SHARES COMMON STOCKS--81.9% VALUE
------ -----
AIRLINES--1.0%
70,000 Delta Air Lines Inc. ......................... $ 5,171,250
-----------
BIO-TECHNOLOGY--1.2%
96,900 Genzyme Corp.--General Division*+ ............ 6,044,138
-----------
BUILDING & CONSTRUCTION--2.0%
273,525 Clayton Homes Inc. ........................... 5,846,596
129,200 Pulte Corp.+ ................................. 4,344,350
-----------
10,190,946
-----------
COMMUNICATIONS--6.6%
54,000 ADC Telecommunications, Inc.* ................ 1,971,000
161,000 America Online Inc.*+ ........................ 6,037,500
139,000 DSC Communications Corporation*+ ............. 5,125,625
125,000 Glenayre Technologies Inc.* .................. 7,781,250
118,200 Tellabs, Inc.* ............................... 4,373,400
90,000 U.S. Robotics Corp* .......................... 7,897,500
-----------
33,186,275
-----------
COMPUTER RELATED &
BUSINESS EQUIPMENT--16.9%
255,800 Altera Corporation* .......................... 12,726,050
265,250 Bay Networks Inc.* ........................... 10,908,405
161,600 Cisco Systems, Inc.* ......................... 12,059,400
82,500 Compaq Computer Corporation* ................. 3,960,000
224,800 Dell Computer Corporation* ................... 7,783,700
204,300 Digital Equipment Corporation* ............... 13,100,738
151,200 Seagate Technology*+ ......................... 7,182,000
216,600 3 Com Corp.* ................................. 10,098,975
231,900 Xilinx, Inc.*+ ............................... 7,072,950
-----------
84,892,218
-----------
COMPUTER SOFTWARE--2.0%
73,000 Broderbund Software Inc.* .................... 4,434,750
184,000 Informix Corporation* ........................ 5,520,000
-----------
9,954,750
-----------
COMPUTER TECHNOLOGY--.5%
99,800 Silicon Graphics, Inc.* ...................... 2,744,500
-----------
CONSUMER PRODUCTS--.1%
19,000 CUC International Inc.* ...................... 648,375
-----------
DEFENSE--3.8%
59,120 Lockheed Martin Corp. ........................ 4,670,480
157,400 Loral Corporation ............................ 5,568,025
96,100 McDonnell Douglas Corporation ................ 8,841,200
-----------
19,079,705
-----------
FINANCIAL SERVICES--4.5%
191,863 First Data Corporation ....................... 12,830,838
95,000 Lehman Brothers Holdings Inc. ................ 2,018,750
110,000 Merrill Lynch & Co., Inc. .................... 5,610,000
99,400 Schwab (Charles) Corporation (The)+ .......... 2,000,425
-----------
22,460,013
-----------
HEALTHCARE--21.5%
109,000 Apria Healthcare Group Inc.*+ ................ 3,079,250
238,500 Biochem Pharma Inc.*+ ........................ 9,569,813
61,600 Boston Scientific Corporation* ............... 3,018,400
204,200 Cardinal Health, Inc. ........................ 11,179,950
184,000 Columbia/HCA Healthcare Corporation .......... 9,338,000
317,000 Healthsource, Inc.*+ ......................... 11,412,000
163,000 Lilly (Eli) Co. .............................. 9,168,750
98,600 Medtronic, Inc. .............................. 5,509,275
163,800 Merck & Co., Inc. ............................ 10,769,850
43,400 Nellcor Puritan Bennett Inc.* ................ 2,517,200
175,000 Oxford Health Plans, Inc.* ................... 12,928,125
166,200 SmithKline Beecham PLC ADS+ .................. 9,224,100
183,500 Summit Technology Inc.*+ ..................... 6,193,125
65,000 United Healthcare Corporation ................ 4,257,500
-----------
108,165,338
-----------
INSURANCE--2.5%
66,000 American International, Group Inc. ........... 6,105,000
100,600 Travelers Group Inc. ......................... 6,325,225
------------
12,430,225
------------
LEISURE & ENTERTAINMENT--1.2%
124,500 Viacom Inc. Cl. B* ........................... 5,898,188
------------
POLLUTION CONTROL--.2%
50,000 USA Waste Services, Inc.* .................... 943,750
------------
RESTAURANTS &
LODGING--3.8%
55,000 Cracker Barrel Old Country Stores, Inc.+ ..... 948,750
144,900 La Quinta Inns, Inc. ......................... 3,966,638
366,100 Lone Star Steakhouse & Saloon, Inc.*+ ........ 14,049,088
------------
18,964,476
------------
RETAILING--4.9%
50,000 Cintas Corp. ................................. 2,225,000
191,500 The Gap, Inc. ................................ 8,043,000
569,000 OfficeMax, Inc.* ............................. 12,731,375
30,000 Viking Office Products, Inc.* ................ 1,395,000
------------
24,394,375
------------
SEMICONDUCTORS--6.9%
154,400 Intel Corporation ............................ 8,762,200
118,000 LSI Logic Corporation* ....................... 3,864,500
174,500 Linear Technology Corporation ................ 6,849,125
358,000 Maxim Integrated Products, Inc.* ............. 13,783,000
50,000 Microchip Technology Incorporated* ........... 1,825,000
------------
35,083,825
------------
MISCELLANEOUS--2.3%
260,800 Service Corporation International ............ 11,475,200
------------
F-6
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1995 (Cont'd)
- --------------------------------------------------------------------------------
WARRANTS COMMON STOCKS (CONTINUED) VALUE
-------- -----
TOTAL COMMON STOCKS
(COST $358,592,571) .......................... $411,727,547
------------
WARRANTS
MANUFACTURING
1 Windmere Corp. Warrant,
expires 1/19/98 (COST $1) .................... 0
------------
SHORT-TERM INVESTMENTS--18.8%
PRINCIPAL SHORT-TERM
AMOUNT CORPORATE NOTES--11.4%
- ----------
$10,000,000 American Honda Finance Corp.,
5.75%, 2/8/96 .............................. 9,939,305
12,500,000 Barnett Banks, Inc.,
5.85%, 1/10/96 ............................. 12,481,719
12,500,000 Countrywide Funding Corp.,
5.77%, 1/4/96 .............................. 12,493,990
10,000,000 Mitsui & Co. (USA) Inc.,
5.68%, 1/26/96 ............................. 9,960,555
12,500,000 Triple-A One Funding Corp.,
5.85%, 1/5/96(a) ........................... 12,491,875
------------
TOTAL SHORT-TERM CORPORATE NOTES
(COST $57,367,444) ......................... 57,367,444
------------
SECURITIES HELD UNDER
REPURCHASE
AGREEMENTS--7.4%
Securities Held Under Repurchase
Agreements, 5.80%-6.00%, 1/2/96,
with Bear, Stearns & Co. Inc., dtd
12/29/95, repurchase price
$37,620,468; collateralized by
U.S. Treasury Strips
(par value $109,684,000, due
5/15/01-8/15/16) .................. $ 37,595,645
------------
TOTAL SHORT-TERM INVESTMENTS
(COST $94,963,089) ................ 94,963,089
------------
TOTAL INVESTMENTS ..................................
(COST $453,555,661)(B) ........................... 100.7% 506,690,636
Liabilities in Excess Of Other Assets .............. (.7) (3,717,097)
----- ------------
NET ASSETS ......................................... 100.0% $502,973,539
===== ============
- --------------------------------------------------------------------------------
* 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, 1995, the net unrealized appreciation on investments, based
on cost for federal income tax purposes of $453,555,661 amounted to
$53,134,975 which consisted of aggregate gross unrealized appreciation of
$58,285,984 and aggregate gross unrealized depreciation of $5,151,009.
See Notes to Financial Statements
F-7
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------
1995 1994 1993 1992 1991
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 23.13 $ 24.67 $ 20.17 $ 18.00 $ 12.86
- -------------------------------------------------------------------------------------------------------------
Net investment income 0.02 0.07 0.03 0.03 0.08(i)
Net realized and unrealized gain on investments 8.33 0.15 4.50 2.19
5.11
- -------------------------------------------------------------------------------------------------------------
Total from investment operations 8.35 0.22 4.53 2.22 5.19
- -------------------------------------------------------------------------------------------------------------
Dividends from net investment income (0.07) (0.03) (0.03) (0.03) (0.05)
Distributions from net realized gains (0.25) (1.73) -- (0.02) --
- -------------------------------------------------------------------------------------------------------------
Total Distributions (0.32) (1.76) (0.03) (0.05) (0.05)
- -------------------------------------------------------------------------------------------------------------
Net asset value, end of year $ 31.16 $ 23.13 $ 24.67 $ 20.17 $ 18.00
=============================================================================================================
Total Return 36.37% 1.45% 22.47% 12.38% 40.39%
=============================================================================================================
Ratios and Supplemental Data:
Net assets, end of year (000's omitted) $502,974 $150,390 $74,878 $30,316
$10,094
=============================================================================================================
Ratio of expenses to average net assets .85% .86% .97% .99%
1.29%
=============================================================================================================
Ratio of net investment income to average
net assets 0.18% 0.48% 0.25% 0.33% 0.52%
=============================================================================================================
Portfolio Turnover Rate 118.33% 111.76% 112.64% 63.91% 58.95%
=============================================================================================================
(i) Amount was computed based on average shares outstanding during the period.
</TABLE>
See Notes to Financial Statements.
F-8
<PAGE>
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
PORTFOLIO HIGHLIGHTS THROUGH DECEMBER 31, 1995 (UNAUDITED)
The Alger American Small Capitalization Portfolio invests in small,
fast-growing companies that offer innovative products, services, or
technologies to a rapidly expanding marketplace.
$10,000 HYPOTHETICAL INVESTMENT SINCE INCEPTION September 21, 1988
[The following table represents a chart in the printed piece]
Alger
American
Small Russell
Capitalization Wishire 2000 Growth
-------------- ------- -----------
09/21/88 10,000 10,000
12/31/88 9,665 10,062 10,006.11
12/31/89 15,897 11,965 12,024.08
12/31/90 17,282 9,689 9,930.66
12/31/91 27,225 15,192 15,013.84
12/31/92 28,192 17,198 16,180.43
12/31/93 31,936 20,290 18,342.12
12/31/94 30,541 20,401 17,896.06
12/31/95 44,073 27,580 23,446.96
The chart above illustrates the growth in value of a hypothetical $10,000
investment made in the Alger American Small Capitalization Portfolio,
Wilshire Small Company Growth Index and the Russell 2000 Growth Index on
September 21, 1988, the inception date of the Alger American Small
Capitalization Portfolio. The figures for the Alger American Small
Capitalization Portfolio, Wilshire Small Company Growth Index (an unmanaged
index of common stocks) and the Russell 2000 Growth Index (an unmanaged index
of common stocks) include reinvestment of dividends.
For the upcoming fiscal year, the Portfolio will use only the Russell 2000
Growth Index (the "Russell 2000") as a comparative index. The Portfolio has
elected to change its comparative index because management of the Portfolio
believes the size of the companies in the Russell 2000 is more representative
of the size of the companies in which the Portfolio invests.
PERFORMANCE COMPARISON THROUGH December 31, 1995
Average Annual Total Returns
1 Year 5 Years Since Inception
----------------------------------------
ALGER AMERICAN SMALL
CAPITALIZATION PORTFOLIO 44.31% 20.59% 22.60%
WILSHIRE SMALL CO. GROWTH INDEX 35.19% 23.27% 14.96%
RUSSELL 2000 GROWTH INDEX 31.04% 18.75% 12.42%
----------------------------------------
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.
F-9
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1995
- --------------------------------------------------------------------------------
SHARES COMMON STOCKS--81.9% VALUE
------- -----
APPAREL--1.9%
186,200 Kenneth Cole Productions Inc. CI.A.* ........ $ 3,491,250
126,000 St. John Knits, Inc.+ ....................... 6,693,750
190,700 Tommy Hilfiger Corporation*+ ................ 8,080,913
-----------
18,265,913
-----------
BIO-TECHNOLOGY--5.1%
253,900 Centocor, Inc.* ............................. 7,839,163
280,000 Cygnus, Inc.* ............................... 6,265,000
25,000 Cytotherapeutics, Inc.* ..................... 428,125
238,000 Genzyme Corp.--General Division*+ ........... 14,845,250
45,000 IDEC Pharmaceuticals Corp.* ................. 877,500
155,500 INCYTE Pharmaceuticals, Inc.*+ .............. 3,887,500
110,000 Oncogene Science, Inc.* ..................... 1,045,000
275,000 Sepracor Inc.*+ ............................. 5,053,125
258,000 VISX, Inc.*+ ................................ 10,062,000
-----------
50,302,663
-----------
BUILDING &
CONSTRUCTION--1.4%
397,500 Clayton Homes, Inc. ......................... 8,496,563
35,000 Continental Homes Holding Corp.+ ............ 861,875
136,600 U.S. Home Corporation*+ ..................... 3,978,475
-----------
13,336,913
-----------
COMMUNICATIONS--11.3%
167,400 ADC Telecommunications, Inc.* ............... 6,110,100
311,400 Ascend Communications, Inc.* ................ 25,262,325
196,200 DSC Communications Corporation* ............. 7,234,875
25,000 DSP Communications, Inc.* ................... 1,090,625
452,550 Glenayre Technologies Inc.* ................. 28,171,238
116,500 Mobile Telecommunications
Technologies Corp.* ......................... 2,490,188
240,000 Network Equipment Technologies, Inc.*+ ...... 6,570,000
45,000 Premisys Communications Inc.* ............... 2,520,000
424,200 Tellabs, Inc.* .............................. 15,695,400
188,500 U.S. Robotics Corp.* ........................ 16,540,875
-----------
111,685,626
-----------
COMPUTER RELATED &
BUSINESS EQUIPMENT--11.1%
376,400 Altera Corporation* ......................... 18,725,900
656,850 Bay Networks Inc.* .......................... 27,012,956
60,000 Cisco Systems, Inc.* ........................ 4,477,500
274,000 Dell Computer Corporation* .................. 9,487,250
335,000 Digital Equipment Corporation* .............. 21,481,875
513,300 Gandalf Technologies Inc.* .................. 8,726,100
142,500 Komag, Incorporated* ........................ 6,572,813
113,700 Teltrend, Inc.* ............................. 5,315,475
160,000 3 Com Corp.* ................................ 7,460,000
-----------
109,259,869
-----------
COMPUTER SOFTWARE--9.0%
20,000 Broderbund Software Inc.*+ .................. 1,215,000
2,500 CBT Group ADS* .............................. 132,500
105,000 Computron Software, Inc.* ................... 1,890,000
236,000 Comshare, Incorporated* ..................... 6,136,000
100,000 Dendrite International Inc.* ................ 1,800,000
488,600 Electronics For Imaging Inc.* ............... 21,376,250
60,000 EPIC Design Technology, Inc.* ............... 1,260,000
105,000 Hyperion Software Corp.* .................... 2,231,250
40,000 Inference Corp. CI. A.* ..................... 760,000
631,000 Informix Corporation* ....................... 18,930,000
150,000 INSO Corp.*+ ................................ 6,375,000
78,000 Maxis, Inc.*+ ............................... 2,964,000
130,700 Medic Computer Systems Inc.* ................ 7,907,350
35,000 Parametric Technology Corporation* .......... 2,327,500
317,600 S3 Incorporated*+ ........................... 5,597,700
218,500 Softkey International Inc.*+ ................ 5,052,813
50,000 Symantec Corp.* ............................. 1,162,500
100,000 Tracor Inc.* ................................ 1,450,000
-----------
88,567,863
-----------
COMPUTER TECHNOLOGY--4.1%
375,000 Adaptec, Inc.* .............................. 15,375,000
145,000 ADFlex Solutions, Inc.*+ .................... 3,878,750
233,300 C.P. Clare Corporation* ..................... 4,782,650
551,400 General Datacomm Industries, Inc.* .......... 9,442,725
165,000 Pinnacle Systems, Inc.*+ .................... 4,083,750
65,100 Sanmina Corporation*+ ....................... 3,377,063
-----------
40,939,938
-----------
<PAGE>
CONSUMER PRODUCTS--1.3%
75,000 G&K Services, Inc. Cl. A .................... 1,912,500
328,000 Oakley, Inc.* ............................... 11,152,000
-----------
13,064,500
-----------
FINANCIAL SERVICES--2.3%
83,100 Advanta Corp., Class B ...................... 3,022,763
60,000 AMRESCO, Inc. ............................... 765,000
281,000 Money Store, Inc.+ .......................... 4,390,625
206,500 Oxford Resources Corp. Cl. A.* .............. 4,646,250
467,400 Schwab (Charles) Corporation (The)+ ......... 9,406,425
-----------
22,231,063
-----------
HEALTHCARE--20.8%
268,200 Apria Healthcare Group Inc.* ................ 7,576,650
649,100 Biochem Pharma Inc.*+ ....................... 26,045,138
40,000 Cardinal Health, Inc. ....................... 2,190,000
134,000 CompDent Corp.*+ ............................ 5,561,000
102,500 Fuisz Technologies Ltd.*+ ................... 1,563,125
230,000 Gliatech, Inc.* ............................. 1,926,250
218,700 HBO & Company ............................... 16,757,888
196,650 Health Management Associates, Inc. Cl. A.* .. 5,137,481
512,800 Healthsource, Inc.* ......................... 18,460,800
F-10
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1995 (Cont'd)
- --------------------------------------------------------------------------------
HEALTHCARE (CONTINUED)
210,500 Hologic, Inc.* .............................. $ 8,630,500
65,000 I-Stat Corp.*+ .............................. 2,112,500
25,000 IDEXX Laboratories Inc.* .................... 1,175,000
35,000 IMNET Systems, Inc.*+ ....................... 840,000
353,000 Lincare Holdings, Inc.*+ .................... 8,825,000
498,200 Liposome Company Inc.*+ ..................... 9,964,000
337,000 Medpartners/Mullikin, Inc.*+ ................ 11,121,000
100,000 Matrix Pharmaceuticals, Inc.* ............... 1,875,000
200,000 Metra Biosystems, Inc.*+ .................... 3,450,000
5,300 Nellcor Puritan Bennett Inc.* ............... 307,400
90,000 Neuromedical Systems, Inc.*+ ................ 1,811,250
235,300 Omnicare, Inc.+ ............................. 10,529,675
216,500 Oxford Health Plans, Inc.*+ ................. 15,993,938
50,000 Perclose, Inc.* ............................. 956,250
254,800 PhyCor Inc.*+ ............................... 12,883,452
55,000 Physicians Sales & Service, Inc.* ........... 1,567,500
89,000 Quintiles Transnational Corp.* .............. 3,649,000
75,000 Steris Corp.* ............................... 2,418,750
172,500 Summit Technology Inc.*+ .................... 5,821,875
158,600 Sybron International Corp.* ................. 3,766,750
264,600 Target Therapeutics, Inc.* .................. 11,311,650
-----------
204,228,822
-----------
POLLUTION CONTROL--2.5%
100,000 Continential Waste Industries, Inc.*+ ....... 1,162,500
350,900 United Waste Systems, Inc.* ................. 13,071,025
525,800 USA Waste Service, Inc.* .................... 9,924,475
-----------
24,158,000
-----------
RESTAURANTS &
LODGING--5.5%
180,400 Apple South, Inc. ........................... 3,878,600
86,800 Applebee's International, Inc. .............. 1,974,700
201,700 Boston Chicken, Inc.*+ ...................... 6,479,613
508,400 Landry's Seafood Restaurants, Inc.*+ ........ 8,674,829
580,500 Lone Star Steakhouse & Saloon, Inc.*+ ....... 22,276,688
192,000 O'Charley's Inc.* ........................... 2,832,000
211,000 Outback Steakhouse, Inc.*+ .................. 7,569,625
-----------
53,686,055
-----------
RETAILING--5.7%
149,000 CompUSA Inc.*+ .............................. 4,637,625
155,500 The Gap, Inc. ............................... 6,531,000
178,000 Gucci Group NV*+ ............................ 6,919,750
158,000 Global DirectMail Corp.*+ ................... 4,345,000
159,750 Guest Supply Inc.*+ ......................... 3,614,344
417,650 OfficeMax, Inc.* ............................ 9,344,919
96,800 Talbots,Inc.+ ............................... 2,783,000
297,000 Viking Office Products, Inc.*+ .............. 13,810,500
245,000 Williams-Sonoma, Inc.*+ ..................... 4,532,500
-----------
56,518,638
-----------
SEMICONDUCTORS--8.0%
180,000 LSI Logic Corporation* ...................... 5,895,000
375,000 Linear Technology Corporation ............... 14,718,750
818,800 Maxim Integrated Products, Inc.* ............ 31,523,800
612,125 Microchip Technology Incorporated* .......... 22,342,563
297,700 TriQuint Semiconductor, Inc.* ............... 4,018,950
35,000 Zoran Corp.*+ ............................... 726,250
-----------
79,225,313
-----------
SEMICONDUCTORS CAPITAL
EQUIPMENT--2.1%
106,700 ASM Lithography Holdings NV* ................ 3,547,775
89,000 Electroglas, Inc.*+ ......................... 2,180,500
267,250 GaSonics International Corp.* ............... 3,607,875
50,000 PRI Automation, Inc.*+ ...................... 1,756,250
65,700 Semitool, Inc.* ............................. 854,100
171,000 Silicon Valley Group, Inc.* ................. 4,317,750
200,000 Tencor Instruments*+ ........................ 4,875,000
-----------
21,139,250
-----------
MISCELLANEOUS--.1%
30,000 COREStaff, Inc.*............................. 1,095,000
-----------
TOTAL COMMON STOCKS
(COST $666,437,434).......................... 907,705,426
-----------
F-11
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1995 (Cont'd)
PRINCIPAL SHORT-TERM INVESTMENTS-21.1% VALUE
AMOUNT SHORT-TERM CORPORATE NOTES-8.4% -------
--------
$ 254,000 American Honda Finance Corp.,
5.75%, 2/8/96 ............................. $ 252,458
12,500,000 Anchor Funding Corp.,
5.90%, 1/3/96(a) .......................... 12,495,903
12,500,000 Barnett Banks, Inc.,
5.85%, 1/10/96 ............................ 12,481,719
10,000,000 Countrywide Funding Corp.,
5.77%, 1/4/96 ............................. 9,995,192
Philip Morris Cos. Inc.,
2,946,000 5.70%, 1/4/96 ............................. 2,944,601
3,400,000 5.65%, 1/8/96 ............................. 3,396,265
6,600,000 5.62%, 1/9/96 ............................. 6,591,757
1,800,000 Sotheby's Inc.,
5.80%, 1/29/96 ............................ 1,791,880
12,500,000 Transamerica Finance Corp.,
5.81%, 1/2/96 ............................. 12,497,982
10,000,000 Triple-A One Funding Corp.,
5.85%, 1/5/96(a) .......................... 9,993,500
10,000,000 United Parcel Service Of America Inc.,
5.85%, 1/4/96 ............................. 9,995,125
-----------
TOTAL SHORT-TERM CORPORATE NOTES
(COST $82,436,382 ) 82,436,382
-----------
SECURITIES HELD UNDER
REPURCHASE AGREEMENTS-- 12.7%
Securities Held Under Repurchase
Agreements, 5.80%-6.00%,
1/2/96, with Bear, Stearns & Co.
Inc., dtd 12/29/95, repurchase price
$125,135,400; collateralized by
U.S. Treasury Bonds and
U.S. Treasury Strips (par value
$442,154,000, due 8/15/05-8/15/23) .......... $ 125,052,300
-------------
TOTAL SHORT-TERM INVESTMENTS
(COST $207,488,682) ........................ 207,488,682
-------------
TOTAL INVESTMENTS
(COST $873,926,116)(B) ...................... 113.3% 1,115,194,108
Liabilities in Excess Of Other Assets ....... (13.3) (130,981,960)
------ ------------
NET ASSETS .................................... 100.0% $ 984,212,148
====== ============
- --------------------------------------------------------------------------------
* 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) AtDecember 31, 1995, the net unrealized appreciation on investments, based
on cost for federal income tax purposes of $873,926,116, amounted to
$241,267,992 which consisted of aggregate gross unrealized appreciation of
$262,127,949 and aggregate gross unrealized depreciation of $20,859,957.
See Notes to Financial Statements
F-12
<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,
------------------------------------------------------
1995 1994 1993 1992 1991
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ..... $ 27.31 $ 30.88 $ 27.26 $ 26.79 $ 17.02
- ---------------------------------------------------------------------------------------------------
Net investment income (loss) ........... (0.09) (0.03)(i) (0.06) (0.06) (0.03)
Net realized and unrealized gain
(loss) on investments ................ 12.19 (1.45) 3.67 0.91 9.82
- ---------------------------------------------------------------------------------------------------
Total from investment operations ... 12.10 (1.48) 3.62 0.85 9.79
- ---------------------------------------------------------------------------------------------------
Dividends from net investment income ... -- -- -- -- (0.02)
Distributions from net realized gains .. -- (2.09) -- (0.38) --
- ---------------------------------------------------------------------------------------------------
Total Distributions ................ -- (2.09) -- (0.38) (0.02)
- ---------------------------------------------------------------------------------------------------
Net asset value, end of year ........... $ 39.41 $ 27.31 $ 30.88 $ 27.26 $ 26.79
===================================================================================================
Total Return ........................... 44.31% (4.38%) 13.28% 3.55% 57.54%
===================================================================================================
Ratios and Supplemental Data:
Net assets, end of year (000's omitted) $984,212 $397,037 $238,850 $135,718 $ 56,798
===================================================================================================
Ratio of expenses to average net assets 0.92% 0.96% 1.03% .98% 1.06%
===================================================================================================
Ratio of net investment income (loss) to
average net assets ................. (0.48%) (0.10%) (0.35%) (0.37%) (0.12%)
====================================================================================================
Portfolio Turnover Rate .............. 80.66% 17.61% 148.07% 108.06% 125.90%
====================================================================================================
(i) Amount was computed based on average shares outstanding during the period.
</TABLE>
See Notes to Financial Statements
F-13
<PAGE>
ALGER AMERICAN INCOME AND GROWTH PORTFOLIO
PORTFOLIO HIGHLIGHTS THROUGH DECEMBER 31, 1995 (UNAUDITED)
The Alger American Income and Growth Portfolio seeks a high level of dividend
income consistent with prudent investment mangement by investing in dividend
paying equity securities. Capital appreciation is a secondary objective of
the Portfolio.
$10,000 HYPOTHETICAL INVESTMENT SINCE INCEPTION November 15, 1988
[The following table represents a chart in the printed piece]
Alger
American
Income and
Growth S&P 500
---------- -------
11/15/88 10,000 10,000
12/31/88 10,095 10,422
12/31/89 10,842 13,715
12/31/90 10,872 13,279
12/31/91 13,428 17,325
12/31/92 14,589 18,640
12/31/93 16,097 20,512
12/31/94 14,765 20,783
12/31/95 19,952 28,593
The chart above illustrates the growth in value of a hypothetical $10,000
investment made in the Alger American Income and Growth Portfolio and the S&P
500 on November 15, 1988, the inception date of the Alger American Income and
Growth Portfolio. Figures for the Alger American Income and Growth Portfolio
and the S&P 500, an unmanaged index of common stocks, include reinvestment of
dividends.
PERFORMANCE COMPARISON THROUGH DECEMBER 31, 1995
AVERAGE ANNUAL TOTAL RETURNS
1 YEAR 5 YEARS SINCE INCEPTION
----------------------------------------
ALGER AMERICAN INCOME
AND GROWTH PORTFOLIO 35.13% 12.91% 10.17%
S&P 500 37.58% 16.59% 15.88%
----------------------------------------
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.
F-14
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN INCOME AND GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1995
- --------------------------------------------------------------------------------
SHARES COMMON STOCKS--88.2% VALUE
------ -----
BUILDING &
CONSTRUCTION--4.5%
3,600 Continental Homes Holding Corp.+ ...................... $ 88,650
9,000 Pulte Corp ............................................ 302,625
-----------
391,275
-----------
COMPUTER RELATED &
BUSINESS EQUIPMENT--18.2%
5,600 Altera Corporation* ................................... 278,600
7,100 Bay Networks Inc.* .................................... 291,988
3,900 Cisco Systems, Inc.* .................................. 291,038
4,700 Digital Equipment Corporation* ........................ 301,388
8,800 3 Com Corp.* .......................................... 410,300
-----------
1,573,314
-----------
COMPUTER SOFTWARE--3.4%
9,900 Informix Corporation* ................................. 297,000
-----------
DEFENSE--7.0%
3,850 Lockheed Martin Corporation ........................... 304,150
3,300 McDonnell Douglas Corporation ......................... 303,600
-----------
607,750
-----------
FINANCIAL SERVICES--7.2%
4,837 First Data Corporation ................................ 323,474
5,800 Merrill Lynch & Co., Inc. ............................. 295,800
-----------
619,274
-----------
HEALTHCARE--24.5%
5,600 Cardinal Health, Inc. ................................. 306,600
5,900 Columbia/HCA Healthcare Corporation ................... 299,425
5,300 Lilly (Eli) Co. ....................................... 298,125
5,300 Medtronic, Inc. ....................................... 296,138
4,600 Merck & Co., Inc. ..................................... 302,450
6,900 Omnicare, Inc.+ ....................................... 308,775
5,500 SmithKline Beecham PLC ADS+ ........................... 305,250
-----------
2,116,763
-----------
INSURANCE--7.2%
3,200 American International Group .......................... 296,000
5,100 Travelers Group Inc. .................................. 320,663
-----------
616,663
-----------
MANUFACTURING--4.1%
8,850 Precision Castparts Corp.+ ............................ 351,788
-----------
SEMICONDUCTORS--8.3%
2,500 Linear Technology Corporation ......................... 98,125
8,100 Maxim Integrated Products, Inc.* ...................... 311,850
8,300 Microchip Technology Incorporated*+ ................... 302,950
-----------
712,925
-----------
MISCELLANEOUS--3.8%
7,500 Service Corporation International ..................... 330,000
-----------
TOTAL COMMON STOCKS
(COST $6,252,431) ................................... 7,616,752
-----------
<PAGE>
Principal SHORT-TERM INVESTMENTS--365.9%
Amount SHORT-TERM CORPORATE NOTES--127.1%
- -----------
$ 1,500,000 AT&T Corp.,
5.78%, 1/2/96 ............................... 1,499,759
1,750,000 American Honda Finance Corp.,
5.75%, 2/8/96 ............................... 1,739,378
1,500,000 Anheuser-Busch Companies Inc.,
5.85%, 1/3/96 ............................... 1,499,513
1,500,000 Bridgestone/Firestone Inc.,
6.08%, 1/4/96 ............................... 1,499,240
1,750,000 Mitsui & Co., (USA) Inc.,
5.68%, 1/26/96 .............................. 1,743,097
1,500,000 Philip Morris Cos. Inc.,
5.92%, 1/3/96 ............................... 1,499,504
1,500,000 Spiegel Funding Corp.,
6.00%, 1/2/96 ............................... 1,499,750
-----------
TOTAL SHORT-TERM CORPORATE NOTES
(COST $10,980,241) ................................. 10,980,241
-----------
SHORT-TERM U.S. GOVERNMENT
OBLIGATIONS--218.8%
19,000,000 U.S. Treasury Bills, 4.45%, 2/8/96
(Cost $18,910,753) ................................. 18,910,753
-----------
SECURITIES HELD
UNDER REPURCHASE
AGREEMENTS--20.0%
Securities Held Under Repurchase
Agreements, 5.80%-6.00%, 1/2/96,
with Bear, Stearns & Co. Inc., dtd 12/29/95,
repurchase price $1,726,553; collateralized
by U.S. Treasury Strips (par value
$4,355,000, due 2/15/11) ............................ 1,725,424
-----------
TOTAL SHORT-TERM INVESTMENTS
(COST $31,616,418) ................................ 31,616,418
-----------
TOTAL INVESTMENTS
(COST $37,868,849)(A) .................... 454.1% 39,233,170
Liabilities in Excess Of Other Assets (354.1) (30,593,711)
----- ------------
NET ASSETS ................................. 100.0% $ 8,639,459
===== ============
* Non-income producing security.
+ Securities partially or fully on loan.
(a) AtDecember 31, 1995, the net unrealized appreciation on investments, based
on costs for federal income tax purposes of $37,868,849, amounted to
$1,364,321 which consisted of aggregate gross unrealized appreciation of
$1,417,926 and aggregate gross unrealized depreciation of $53,605.
See Notes to Financial Statements
F-15
<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,
----------------------------------------------------
1995 1994 1993 1992 1991
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 13.30 $ 15.31 $ 13.93 $ 13.08 $ 10.67
- -------------------------------------------------------------------------------------------------------------
Net investment income 0.11(i) 0.17 0.07 0.08 0.09
Net realized and unrealized gain
(loss) on investments 4.54 (1.47) 1.37 1.02 2.41
- -------------------------------------------------------------------------------------------------------------
Total from investment operations 4.65 (1.30) 1.44 1.10 2.50
- -------------------------------------------------------------------------------------------------------------
Dividends from net investment income (0.16) (0.15) (0.06) (0.12) (0.09)
Distributions from net realized gains -- (0.56) -- (0.13) --
- -------------------------------------------------------------------------------------------------------------
Total Distributions (0.16) (0.71) (0.06) (0.25) (0.09)
- -------------------------------------------------------------------------------------------------------------
Net asset value, end of year $ 17.79 $ 13.30 $ 15.31 $ 13.93 $ 13.08
=============================================================================================================
Total Return 35.13% (8.28%) 10.34% 8.64% 23.51%
=============================================================================================================
Ratios and Supplemental Data:
Net assets, end of year (000's omitted) $ 8,639 $ 29,135 $ 31,895 $ 8,671 $ 2,663
=============================================================================================================
Ratio of expenses to average net assets .75% .75% .97% 1.25% 1.25%
=============================================================================================================
Decrease reflected in above expense ratios
due to expense reimbursements -- -- -- 0.01% 0.66%
=============================================================================================================
Ratio of net investment income to average
net assets 0.61% 1.22% 1.51% 1.62% 2.54%
=============================================================================================================
Portfolio Turnover Rate 164.05% 177.97% 105.80% 100.62% 61.11%
=============================================================================================================
(i) Amount was computed based on average shares outstanding during the period.
</TABLE>
See Notes to Financial Statements
F-16
<PAGE>
ALGER AMERICAN BALANCED PORTFOLIO
PORTFOLIO HIGHLIGHTS THROUGH DECEMBER 31, 1995 (UNAUDITED)
The Alger American Balanced Portfolio invests in stocks of companies with
growth potential and fixed-income securities, with emphasis on
income-producing securities which appear to have some potential for capital
appreciation.
$10,000 HYPOTHETICAL INVESTMENT SINCE INCEPTION September 5, 1989
[The following table represents a chart in the printed piece]
Alger
American Lehman Govt/
Balanced S&P 500 Corp Bond Index
-------- ------- ---------------
09/05/89 10,000 10,000 10,000
12/31/89 10,265 10,170 10,399
12/31/90 10,933 9,847 11,261
12/31/91 11,447 12,847 13,077
12/31/92 12,535 13,822 14,067
12/31/93 13,511 15,210 15,623
12/31/94 12,935 15,410 15,075
12/31/95 16,638 21,201 17,975
The chart above illustrates the growth in value of a hypothetical $10,000
investment made in the Alger American Balanced Portfolio, the S&P 500, and
the Lehman Government/Corporate Bond Index on September 5, 1989, the
inception date of the Alger American Balanced Portfolio. Figures for the
Alger American Balanced 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.
PERFORMANCE COMPARISON THROUGH December 31, 1995
Average Annual Total Returns
1 Year 5 Years Since Inception
---------------------------------------
Alger American Balanced Portfolio 28.62% 8.75% 8.38%
S&P 500 37.58% 16.59% 12.63%
Lehman Corp./Gov't Bond Index 19.24% 9.80% 9.73%
----------------------------------------
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.
F-17
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1995
- --------------------------------------------------------------------------------
SHARES COMMON STOCKS--81.9% VALUE
------ -----
BUILDING & CONSTRUCTION--2.2%
3,750 Clayton Homes, Inc. ......................... $ 80,156
-----------
COMPUTER RELATED &
BUSINESS EQUIPMENT--15.6%
1,900 Altera Corporation* ......................... 94,525
2,350 Bay Networks Inc.* .......................... 96,644
1,300 Cisco Systems, Inc.* ........................ 97,013
2,800 Dell Computer Corporation* .................. 96,950
1,600 Digital Equipment Corporation* .............. 102,600
1,800 3 Com Corp.* ................................ 83,925
-----------
571,657
-----------
COMPUTER SOFTWARE--2.7%
3,300 Informix Corporation* ....................... 99,000
-----------
DEFENSE--2.7%
1,241 Lockheed Martin Corp. ....................... 98,039
-----------
FINANCIAL SERVICES--2.8%
1,513 First Data Corporation ...................... 101,182
-----------
HEALTHCARE--10.5%
1,900 Cardinal Health, Inc. ....................... 104,025
2,000 Columbia/HCA Healthcare Corporation ......... 101,500
1,500 Merck & Co., Inc. ........................... 98,625
1,100 Oxford Health Plans, Inc.* .................. 81,263
-----------
385,413
-----------
INSURANCE--2.5%
1,000 American International Group ................ 92,500
-----------
RESTAURANTS & LODGING--2.7%
2,600 Lone Star Steakhouse & Saloon, Inc.* ........ 99,775
-----------
RETAILING--2.6%
2,300 The Gap, Inc. ............................... 96,600
-----------
SEMICONDUCTORS--2.8%
2,700 Maxim Intergrated Products, Inc.* ........... 103,950
-----------
TOTAL COMMON STOCK
(COST $1,360,879) 1,728,272
-----------
PRINCIPAL
AMOUNT CORPORATE BONDS--11.7%
- ---------
AUTOMOTIVE--5.9%
$200,000 Ford Motor Credit Corp.,
7.75%, 11/15/02 .......................... $ 217,912
----------
FINANCIAL SERVICES--2.9%
100,000 Associates Corp. of North America
7.50%, 4/15/02 ........................... 107,710
-----------
INSURANCE--2.9%
100,000 Travelers Inc.,
7.75%, 6/15/99 ........................... 105,644
-----------
TOTAL CORPORATE BONDS
(COST $403,681) .......................... 431,266
-----------
U.S. GOVERNMENT AND
AGENCY OBLIGATIONS--30.0%
200,000 U.S. Treasury Notes, 7.50%, 10/31/99 ....... 214,750
200,000 U.S. Treasury Notes, 7.50%, 5/15/02 ........ 221,906
200,000 U.S. Treasury Bonds, 7.625%, 11/15/22 ...... 241,562
200,000 Federal Home Loan Mortgage Corp.,
8.20%, 1/16/98 ........................... 205,812
200,000 Federal National Mortgage Association,
8.50%, 2/1/05 ............................ 219,126
-----------
TOTAL U.S. GOVERNMENT & AGENCY
OBLIGATIONS (COST $989,251) 1,103,156
-----------
<PAGE>
SHORT-TERM INVESTMENTS--271.0%
SHORT-TERM CORPORATE NOTES--122.5%
500,000 Anheuser-Busch Companies Inc.,
5.85%,1/3/96 ............................. 499,838
500,000 AT&T Corp.,
5.78%, 1/2/96 ............................ 499,920
500,000 Bridgestone/Firestone Inc.,
6.08%, 1/4/96 ............................ 499,747
500,000 Dupont (E.I.) De Nemours & Co.,
5.95%, 1/5/96 ............................ 499,669
500,000 GTE California Inc.,
5.92%, 1/5/96 ............................ 499,671
500,000 Mitsui & Co., (USA) Inc.,
5.68%, 1/26/96 ........................... 498,028
500,000 PHH Corp.,
5.95%, 1/2/96 ............................ 499,917
500,000 Philip Morris Cos. Inc.,
5.92%, 1/3/96 ............................ 499,835
500,000 Spiegel Funding Corp.,
6.00%, 1/2/96 ............................ 499,917
-----------
TOTAL SHORT-TERM CORPORATE NOTES
(COST $4,496,542) ........................ 4,496,542
-----------
F-18
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1995 (Cont'd)
- --------------------------------------------------------------------------------
SHORT-TERM
U.S. GOVERNMENT
OBLIGATIONS--135.6%
$5,000,000 U.S. Treasury Bills, 4.45%, 2/8/96 ......... $ 4,976,512
------------
(COST $4,976,512)
SECURITIES HELD UNDER
REPURCHASE
AGREEMENTS--12.9%
Securities Held Under Repurchase
Agreements, 5.80%, 1/2/96,
with Bear, Stearns & Co. Inc., dtd
12/29/95, repurchase price $474,547;
collateralized by U.S. Treasury Bonds
(par value $2,500,000, due
2/15/23) ................................. 474,242
------------
TOTAL SHORT-TERM INVESTMENTS
(COST $9,947,296) ....................... 9,947,296
------------
TOTAL INVESTMENTS
(COST $12,701,107)(a) 359.8% 13,209,990
Liabilities in Excess Of Other Assets (259.8) (9,538,821)
------ ----------
NET ASSETS 100.0% $ 3,671,169
====== ===========
- -------------------------------------------------------------------------------
* Non-income producing security.
(a) AtDecember 31, 1995, the net unrealized appreciation on investments, based
on cost for federal income tax purposes of $12,701,107, amounted to
$508,883 which consisted of aggregate gross unrealized appreciation of
$522,176 and aggregate gross unrealized depreciation of $13,293.
See Notes to Financial Statements
F-19
<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,
------------------------------------------------------------------------------
1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 10.80 $ 11.58 $ 10.77 $ 10.02 $ 10.01
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income 0.33(ii) 0.20 0.15 0.22 0.45
Net realized and unrealized gain
(loss) on investments 2.73 (0.70) 0.69 0.72 0.01
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 3.06 (0.50) 0.84 0.94 0.46
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (0.22) (0.13) (0.03) (0.19) (0.45)
Distributions from net realized gains -- (0.15) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.22) (0.28) (0.03) (0.19) (0.45)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $ 13.64 $ 10.80 $ 11.58 $ 10.77 $ 10.02
====================================================================================================================================
Total Return 28.62% (4.27%) 7.79% 9.48% 4.70%
====================================================================================================================================
Ratios and Supplemental Data:
Net assets, end of year (000's omitted) $ 3,671 $ 10,394 $ 7,848 $ 4,009 $ 1,487
====================================================================================================================================
Ratio of expenses to average net assets 1.00% 1.08% 1.25% 1.25% 1.25%
====================================================================================================================================
Decrease reflected in above expense ratios
due to expense reimbursements -- -- 0.19% 0.42% 1.37%
====================================================================================================================================
Ratio of net investment income to average
net assets 2.49% 2.30% 2.05% 1.99% 4.22%
====================================================================================================================================
Portfolio Turnover Rate 113.02% 78.80% 85.46% 15.27% --
====================================================================================================================================
</TABLE>
(i) Prior to October 1, 1992, the American Balanced Portfolio was the American
Fixed Income Portfolio.
(ii) Amount was computed based on average shares outstanding during the period.
See Notes to Financial Statements
F-20
<PAGE>
- --------------------------------------------------------------------------------
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
PORTFOLIO HIGHLIGHTS THROUGH DECEMBER 31, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
The Alger American MidCap Growth Portfolio invests in mid-sized companies.
- --------------------------------------------------------------------------------
$10,000 HYPOTHETICAL INVESTMENT SINCE INCEPTION May 3, 1993
- --------------------------------------------------------------------------------
[The following table represents a chart in the printed piece]
Alger
American
Midcap
Growth S&P Midcap 400
------ --------------
05/23/93 10,000 10,000
12/31/93 13,867 11,297
12/31/94 13,653 10,893
12/31/95 19,722 14,624
The chart above illustrates the growth in value of a hypothetical $10,000
investment made in the Alger American MidCap Growth Portfolio and the S&P
MidCap 400 on May 3, 1993, the inception date of the Alger American MidCap
Growth Portfolio. Figures for the Alger American MidCap Growth Portfolio and
the S&P MidCap 400, an unmanaged index of common stock, include reinvestment
of dividends.
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON THROUGH December 31, 1995
- --------------------------------------------------------------------------------
Average Annual Total Return
1 Year Since Inception
-------------------------------------
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO 44.45% 29.02%
S&P MidCap 400 30.95% 14.24%
-------------------------------------
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.
F-21
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1995
- --------------------------------------------------------------------------------
Shares COMMON STOCKS--91.6% Value
------ -----
APPAREL--.9%
38,000 Tommy Hilfiger Corporation* ............. $ 1,610,250
---------------
BIO-TECHNOLOGY--2.2%
42,300 Centocor, Inc.* ......................... 1,306,012
45,100 Genzyme Corp.--General Division* ........ 2,813,113
---------------
4,119,125
---------------
BUILDING AND
CONSTRUCTION--2.6%
118,025 Clayton Homes, Inc. ..................... 2,522,783
68,500 Pulte Corp. ............................. 2,303,313
---------------
4,826,096
---------------
COMMUNICATIONS--8.9%
30,000 America Online, Inc.*+ .................. 1,125,000
60,000 Ascend Communications, Inc.* ............ 4,867,500
47,800 DSC Communications Corporation* ......... 1,762,625
54,050 Glenayre Technologies Inc.* ............. 3,364,612
64,000 Tellabs, Inc.* .......................... 2,368,000
33,600 U.S. Robotics Corp.* .................... 2,948,400
---------------
16,436,137
---------------
COMPUTER RELATED &
BUSINESS EQUIPMENT--13.3%
99,900 Altera Corporation* ..................... 4,970,025
104,850 Bay Networks Inc.* ...................... 4,311,955
101,300 Dell Computer Corporation* .............. 3,507,512
50,000 Digital Equipment Corporation* .......... 3,206,250
74,000 Seagate Technology*+ .................... 3,515,000
45,000 3 Com Corp.* ............................ 2,098,125
97,200 Xilinx Inc.* ............................ 2,964,600
---------------
24,573,467
---------------
COMPUTER SOFTWARE--4.9%
40,000 Broderbund Software, Inc.*+ ............. 2,430,000
10,000 Computron Software, Inc.* ............... 180,000
50,000 Electronics For Imaging Inc.* ........... 2,187,500
54,000 Informix Corporation* ................... 1,620,000
113,100 Softkey International Inc.*+ ............ 2,615,437
---------------
9,032,937
---------------
COMPUTER TECHNOLOGY--1.4%
35,000 Adaptec, Inc.* .......................... 1,435,000
64,000 General Datacomm Industries, Inc.* ...... 1,096,000
---------------
2,531,000
---------------
CONSUMER PRODUCTS--2.6%
70,500 CUC International Inc.* ................. 2,405,813
70,200 Oakley, Inc.* ........................... 2,386,800
---------------
4,792,613
---------------
FINANCIAL SERVICES--4.8%
50,000 Advanta Corp., Class B .................. 1,818,750
55,506 First Data Corporation .................. 3,711,964
167,500 Money Store, Inc.+ ...................... 2,617,188
40,000 Schwab (Charles) Corporation (The)+ ..... 805,000
---------------
8,952,902
---------------
HEALTHCARE--20.5%
52,100 Apria Healthcare Group Inc.* ............ 1,471,825
145,600 Biochem Pharma Inc.*+ ................... 5,842,200
30,000 Boston Scientific Corporation* .......... 1,470,000
96,100 Cardinal Health, Inc. ................... 5,261,475
33,750 Health Management Associates, Inc.* ..... 881,719
158,800 Healthsource, Inc.* ..................... 5,716,800
45,000 IDEXX Laboratories Inc.* ................ 2,115,000
135,000 Liposome Company Inc.*+ ................. 2,700,000
66,500 MedPartners/Mullikin, Inc.*+ ............ 2,194,500
21,500 Nellcor Puritan Bennett Inc.*+ .......... 1,247,000
40,700 Oxford Health Plans, Inc.* .............. 3,006,713
119,550 Summit Technology Inc.*+ ................ 4,034,813
30,000 United Healthcare Corporation ........... 1,965,000
---------------
37,907,045
---------------
<PAGE>
LEISURE &
ENTERTAINMENT--.5%
27,000 Mirage Resorts, Incorporated* ........... 931,500
---------------
POLLUTION CONTROL--3.1% .................
91,300 United Waste Systems, Inc.* ............. 3,400,925
127,700 USA Waste Services, Inc.* ............... 2,410,338
---------------
5,811,263
---------------
RESTAURANTS &
LODGING--5.6%
78,700 Boston Chicken Inc.*+ ................... 2,528,238
144,300 Lone Star Steakhouse & Saloon, Inc.* .... 5,537,513
63,500 Outback Steakhouse, Inc.* ............... 2,278,062
---------------
10,343,813
---------------
RETAILING--9.5%
40,600 Cintas Corp. ............................ 1,806,700
82,400 CompUSA Inc.*+ .......................... 2,564,700
45,000 The Gap, Inc. ........................... 1,890,000
90,000 Global DirectMail Corp.* ................ 2,475,000
25,000 Gucci Group NV*+ ........................ 971,875
240,200 OfficeMax, Inc.* ........................ 5,374,475
56,400 Viking Office Products Inc.* ............ 2,622,600
---------------
17,705,350
---------------
F-22
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1995 (Cont'd)
- --------------------------------------------------------------------------------
Shares COMMON STOCKS (Continued) Value
------ -----
SEMICONDUCTORS--7.1%
58,600 LSI Logic Corporation* .................. $ 1,919,150
80,000 Linear Technology Corporation ........... 3,140,000
151,800 Maxim Integrated Products, Inc.* ........ 5,844,300
65,000 Microchip Technology Incorporated* ...... 2,372,500
---------------
13,275,950
---------------
SEMICONDUCTORS
CAPITAL EQUIPMENT--.9%
35,000 ASM Lithography Holdings NV* ............ 1,163,750
23,300 Silicon Valley Group, Inc.* ............. 588,325
---------------
1,752,075
---------------
MISCELLANEOUS--2.8%
119,000 Service Corporation International ....... 5,236,000
---------------
TOTAL COMMON STOCKS
(COST $138,228,577) ................... 169,837,523
---------------
Principal
Amount SHORT TERM INVESTMENTS--16.3%
------
SHORT-TERM
CORPORATE NOTES--6.7%
$5,000,000 Barnett Banks, Inc.
5.85%, 1/10/96 ........................ 4,992,688
7,500,000 Philip Morris Cos. Inc.
5.70%, 1/04/96 ........................ 7,496,437
---------------
TOTAL SHORT-TERM CORPORATE NOTES
(COST $12,489,125) .................... 12,489,125
---------------
SECURITIES HELD
UNDER REPURCHASE
AGREEMENTS--9.6%
Securities Held Under Repurchase
Agreements, 5.80%-6.00%, 1/2/96,
with Bear, Stearns & Co. Inc., dtd
12/29/95, repurchase price
$17,698,587; collateralized by
U.S. Treasury Bonds and U.S.
Treasury Strips (par value $62,675,000,
due 8/15/10-2/15/23) .................. 17,686,905
---------------
TOTAL SHORT-TERM INVESTMENTS
(COST $30,176,030) ..................... 30,176,030
---------------
TOTAL INVESTMENTS
(COST $168,404,607)(A) 107.9% 200,013,553
Liabilities in Excess Of Other Assets (7.9) (14,664,790)
-------- ---------------
NET ASSETS 100.0% $185,348,763
======== ================
- --------------------------------------------------------------------------------
* Non-income producing security.
+ Securities partially or fully on loan.
(a) At December 31,1995, the net unrealized appreciation on investments, based
on cost for federal income tax purposes of $168,404,607, amounted to
$31,608,946 which consisted of aggregate gross unrealized appreciation of
$35,398,742 and aggregate gross unrealized depreciation of $3,789,796.
See Notes to Financial Statements.
F-23
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FROM MAY 3, 1993
YEAR ENDED DECEMBER 31, (COMMENCEMENT OF
------------------------------- OPERATIONS)
1995 1994 TO DECEMBER 31, 1993(I)
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year $ 13.46 $ 13.72 $ 10.00
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (0.03) 0.00(ii) (0.02)
Net realized and unrealized gain (loss) on investments 6.01 (0.21) 3.88
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 5.98 (0.21) 3.86
Distributions from net realized gains -- (0.05) (0.14)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $ 19.44 $ 13.46 $ 13.72
====================================================================================================================================
Total Return 44.45% (1.54%) 38.67%
====================================================================================================================================
Ratios and Supplemental Data:
Net assets, end of year (000's omitted) $185,349 $62,178 $21,301
====================================================================================================================================
Ratio of expenses to average net assets 0.90% 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 (0.25%) 0.03% (0.58%)
====================================================================================================================================
Portfolio Turnover Rate 104.74% 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-24
<PAGE>
- --------------------------------------------------------------------------------
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
PORTFOLIO HIGHLIGHTS THROUGH DECEMBER 31, 1995 (UNAUDITED)
- --------------------------------------------------------------------------------
The Alger American Leveraged AllCap Portfolio focuses on companies with
promising growth potential and uses some special investment tools such as
leveraging and options and futures transactions.
- --------------------------------------------------------------------------------
$10,000 HYPOTHETICAL INVESTMENT SINCE INCEPTION January 25, 1995
- --------------------------------------------------------------------------------
[The following table represents a chart in the printed piece]
Alger
American
Leveraged
AllCap S&P 500
------ -------
01/25/95 10,000 10,000
12/31/95 17,430 13,489
The chart above illustrates the growth in value of a hypothetical $10,000
investment made in the Alger American Leveraged AllCap Portfolio and the S&P
500 on January 25, 1995, the inception date of the Alger American Leveraged
AllCap Portfolio. Figures for the Alger American Leveraged AllCap Portfolio
and the S&P 500, an unmanaged index of common stocks, include reinvestment
of dividends.
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON THROUGH December 31, 1995
- --------------------------------------------------------------------------------
Cumulative Total Return
Since Inception
-------------------------
Alger American Leveraged AllCap Portfolio 74.30%
S&P 500 34.89%
-------------------------
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.
F-25
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1995
- --------------------------------------------------------------------------------
Shares COMMON STOCKS--95.4% Value
------ -----
BIO-TECHNOLOGY--11.3%
3,500 CellPro Incorporated* .................... $ 56,000
3,000 Centocor, Inc.* .......................... 92,625
2,000 Cygnus Inc.* ............................. 44,750
3,400 Cytotherapeutics, Inc.* .................. 58,225
1,200 Genzyme Corp.-General Division* .......... 74,850
2,300 INCYTE Pharmaceuticals, Inc.* ............ 57,500
1,000 Myriad Genetics, Inc.* ................... 32,625
2,100 Oncogene Science, Inc.* .................. 19,950
3,000 Sepracor Inc.*+ .......................... 55,125
3,300 VISX, Inc.* .............................. 128,700
---------------
620,350
---------------
BUILDING & CONSTRUCTION--3.5%
1,000 Centex Corp. ............................ 34,750
4,250 Clayton Homes Inc. ...................... 90,843
1,000 Pulte Corp. ............................. 33,625
1,100 U.S. Home Corporation* .................. 32,038
---------------
191,256
---------------
CHEMICALS--1.5%
700 Monsanto Co. ............................ 85,750
---------------
COMMUNICATIONS--6.0%
1,300 Ascend Communications, Inc.* ............ 105,463
800 DSC Communications Corporation* ......... 29,500
2,000 DSP Communications, Inc.* ............... 87,250
850 Glenayre Technologies Inc.* ............. 52,912
1,100 Network Equipment Technologies, Inc.* ... 30,112
300 U.S. Robotics Corp.* .................... 26,325
---------------
331,562
---------------
COMPUTER RELATED &
BUSINESS EQUIPMENT--17.3%
2,300 Altera Corporation* ..................... 114,425
3,300 Bay Networks Inc.* ...................... 135,713
1,650 Cisco Systems, Inc.* .................... 123,130
1,600 Compaq Computer Corporation* ............ 76,800
2,600 Digital Equipment Corporation* .......... 166,725
2,000 ESS Technology, Inc.* ................... 46,000
2,000 Network Appliance, Inc.* ................ 80,250
1,500 Teltrend, Inc.* ......................... 70,125
3,000 3 Com Corp.* ............................ 139,875
---------------
953,043
---------------
COMPUTER SOFTWARE--7.5%
2,000 Activision Inc.*+ ....................... 22,000
3,000 Comshare, Incorporated* ................. 78,000
600 Electronics For Imaging Inc.* ........... 26,250
1,600 EPIC Design Technology, Inc.* ........... 33,600
2,000 Inference Corp. Cl. A.* ................. 38,000
3,300 Informix Corporation* ................... 99,000
500 Maxis, Inc.*+ ........................... 19,000
Shares
------
3,900 Softkey International Inc.*+ ............ 90,187
400 Tracor Inc.* ............................ 5,800
---------------
411,837
---------------
COMPUTER TECHNOLOGY--4.6%
2,100 Adaptec, Inc.* .......................... 86,100
1,000 C.P. Clare Corporation* ................. 20,500
2,000 General Datacomm Industries, Inc.* ...... 34,250
100 Pinnacle Systems, Inc.* ................. 2,475
2,000 Secure Computing Corporation* ........... 112,000
---------------
255,325
---------------
CONSUMER PRODUCTS--2.2%
2,000 Lauder (Estee) Companies, Inc. Class A* . 69,750
1,500 Oakley, Inc.* ........................... 51,000
---------------
120,750
---------------
DEFENSE--1.2%
700 McDonnell Douglas Corporation ........... 64,400
---------------
FINANCIAL SERVICES--3.9%
4,000 AMRESCO Inc. ............................ 51,000
1,400 First Data Corporation .................. 93,625
4,000 Money Store, Inc. ....................... 62,500
300 Schwab (Charles) Corporation (The)+ ..... 6,038
---------------
213,163
---------------
<PAGE>
HEALTHCARE--19.7%
2,700 Biochem Pharma Inc.*+ ................... 108,337
2,300 Cardinal Health, Inc. ................... 125,925
1,000 HBO & Company ........................... 76,625
1,600 Healthsource, Inc.* ..................... 57,600
200 Hologic, Inc.* .......................... 8,200
2,400 Lilly (Eli) Co. ......................... 135,000
3,500 Liposome Company Inc.* .................. 70,000
2,250 Lunar Corp.*+ ........................... 61,875
2,000 Medpartners/Mullikin, Inc.* ............. 66,000
1,000 Medtronic, Inc. ......................... 55,875
200 Merck & Co., Inc. ....................... 13,150
500 Nellcor Puritan Bennett Inc.* ........... 29,000
1,000 Oxford Health Plans, Inc.* .............. 73,875
1,000 Quintiles Transnational Corp.* .......... 41,000
750 Summit Technology, Inc.*+ ............... 25,313
400 Target Therapeutics, Inc.* .............. 17,100
1,800 United Healthcare Corporation ........... 117,900
---------------
1,082,775
---------------
INSURANCE--2.0%
500 American International Group ............ 46,250
1,000 Travelers Group Inc. .................... 62,875
---------------
109,125
---------------
F-26
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1995 (Cont'd)
- --------------------------------------------------------------------------------
Shares COMMON STOCKS (CONTINUED) Value
------ -----
POLLUTION CONTROL--.4%
600 United Waste Systems, Inc.* ............. $ 22,350
---------------
RESTAURANTS & LODGING--2.7%
3,900 Lone Star Steakhouse & Saloon, Inc.* .... 149,663
---------------
RETAILING--1.2%
300 CompUSA Inc.* ........................... 9,338
500 The Gap, Inc. ........................... 21,000
200 Viking Office Products, Inc.* ........... 9,300
1,500 Williams-Sonoma, Inc.*+ ................. 27,750
---------------
67,388
---------------
SEMICONDUCTORS--7.2%
3,300 Linear Technology Corporation ........... 129,525
2,600 Maxim Integrated Products, Inc.* ........ 100,100
3,350 Microchip Technology Incorporated* ...... 122,275
3,000 Sandisk Corp.* .......................... 45,000
---------------
396,900
---------------
SEMICONDUCTORS CAPITAL
EQUIPMENT--.4%
850 Tencor Instruments* ..................... 20,719
---------------
MISCELLANEOUS--2.8%
1,500 DST Systems, Inc.* ...................... 42,750
2,500 Service Corporation International ....... 110,000
---------------
152,750
---------------
TOTAL COMMON STOCKS
(COST $4,845,395) ..................... 5,249,106
---------------
Principal
Amount SHORT-TERM INVESTMENTS--22.1% Value
------ -----
SHORT-TERM CORPORATE NOTES--16.4%
$200,000 Barnett Banks, Inc., 5.85%, 1/10/96 ..... $ 199,707
200,000 GTE California Inc., 5.92%, 1/5/96 ...... 199,868
100,000 Mitsui & Co. (USA) Inc., 5.68%, 1/26/96 . 99,606
200,000 Narragansett Electric Co., 6.00%, 1/3/96 199,933
200,000 United Parcel Service Of America Inc.,
5.85%, 1/4/96 ......................... 199,904
---------------
TOTAL SHORT-TERM CORPORATE NOTES
(COST $899,018) ....................... 899,018
---------------
SECURITIES HELD
UNDER REPURCHASE
AGREEMENTS--5.7%
Securities Held Under Repurchase
Agreements, 5.80%-6.00%, 1/2/96,
with Bear, Stearns & Co. Inc., dtd
12/29/95, repurchase price
$313,673; collateralized by
U.S. Treasury Strips
(par value $770,000, due
8/15/10) .............................. 313,467
---------------
TOTAL SHORT-TERM INVESTMENTS
(COST $1,212,485) ..................... 1,212,485
---------------
TOTAL INVESTMENTS
(COST $6,057,880)(A) .................. 117.5% 6,461,591
Liabilities in Excess Of Other Assets ... (17.5) (964,505)
-------- ---------------
NET ASSETS .............................. 100.0% $ 5,497,086
======== ===============
- --------------------------------------------------------------------------------
* Non-income producing security.
+ Securities partially or fully on loan.
(a) At December 31, 1995, the net unrealized appreciation on
investments, based on cost for federal income tax purposes of
$6,057,880, amounted to $403,711, which consisted of aggregate
gross unrealized appreciation of $555,479 and aggregate gross
unrealized depreciation of $151,768.
See Notes to Financial Statements
F-27
<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 DECEMBER 31, 1995(I)
- --------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.00
- --------------------------------------------------------------------------------
Net investment (loss) (0.03)
Net realized and unrealized gain (loss) on investments 7.46
- --------------------------------------------------------------------------------
Total from investment operations 7.43
- --------------------------------------------------------------------------------
Net asset value, end of period $ 17.43
================================================================================
Total Return 74.30%
================================================================================
Ratios and Supplemental Data:
Net assets, end of period (000's omitted) $ 5,497
================================================================================
Ratio of expenses excluding interest to average net assets 1.50%
================================================================================
Ratio of expenses including interest to average net assets 1.56%
================================================================================
Decrease reflected in above expense ratios
due to expense reimbursements 2.36%
================================================================================
Ratio of net investment (loss) to average net assets (0.71%)
================================================================================
Portfolio Turnover Rate 178.23%
================================================================================
Debt outstanding at end of period $ 0
================================================================================
Average amount of debt outstanding during the period $ 8,122
================================================================================
Average daily number of shares outstanding during the period 75,460
================================================================================
Average amount of debt per share during the period $ 0.11
================================================================================
(i) Ratios have been annualized; total return has not been annualized.
See Notes to Financial Statements.
F-28
<PAGE>
THE ALGER AMERICAN FUND
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERICAN AMERICAN
SMALL INCOME
AMERICAN CAPITALIZA- AND
GROWTH TION GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Investments in securities, at value
(identified cost*)--see accompany-
ing schedules of investments $506,690,636 $1,115,194,108 $39,233,170
Receivable for investment securities
sold -- 2,519,387 --
Receivable for shares of beneficial
interest sold 67,463,666 2,478,261 9,800
Interest and dividends receivable 213,098 107,348 55,403
Receivable from Investment
Manager--Note 3(a) -- -- --
Other assets 6,155 16,752 6,570
- ------------------------------------------------------------------------------------------------------------
Total Assets 574,373,555 1,120,315,856 39,304,943
- ------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for securities loaned 27,639,745 114,379,873 776,167
Payable for investment securities
purchased 43,329,864 18,273,986 --
Payable for shares of beneficial
interest redeemed 13,715 2,518,403 29,855,415
Interest payable -- -- --
Accrued investment management fees 258,354 674,370 20,688
Accrued expenses 158,338 257,076 13,214
- ------------------------------------------------------------------------------------------------------------
Total Liabilities 71,400,016 136,103,708 30,665,484
- ------------------------------------------------------------------------------------------------------------
NET ASSETS $502,973,539 $ 984,212,148 $ 8,639,459
============================================================================================================
NET ASSETS CONSIST OF:
Paid-in capital $434,692,227 $ 769,498,764 $ (610,924)
Undistributed net investment
income (accumulated loss) 448,672 (4,389,480) 240,007
Undistributed net realized gain
(accumulated loss) 14,697,665 (22,165,128) 7,646,055
Net unrealized appreciation 53,134,975 241,267,992 1,364,321
- ------------------------------------------------------------------------------------------------------------
NET ASSETS $502,973,539 $ 984,212,148 $ 8,639,459
============================================================================================================
Shares of beneficial interest
outstanding--Note 6 16,143,581 24,976,457 485,739
============================================================================================================
NET ASSET VALUE PER SHARE $ 31.16 $ 39.41 $ 17.79
============================================================================================================
*Identified cost $453,555,661 $ 873,926,116 $37,868,849
============================================================================================================
</TABLE>
<PAGE>
THE ALGER AMERICAN FUND
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED)
DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERICAN AMERICAN
AMERICAN MIDCAP LEVERAGED
BALANCED GROWTH ALLCAP
PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Investments in securities, at value
(identified cost*)--see accompany-
ing schedules of investments $13,209,990 $200,013,553 $6,461,591
Receivable for investment securities
sold 1,172,674 -- --
Receivable for shares of beneficial
interest sold 16,430 830,074 118,620
Interest and dividends receivable 30,328 47,455 2,118
Receivable from Investment
Manager--Note 3(a) -- -- 8,549
Other assets 2,429 3,683 12
- ------------------------------------------------------------------------------------------------------------
Total Assets 14,431,851 200,894,765 6,590,890
- ------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for securities loaned -- 13,414,005 188,673
Payable for investment securities
purchased -- 1,950,213 886,306
Payable for shares of beneficial
interest redeemed 10,741,530 72 946
Interest payable -- -- 139
Accrued investment management fees 9,339 120,898 3,080
Accrued expenses 9,813 60,814 14,660
- ------------------------------------------------------------------------------------------------------------
Total Liabilities 10,760,682 15,546,002 1,093,804
- ------------------------------------------------------------------------------------------------------------
NET ASSETS $ 3,671,169 $185,348,763 $5,497,086
============================================================================================================
NET ASSETS CONSIST OF:
Paid-in capital $ 676,343 $152,728,945 $5,210,790
Undistributed net investment
income (accumulated loss) 319,185 (304,781) (8,065)
Undistributed net realized gain
(accumulated loss) 2,166,758 1,315,653 (109,350)
Net unrealized appreciation 508,883 31,608,946 403,711
- ------------------------------------------------------------------------------------------------------------
NET ASSETS $ 3,671,169 $185,348,763 $5,497,086
============================================================================================================
Shares of beneficial interest
outstanding--Note 6 269,192 9,533,195 315,382
============================================================================================================
NET ASSET VALUE PER SHARE $ 13.64 $ 19.44 $ 17.43
============================================================================================================
*Identified cost $12,701,107 $168,404,607 $6,057,880
============================================================================================================
</TABLE>
See Notes to Financial Statements.
F-29
<PAGE>
THE ALGER AMERICAN FUND
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERICAN AMERICAN
SMALL INCOME
AMERICAN CAPITALIZA- AND
GROWTH TION GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
Income:
Interest $ 1,329,367 $ 2,298,429 $ 109,016
Dividends 1,263,383 618,628 401,049
- ------------------------------------------------------------------------------------------------------------
Total Income 2,592,750 2,917,057 510,065
- ------------------------------------------------------------------------------------------------------------
Expenses:
Management fees-- Note 3(a) 1,894,223 5,628,002 235,434
Interest expense -- -- --
Custodian fees 76,320 178,020 18,749
Transfer Agent fees 2,500 2,500 2,500
Professional fees 37,836 77,846 10,309
Trustees' fees 4,000 4,000 4,000
Miscellaneous 130,694 203,958 9,872
- ------------------------------------------------------------------------------------------------------------
2,145,573 6,094,326 280,864
Less, expense reimbursement
Note 3(a) -- -- --
- ------------------------------------------------------------------------------------------------------------
Total Expenses 2,145,573 6,094,326 280,864
- ------------------------------------------------------------------------------------------------------------
Net Investment Income
(Loss) 447,177 (3,177,269) 229,201
- ------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on investments 15,710,698 (5,203,810) 10,080,314
Net change in unrealized appreciation
on investments 42,409,681 195,831,810 678,273
- ------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
on investments 58,120,379 190,628,000 10,758,587
- ------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET
ASSETS RESULTING FROM
OPERATIONS $58,567,556 $187,450,731 $10,987,788
============================================================================================================
</TABLE>
THE ALGER AMERICAN FUND
STATEMENTS OF OPERATIONS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERICAN AMERICAN
AMERICAN MIDCAP LEVERAGED
BALANCED GROWTH ALLCAP
PORTFOLIO PORTFOLIO PORTFOLIO(*)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
Income:
Interest $ 409,706 $ 555,343 $ 7,631
Dividends 38,778 181,692 1,942
- ------------------------------------------------------------------------------------------------------------
Total Income 448,484 737,035 9,573
- ------------------------------------------------------------------------------------------------------------
Expenses:
Management fees-- Note 3(a) 96,391 900,673 9,604
Interest expense -- -- 690
Custodian fees 13,345 41,930 13,452
Transfer Agent fees 2,500 2,500 2,500
Professional fees 8,585 21,485 5,278
Trustees' fees 4,000 4,000 4,000
Miscellaneous 3,487 42,419 8,785
- ------------------------------------------------------------------------------------------------------------
128,308 1,013,007 44,309
Less, expense reimbursement
Note 3(a) -- -- (26,671)
- ------------------------------------------------------------------------------------------------------------
Total Expenses 128,308 1,013,007 17,638
- ------------------------------------------------------------------------------------------------------------
<PAGE>
Net Investment Income
(Loss) 320,176 (275,972) (8,065)
- ------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on investments 2,423,578 3,625,757 (109,350)
Net change in unrealized appreciation
on investments 354,713 26,654,319 403,711
- ------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
on investments 2,778,291 30,280,076 294,361
- ------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET
ASSETS RESULTING FROM
OPERATIONS $3,098,467 $30,004,104 $286,296
============================================================================================================
</TABLE>
(*) Commenced operations January 25, 1995.
See Notes to Financial Statements.
F-30
<PAGE>
THE ALGER AMERICAN FUND
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERICAN
AMERICAN INCOME
AMERICAN SMALL AND
GROWTH CAPITALIZATION GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN CASH Cash flows from operating activities:
Interest received $ 1,284,056 $ 2,257,218 $ 107,560
Dividends received 1,284,564 651,822 412,621
Operating expenses paid (1,863,413) (5,537,740) (272,801)
Purchase of short-term securities, net (62,246,511) (56,163,927) (25,637,367)
Purchase of portfolio securities (466,813,895) (882,002,846) (57,052,607)
Proceeds from disposition of
portfolio securities 282,951,993 510,524,878 86,109,362
Other (1,195) (3,881) (4,977)
- ------------------------------------------------------------------------------------------------------------
Net cash (used for) provided
by operating activities (245,404,401) (430,274,476) 3,661,791
- ------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Dividends paid (2,183,739) 0 (352,788)
Proceeds from shares sold and
dividends reinvested 336,098,077 689,235,046 14,937,635
Payments on shares redeemed (107,132,855) (293,464,899) (16,633,691)
Increase (decrease) in cash collateral
received on securities loaned 18,622,918 34,504,329 (1,612,947)
- ------------------------------------------------------------------------------------------------------------
Net cash provided by (used for)
financing activities 245,404,401 430,274,476 (3,661,791)
- ------------------------------------------------------------------------------------------------------------
Net increase in cash 0 0 0
Cash--beginning of year 0 0 0
- ------------------------------------------------------------------------------------------------------------
Cash--end of year $ 0 $ 0 $
============================================================================================================
RECONCILIATION OF NET INCREASE IN NET ASSETS TO NET CASH (USED FOR) PROVIDED
BY OPERATING ACTIVITIES:
Net increase in net assets
resulting from operations $ 58,567,556 $187,450,731 $10,987,788
(Increase) decrease in investments (279,282,731) (421,521,851) 4,803,370
(Increase) decrease in receivable for
investments sold 0 (619,287) 364,733
(Increase) decrease in interest and
dividends receivable (24,130) (8,017) 10,116
Increase (decrease) in payable
for investments purchased 33,174,315 (5,500,758) (1,748,723)
Net realized gain (loss) (15,710,698) 5,203,810 (10,080,314)
Net (increase) in unrealized appreciation (42,409,681) (195,831,810) (678,273)
Increase in accrued expenses 282,160 556,586 8,063
Net (increase) in other assets (1,192) (3,880) (4,969)
- ------------------------------------------------------------------------------------------------------------
Net cash (used for) provided by
operating activities $(245,404,401) $(430,274,476) $ 3,661,791
============================================================================================================
(*) Commenced operations January 25, 1995.
<PAGE>
THE ALGER AMERICAN FUND
STATEMENTS OF CASH FLOWS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1995
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERICAN AMERICAN
AMERICAN MIDCAP LEVERAGED
BALANCED GROWTH ALLCAP
PORTFOLIO PORTFOLIO PORTFOLIO(*)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INCREASE (DECREASE) IN CASH Cash flows from operating activities:
Interest received $ 415,577 $ 533,022 $ 5,907
Dividends received 39,342 177,458 1,548
Operating expenses paid (124,658) (897,315) (8,308)
Purchase of short-term securities, net (5,693,864) (10,380,018) (1,212,484)
Purchase of portfolio securities (12,041,910) (199,719,781) (6,310,543)
Proceeds from disposition of
portfolio securities 17,288,738 112,883,607 2,242,103
Other (1,596) (1,193) (12)
- ------------------------------------------------------------------------------------------------------------
Net cash (used for) provided
by operating activities (118,371) (97,404,220) (5,281,789)
- ------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Dividends paid (217,622) (10,668) 0
Proceeds from shares sold and
dividends reinvested 5,141,339 159,569,464 6,625,927
Payments on shares redeemed (4,020,864) (66,975,668) (1,532,811)
Increase (decrease) in cash collateral
received on securities loaned (784,482) 4,821,092 188,673
- ------------------------------------------------------------------------------------------------------------
Net cash provided by (used for)
financing activities 118,371 97,404,220 5,281,789
- ------------------------------------------------------------------------------------------------------------
Net increase in cash 0 0 0
Cash--beginning of year 0 0 0
- ------------------------------------------------------------------------------------------------------------
Cash--end of year $ 0 $ 0 $ 0
============================================================================================================
RECONCILIATION OF NET INCREASE IN NET ASSETS TO NET CASH (USED FOR) PROVIDED
BY OPERATING ACTIVITIES:
Net increase in net assets
resulting from operations $3,098,467 $ 30,004,104 $ 286,296
(Increase) decrease in investments 764,087 (94,433,309) (6,167,231)
(Increase) decrease in receivable for
investments sold (963,254) 650,966 0
(Increase) decrease in interest and
dividends receivable 6,435 (26,555) (2,118)
Increase (decrease) in payable
for investments purchased (247,870) (3,433,850) 886,306
Net realized gain (loss) (2,423,578) (3,625,757) 109,350
Net (increase) in unrealized appreciation (354,713) (26,654,319) (403,711)
Increase in accrued expenses 3,650 115,692 17,879
Net (increase) in other assets (1,595) (1,192) (8,560)
- ------------------------------------------------------------------------------------------------------------
Net cash (used for) provided by
operating activities $ (118,371) $ (97,404,220) $(5,281,789)
============================================================================================================
</TABLE>
(*) Commenced operations January 25, 1995.
See Notes to Financial Statements.
F-31
<PAGE>
THE ALGER AMERICAN FUND
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERICAN
AMERICAN INCOME
AMERICAN SMALL AND
GROWTH CAPITALIZATION GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net investment income (loss) $ 447,177 $ (3,177,269) $ 229,201
Net realized gain (loss) on investments 15,710,698 (5,203,810) 10,080,314
Net change in unrealized appreciation
on investments 42,409,681 195,831,810 678,273
- ------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting
from operations 58,567,556 187,450,731 10,987,788
Dividends to shareholders:
Net investment income (480,697) -- (352,788)
Net realized gains (1,703,042) -- --
Net increase (decrease) from
shares of beneficial interest
transactions-- Note 6 296,199,246 399,724,319 (31,130,440)
- ------------------------------------------------------------------------------------------------------------
Total increase (decrease) 352,583,063 587,175,050 (20,495,440)
Net Assets
Beginning of year 150,390,476 397,037,098 29,134,899
- ------------------------------------------------------------------------------------------------------------
End of year $ 502,973,539 $ 984,212,148 $ 8,639,459
============================================================================================================
Undistributed net investment income
(accumulated loss) $ 448,672 $ (4,389,480) $ 240,007
============================================================================================================
THE ALGER AMERICAN FUND
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
FOR THE YEAR ENDED DECEMBER 31, 1995
- --------------------------------------------------------------------------------
AMERICAN AMERICAN
AMERICAN MIDCAP LEVERAGED
BALANCED GROWTH ALLCAP
PORTFOLIO PORTFOLIO PORTFOLIO(*)
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net investment income (loss) $ 320,176 $ (275,972) $ (8,065)
Net realized gain (loss) on investments 2,423,578 3,625,757 (109,350)
Net change in unrealized appreciation
on investments 354,713 26,654,319 403,711
- ------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting
from operations 3,098,467 30,004,104 286,296
Dividends to shareholders:
Net investment income (217,622) (10,668) --
Net realized gains -- -- --
Net increase (decrease) from
shares of beneficial interest
transactions-- Note 6 (9,604,163) 93,177,691 5,210,790
- ------------------------------------------------------------------------------------------------------------
Total increase (decrease) (6,723,318) 123,171,127 5,497,086
Net Assets
Beginning of year 10,394,487 62,177,636 --
- ------------------------------------------------------------------------------------------------------------
End of year $ 3,671,169 $ 185,348,763 $ 5,497,086
============================================================================================================
Undistributed net investment income
(accumulated loss) $ 319,185 $ (304,781) $ (8,065)
============================================================================================
===============
(*) Commenced operations January 25, 1995.
See Notes to Financial Statements.
</TABLE>
F-32
<PAGE>
THE ALGER AMERICAN FUND
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERICAN
AMERICAN INCOME AMERICAN
AMERICAN SMALL 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 6 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-33
<PAGE>
THE ALGER AMERICAN FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 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 qualified retirement plans and for life insurance companies
writing all types of variable annuity contracts and variable life insurance
policies.
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 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 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 ensures 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 December 31, 1995, the value of securities loaned
and cash collateral received thereon were as follows:
VALUE OF CASH
SECURITIES COLLATERAL
LOANED RECEIVED
--------- ---------
American Growth Portfolio............. $ 26,693,177 $ 27,639,745
American Small Capitalization
Portfolio.......................... 111,387,107 114,379,873
American Income and Growth
Portfolio.......................... 763,981 776,167
American Balanced Portfolio........... -- --
American MidCap Growth
Portfolio.......................... 12,981,913 13,414,005
American Leveraged AllCap
Portfolio.......................... 185,934 188,673
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,
1995, the American Growth Portfolio, the American Small Capitalization
Portfolio, the American Income and Growth Portfolio, the American Balanced
Portfolio, the American MidCap Growth Portfolio and the American Leveraged
AllCap Portfolio received $57,569, $329,699, $9,625, $2,804, $33,854, and $408,
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.
Dividends from net investment income 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-34
<PAGE>
THE ALGER AMERICAN FUND
NOTES TO FINANCIAL STATEMENTS (CONT'D)
DECEMBER 31, 1995
- --------------------------------------------------------------------------------
(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.
(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.
(h) OTHER: The negative balance in paid-in-capital for the American Income and
Growth Portfolio as of December 31, 1995 is the result of payments for fund
shares redeemed exceeding the receipts for fund shares sold on an aggregate
basis.
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:
American Growth Portfolio..................................... .750%
American Small Capitalization Portfolio....................... .850
American Income and Growth Portfolio.......................... .625
American Balanced Portfolio................................... .750
American MidCap Growth Portfolio.............................. .800
American Leveraged AllCap Portfolio........................... .850
The Agreements further provide that if in any fiscal year the aggregate
expenses, excluding interest, taxes, brokerage commissions, and extraordinary
expenses, of 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%; the American MidCap
Growth Portfolio exceed 1.50% and the American Leveraged AllCap 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, 1995, Alger Management reimbursed the American Leveraged
AllCap Portfolio $26,671.
(b) BROKERAGE COMMISSIONS: During the year ended December 31, 1995, the American
Growth Portfolio, American Small Capitalization Portfolio, American Income and
Growth Portfolio, American Balanced Portfolio, American MidCap Growth Portfolio
and the American Leveraged AllCap Portfolio paid Fred Alger & Company,
Incorporated ("Alger Inc.") $815,307, $697,538, $154,254, $25,463, $326,893 and
$4,108, 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, 1995, Alger Inc. and affiliates owned 35,482 shares, 21,919 shares,
1,122 shares, 1,464 shares, 1 share, and 24,501 shares 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, 1995, were as follows:
PURCHASES SALES
--------- -----
American Growth Portfolio............. $499,988,210 $282,949,942
American Small Capitalization
Portfolio.......................... 876,502,088 511,075,264
American Income and Growth
Portfolio.......................... 55,303,884 85,744,658
American Balanced Portfolio........... 11,794,040 18,252,029
American MidCap Growth
Portfolio.......................... 196,285,931 112,233,087
American Leveraged AllCap
Portfolio.......................... 7,196,849 2,242,107
NOTE 5--SHORT-TERM BORROWINGS:
The American Leveraged AllCap Portfolio has a line of credit with a bank whereby
it may borrow up to one-third 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 December 31, 1995, the Portfolio had borrowings
which averaged $8,122 at a weighted average interest rate of 8.97%.
NOTE 6--SHARE CAPITAL:
The Fund has an unlimited number of authorized shares of beneficial interest of
$.001 par value.
F-35
<PAGE>
THE ALGER AMERICAN FUND
NOTES TO FINANCIAL STATEMENTS (CONT'D)
DECEMBER 31, 1995
- --------------------------------------------------------------------------------
During the year ended December 31, 1995, transactions of shares of beneficial
interest were as follows:
SHARES AMOUNT
------ -------
American Growth
Portfolio:
Shares sold....................... 13,397,031 $401,141,672
Dividends reinvested.............. 84,119 2,183,739
--------- -----------
13,481,150 403,325,411
Shares redeemed...................... (3,839,223) (107,126,165)
--------- -----------
Net increase.................... 9,641,927 $296,199,246
========= ===========
SHARES AMOUNT
------ -------
American Small Capitalization
Portfolio:
Shares sold....................... 18,702,535 $ 691,048,373
Shares redeemed...................... (8,263,881) (291,324,054)
--------- -----------
Net increase.................... 10,438,654 $ 399,724,319
========= ===========
SHARES AMOUNT
------ -------
American Income and Growth
Portfolio:
Shares sold....................... 887,706 $ 14,574,940
Dividends reinvested.............. 23,363 352,788
--------- -----------
911,069 14,927,728
Shares redeemed...................... (2,616,215) (46,058,168)
--------- -----------
Net decrease....................... (1,705,146) $ (31,130,440)
========= ===========
SHARES AMOUNT
------ -------
American Balanced
Portfolio:
Shares sold....................... 392,582 $ 4,925,776
Dividends reinvested.............. 18,568 217,622
--------- -----------
411,150 5,143,398
Shares redeemed...................... (1,104,001) (14,747,561)
--------- -----------
Net decrease....................... (692,851) $ (9,604,163)
========= ===========
SHARES AMOUNT
------ -------
American MidCap Growth
Portfolio:
Shares sold....................... 8,606,684 $ 160,082,716
Dividends reinvested.............. 706 10,668
--------- -----------
8,607,390 160,093,384
Shares redeemed...................... (3,694,620) (66,915,693)
--------- -----------
Net increase.................... 4,912,770 $ 93,177,691
========= ===========
SHARES AMOUNT
------ -------
American Leveraged AllCap
Portfolio:
Shares sold....................... 405,310 $ 6,744,547
Shares redeemed...................... (89,928) (1,533,757)
--------- -----------
Net increase.................... 315,382 $ 5,210,790
========= ===========
During the year ended December 31, 1994, transactions of shares of beneficial
interest were as follows:
SHARES AMOUNT
------ -------
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
========= ===========
SHARES AMOUNT
------ -------
American Small Capitalization
Portfolio:
Shares sold....................... 12,403,211 $335,183,769
Dividends 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
========= ===========
SHARES AMOUNT
------ -------
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
========= ===========
SHARES AMOUNT
------ -------
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
========= ===========
SHARES AMOUNT
------ -------
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
========= ===========
F-36
<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, Alger American MidCap Growth
Portfolio and Alger American Leveraged AllCap Portfolio) as of December 31,
1995, 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, 1995, 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, 1995, 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 5, 1996
F-37
<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 THE |
- -------------------------------------- ALGER | Meeting the challenge
DISTRIBUTOR: AMERICAN | of investing
Fred Alger & Company, Incorporated FUND |
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
- --------------------------------------
|
STATEMENT |
OF ADDITIONAL | May 1, 1996
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, 1995 and for the
period then ended;
(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 6
Alger American Small Capitalization Portfolio 17
Alger American Growth Portfolio 16
Alger American Balanced Portfolio 5
Alger American MidCap Growth Portfolio 13
Alger American Leveraged AllCap Portfolio 9
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 26th day of
February, 1996.
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 February 20, 1996
- --------------------------------
Fred M. Alger III
/s/ David D. Alger President and Trustee February 20, 1996
- -------------------------------- (Chief Executive Officer)
David D. Alger
/s/ Gregory S. Duch Treasurer February 20, 1996
- -------------------------------- (Chief Financial and Accounting
Gregory S. Duch Officer)
/s/ Nathan E. Saint-Amand* Trustee February 20, 1996
- --------------------------------
Nathan E. Saint-Amand
/s/ Stephen E. O'Neil* Trustee February 20, 1996
- --------------------------------
Stephen E. O'Neil
/s/ Arthur M. Dubow* Trustee February 20, 1996
- --------------------------------
Arthur M. Dubow
/s/ John T. Sargent* Trustee February 20, 1996
- --------------------------------
John T. Sargent
C-7
<PAGE>
Securities Act File No. 33-21722
Investment Company Act File No. 811-5550
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-1A
---
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ---
---
Pre-Effective Amendment No. ---
---
Post-Effective Amendment No. 12 X
---
and/or
---
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 ---
---
Amendment No. 14 x
---
(Check appropriate box or boxes)
THE ALGER AMERICAN FUND
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
--------------------------
E X H I B I T S
--------------------------
<PAGE>
INDEX TO EXHIBITS
Exhibit Page Number in Sequential
No. Number System
- ------ -------------------------
11 Consent of Arthur Andersen LLP .............
ARTHUR ANDERSEN & CO. SC
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the use of our report
dated February 2, 1995 on the financial statements for 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. 14), Investment Company Act File No.
811-5550 with the Securities and Exchange Commission.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
New York, New York
February 29, 1996
