As filed with the Securities and Exchange Commission
on April 9, 1998
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. l5 __X__
and/or
_____
Registration Statement Under The Investment Company Act of 1940 _____
_____
Amendment No. 17 __X__
(Check appropriate box or boxes)
THE ALGER AMERICAN FUND
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
75 Maiden Lane
New York, New York 10038
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: 212-806-8800
Mr. Gregory S. Duch
Fred Alger Management, Inc.
75 Maiden Lane
New York, NY 10038
- --------------------------------------------------------------------------------
(Name and Address of Agent for Service)
Page 1 of _____ Pages
Exhibit Index at Page _____
<PAGE>
It is proposed that this filing will become effective (check appropriate box):
_____
_____ immediately upon filing pursuant to paragraph (b), or
_____
__X__ on May 1, 1998 pursuant to paragraph (b), or
_____
_____ 60 days after filing pursuant to paragraph (a), or
_____
_____ on [date] pursuant to paragraph (a) of Rule 485
----------
DECLARATION PURSUANT TO RULE 24f-2
Registrant has registered an indefinite number or amount of securities under
the Securities Act of 1933, as amended, pursuant to Securities (a)(l) of Rule
24f-2 under the Investment Company Act of 1940, as amended. The Rule 24f-2
Notice for Registrant's fiscal year ended December 31, 1997 was filed on
February 26, 1998.
<PAGE>
THE ALGER AMERICAN FUND
FORM N-1A
CROSS REFERENCE SHEET
PART A
ITEM NO. PROSPECTUS HEADING
- -------- ------------------
1. Cover Page ............................. Front Cover Page
2. Synopsis ............................... Portfolio Expenses
3. Condensed Financial Information ........ Financial Highlights
4. General Description of Registrant ...... Front Cover Page; The Alger
American Fund; Investment
Objectives and Policies;
Investment Practices;
Management of the Fund
5. Management of the Fund ................. Management of the Fund
6. Capital Stock and Other Securities ..... Front Cover Page; Management
of the Fund; Dividends and
Distributions; Taxes; Investor
and Shareholder Information
7. Purchase of Securities Being Offered ... Management of the Fund; Net
Asset Value; Purchases and
Redemptions;
8. Redemption or Repurchase ............... Purchases and Redemptions
9. Pending Legal Proceedings .............. Not Applicable
<PAGE>
PART B
ITEM NO. PROSPECTUS HEADING
- -------- ------------------
10. Cover Page ............................. Front Cover Page
11. Table of Contents ...................... Contents
12. General Information and History ........ Organization
13. Investment Objectives and Policies ..... Investment Objectives and
Policies; Appendix
14. Management of the Fund ................. Management
15. Control Persons and Principal Holders
of Securities ..................... Certain Shareholders
16. Investment Advisory and Other Services . Management; Custodian and
Transfer Agent; Purchases; See
in the Prospectus "Management
of the Fund"
17. Brokerage Allocation and Other
Practices ......................... Investment Objectives and
Policies
18. Capital Stock and Other Securities ..... Organization; See in the
Prospectus "Dividends and
Distributions" and "Management
of the Fund"
19. Purchase, Redemption and Pricing of
Securities Being Offered .......... Net Asset Value; Purchases and
Redemptions
20. Tax Status ............................. Taxes; See in the Prospectus
"Taxes"
21. Underwriters ........................... Purchases and Redemptions
22. Calculation of Performance Data ........ Determination of Performance;
See in the Prospectus
"Performance"
23. Financial Statements ................... Financial Statements
PART C
- ------
Information required to be included in Part C is set forth under the
appropriate item, so numbered, in Part C to this Registration Statement.
<PAGE>
PROSPECTUS
- ----------
THE |
ALGER | 75 Maiden Lane
AMERICAN | New York, New York 10038
FUND | (800) 992-FUND (992-3863)
The Alger American Fund (the "Fund") is a registered investment company -- a
mutual fund -- that presently offers interests in six 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 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 are also
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, 1998 containing further information about
the Fund has been filed with the Securities and Exchange Commission and is
incorporated by reference into this Prospectus. It is available at no charge by
contacting the Fund at the address or phone number above.
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, 1998
<PAGE>
- --------------------------------------------------------------------------------
CONTENTS
Page
-----
Portfolio Expenses............................. iii
Financial Highlights........................... iv
The Alger American Fund........................ 1
Participating Insurance Companies and Plans.... 1
Investment Objectives and Policies............. 1
Alger American Balanced Portfolio............ 1
Alger American Income and Growth
Portfolio.................................. 2
Alger American Small Capitalization
Portfolio.................................. 2
Alger American Growth Portfolio.............. 2
Alger American MidCap Growth
Portfolio.................................. 2
Alger American Leveraged AllCap
Portfolio.................................. 2
Investment Practices........................... 3
Management of the Fund......................... 5
Net Asset Value................................ 7
Purchases and Redemptions...................... 7
Dividends and Distributions.................... 7
Taxes.......................................... 7
Performance.................................... 8
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 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 a Portfolio. 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
Exchange 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........................... .26% .115% .04% .04% .04% .15%*
---- ---- --- --- --- ----
Total Fund Operating Expenses ........... 1.01% .74% .89% .79% .84% 1.00%
==== ==== === === === ====
</TABLE>
*Included in Other Expenses of the Alger American Leveraged AllCap Portfolio
is 0.04% of interest expense.
Example
<TABLE>
<CAPTION>
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end of each time period:
<S> <C> <C> <C> <C> <C> <C>
One Year................................. $ 10 $ 8 $ 9 $ 8 $ 9 $ 10
Three Years.............................. 32 24 28 25 27 32
Five Years............................... 56 41 49 44 47 55
Ten Years................................ 124 92 110 98 104 122
</TABLE>
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iii
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The Financial Highlights for the years ended December 31, 1990 through 1997
have been audited by Arthur Andersen LLP, the Fund's independent public
accountants. This information should be read in conjunction with the financial
statements of the Fund as contained in its Statement of Additional Information.
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
Fund's Annual Report contains additional performance information and is
available upon request and without charge by contacting the Fund at (800)
992-3863.
<TABLE>
<CAPTION>
THE ALGER AMERICAN FUND
GROWTH PORTFOLIO
Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
Year Ended December 31,
---------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989(ii)
---------- -------- -------- -------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year.......... $ 34.33 $ 31.16 $ 23.13 $ 24.67 $ 20.17 $ 18.00 $ 12.86 $ 12.41 $ 10.00
---------- -------- -------- -------- ------- ------- ------- ------- -------
Net investment income........ 0.13 0.12 0.02 0.07 0.03 0.03 0.08(i) 0.07 0.09
Net realized and unrealized
gain on investments........ 8.66 4.00 8.33 0.15 4.50 2.19 5.11 0.44 2.32
---------- -------- -------- -------- ------- ------- ------- ------- -------
Total from investment
operations............... 8.79 4.12 8.35 0.22 4.53 2.22 5.19 0.51 2.41
---------- -------- -------- -------- ------- ------- ------- ------- -------
Dividends from net investment
income..................... (0.13) (0.02) (0.07) (0.03) (0.03) (0.03) (0.05) (0.06) --
Distributions from net realized
gains...................... (0.23) (0.93) (0.25) (1.73) -- (0.02) -- -- --
---------- -------- -------- -------- ------- ------- ------- ------- -------
Total Distributions........ (0.36) (0.95) (0.32) (1.76) (0.03) (0.05) (0.05) (0.06) --
---------- -------- -------- -------- ------- ------- ------- ------- -------
Net asset value, end of year. $ 42.76 $ 34.33 $ 31.16 $ 23.13 $ 24.67 $ 20.17 $ 18.00 $ 12.86 $ 12.41
========== ======== ======== ======== ======= ======= ======= ======= =======
Total Return................. 25.75% 13.35% 36.37% 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).......... $1,072,529 $991,028 $502,974 $150,390 $74,878 $30,316 $10,094 $ 1,228 $ 171
========== ======== ======== ======== ======= ======= ======= ======= =======
Ratio of expenses to average
net assets............... 0.79% 0.79% 0.85% 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.... 0.27% 0.50% 0.18% 0.48% 0.25% 0.33% 0.52% 1.69% 1.30%
========== ======== ======== ======== ======= ======= ======= ======= =======
Portfolio Turnover Rate.... 129.50% 82.86% 118.33% 111.76% 112.64% 63.91% 58.95% 86.77% 79.59%
========== ======== ======== ======== ======= ======= ======= ======= =======
Average Commission
Rate Paid.................. $ .0697 $ .0683
========== ========
(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.
</TABLE>
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iv
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
THE ALGER AMERICAN FUND
SMALL CAPITALIZATION PORTFOLIO
Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
Year Ended December 31,
---------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988(iii)
-------- ---------- -------- -------- -------- -------- ------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year...... $ 40.91 $ 39.41 $ 27.31 $ 30.88 $ 27.26 $ 26.79 $ 17.02 $ 15.79 $ 9.60 $ 10.00
-------- ---------- -------- -------- -------- -------- ------- -------- -------- --------
Net investment
income (loss).......... (0.05)(i) (0.04)(i) (0.09) (0.03)(i) (0.05) (0.06) (0.03) 0.02 0.04 0.06
Net realized and
unrealized gain
(loss) on investments.. 4.45 1.70 12.19 (1.45) 3.67 0.91 9.82 1.35 6.15 (0.40)
-------- ---------- -------- -------- -------- -------- ------- -------- -------- --------
Total from investment
operations........... 4.40 1.66 12.10 (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......... (1.56) (0.16) -- (2.09) -- (0.38) -- (0.13) -- --
-------- ---------- -------- -------- -------- -------- ------- -------- ------- --------
Total Distributions.... (1.56) (0.16) -- (2.09) -- (0.38) (0.02) (0.14) -- (0.06)
-------- ---------- -------- -------- -------- -------- ------- -------- -------- --------
Net asset value, end
of year................ $ 43.75 $ 40.91 $ 39.41 $ 27.31 $ 30.88 $ 27.26 $ 26.79 $ 17.02 $ 15.79 $ 9.60
======== ========== ======== ======== ======== ======== ======= ======== ======== ========
Total Return............. 11.39% 4.18% 44.31% (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)...... $997,586 $1,469,518 $984,212 $397,037 $238,850 $135,718 $56,798 $ 7,149 $ 569 $ 39
======== ========== ======== ======== ======== ======== ======= ======== ======== ========
Ratio of expenses to
average net assets... 0.89% 0.88% 0.92% 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... (0.12%) (0.09%) (0.48%) (0.10%) (0.35%) (0.37%) (0.12%) 0.50% 1.11% 2.27%
======== ========== ======== ======== ======== ======== ======= ======== ======= ========
Portfolio Turnover
Rate................. 104.43% 110.04% 80.66% 117.61% 148.07% 108.06% 125.90% 132.46% 133.61% 20.86%
======== ========== ======== ======== ======== ======== ======= ======== ======= ========
Average Commission
Rate Paid............ $ .0640 $ .0591
======= =======
(i) Amount was computed based on average shares outstanding during the period.
(ii) Unaudited.
(iii) For the period September 21, 1988 (commencement of operations) to December
31, 1988. Ratios have been annualized; total return has not been
annualized.
</TABLE>
- --------------------------------------------------------------------------------
v
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
THE ALGER AMERICAN FUND
INCOME AND GROWTH PORTFOLIO
Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
Year Ended December 31,
-----------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988(ii)
-------- -------- -------- -------- -------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year...... $ 8.42 $ 17.79 $ 13.30 $ 15.31 $ 13.93 $ 13.08 $ 10.67 $ 10.74 $ 10.00 $ 10.00
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net investment income.... 0.03 0.09(iii) 0.11(iii) 0.17 0.07 0.08 0.09 0.11 0.18 0.10
Net realized and
unrealized gain (loss)
on investments......... 2.94 1.87 4.54 (1.47) 1.37 1.02 2.41 (0.08) 0.56 --
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total from investment
operations............. 2.97 1.96 4.65 (1.30) 1.44 1.10 2.50 0.03 0.74 0.10
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Dividends from net
investment income...... (0.04) (0.33) (0.16) (0.15) (0.06) (0.12) (0.09) (0.10) -- (0.10)
Distributions from net
realized gains......... (0.36) (11.00) -- (0.56) -- (0.13) -- -- -- --
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Total Distributions... (0.40) (11.33) (0.16) (0.71) (0.06) (0.25) (0.09) (0.10) -- (0.10)
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
Net asset value,
end of year ......... $ 10.99 $ 8.42 $ 17.79 $ 13.30 $ 15.31 $ 13.93 $ 13.08 $ 10.67 $ 10.74 $ 10.00
======== ========== ======== ======= ======== ======== ======== ======== ======== ========
Total Return............. 36.29% 19.68% 35.13% (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)...... $ 47,399 $ 20,910 $ 8,639 $ 29,135 $ 31,895 $ 8,671 $ 2,663 $ 436 $ 98 $ 28
======== ========== ======== ======= ======== ======== ======== ======== ======== ========
Ratio of expenses to
average net assets... 0.74% 0.81% 0.75% 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........... 0.56% 0.94% 0.61% 1.22% 1.51% 1.62% 2.54% 3.61% 7.36% 7.30%
======== ========== ======== ======= ======== ======== ======== ======== ======= ========
Portfolio Turnover Rate 150.09 121.60% 164.05% 177.97% 105.80% 100.62% 61.11% 56.90% -- --
======== ========== ======== ======= ======== ======== ======== ======== ======= ========
Average Commission
Rate Paid.............. $ .0724 $ .0728
======== ========
(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.
(iii) Amount was computed based on average shares outstanding during the period.
</TABLE>
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vi
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
THE ALGER AMERICAN FUND
BALANCED PORTFOLIO (i)
Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
Year Ended December 31,
-------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989(ii)
------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year.......... $ 9.24 $ 13.64 $ 10.80 $ 11.58 $ 10.77 $ 10.02 $ 10.01 $ 10.04 $ 10.00
------- ------- ------- ------- ------- ------- ------- ------- -------
Net investment income........ 0.17 0.21(iv) 0.33(iv) 0.20 0.15 0.22 0.45 0.66 0.22
Net realized and unrealized
gain (loss) on investments. 1.63 1.01 2.73 (0.70) 0.69 0.72 0.01 (0.03) 0.04
------- ------- ------- ------- ------- ------- ------- ------- -------
Total from investment
operations ................ 1.80 1.22 3.06 (0.50) 0.84 0.94 0.46 0.63 0.26
------- ------- ------- ------- ------- ------- ------- ------- -------
Dividends from net investment
income..................... (0.12) (0.73) (0.22) (0.13) (0.03) (0.19) (0.45) (0.66) (0.22)
Distributions from net
realized gains ............. (0.16) (4.89) -- (0.15) -- -- -- -- --
------- ------- ------- ------- ------- ------- ------- ------- -------
Total Distributions........ (0.28) (5.62) (0.22) (0.28) (0.03) (0.19) (0.45) (0.66) (0.22)
------- ------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end of year. $ 10.76 $ 9.24 $ 13.64 $ 10.80 $ 11.58 $ 10.77 $ 10.02 $ 10.01 $10.04
======= ======= ======= ======= ======= ======= ======= ======= ======
Total Return................. 19.82% 10.17% 28.62% (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).......... $16,614 $10,486 $ 3,671 $10,394 $ 7,848 $ 4,009 $ 1,487 $ 365 $ 131
======= ======= ======= ======= ======= ======= ======= ======= ======
Ratio of expenses to average
net assets................ 1.01% 1.14% 1.00% 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..... 2.14% 2.06% 2.49% 2.30% 2.05% 1.99% 4.22% 6.60% 6.92%
======= ======= ======= ======= ======= ======= ======= ======= ======
Portfolio Turnover Rate.... 105.01% 68.66% 113.02% 78.80% 85.46% 15.27% -- 132.55% --
======= ======= ======= ======= ======= ======= ======= ======= ======
Average Commission
Rate Paid.................. $ .0712 $ .0712
======= =======
(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.
(iv) Amount was computed based on average shares outstanding during the period.
</TABLE>
- --------------------------------------------------------------------------------
vii
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
THE ALGER AMERICAN FUND
MIDCAP GROWTH PORTFOLIO
Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
From May 3, 1993
(commencement of
operations)
Year Ended December 31, to December 31, 1993(i)
-------------------------------------- ------------------------
1997 1996 1995 1994
-------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year..........$ 21.35 $ 19.44 $ 13.46 $ 13.72 $ 10.00
-------- -------- -------- ------- -------
Net investment income (loss)................ (0.04) 0.03 (0.03) 0.00(ii) (0.02)
Net realized and unrealized gain (loss)
on investments............................ 3.20 2.29 6.01 (0.21) 3.88
-------- -------- -------- ------- -------
Total from investment operations........ 3.16 2.32 5.98 (0.21) 3.86
-------- -------- -------- ------- -------
Dividends from net investment income...... (0.01) -- -- -- --
Distributions from net realized gains..... (0.32) (0.41) -- (0.05) (0.14)
-------- -------- -------- ------- -------
Total Distributions..................... (0.33) (0.41) -- (0.05) (0.14)
-------- -------- -------- ------- -------
Net asset value, end of year................$ 24.18 $ 21.35 $ 19.44 $ 13.46 $ 13.72
======== ======== ======== ======= =======
Total Return................................ 15.01% 11.90% 44.45% (1.54%) 38.67%
======== ======== ======== ======= =======
Ratios and Supplemental Data:
Net assets, end of year (000's omitted)...$444,967 $394,847 $185,349 $62,178 $21,301
======== ======== ======== ======= =======
Ratio of expenses to average net assets... 0.84% 0.84% 0.90% 0.97% 1.50%
======== ======== ======== ======= =======
Decrease reflected in above expense
ratio due to expense reimbursements..... -- -- -- -- 0.03%
======== ======== ======== ======= =======
Ratio of net investment income (loss)
to average net assets................... (0.15%) 0.08% (0.25%) 0.03% (0.58%)
======== ======== ======== ======= =======
Portfolio Turnover Rate................... 151.98% 90.97% 104.74% 83.96% 67.22%
======== ======== ======== ======= =======
Average Commission
Rate Paid.................................$ .0676 $ .0663
======== ========
(i) Ratios have been annualized; total return has not been annualized.
(ii) Amount was computed based on average shares outstanding during the period.
</TABLE>
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viii
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THE ALGER AMERICAN FUND
LEVERAGED ALLCAP PORTFOLIO
Financial Highlights
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
From January 25, 1995
Year Ended December 31, (commencement of
------------------------- operations)
1997 1996 to December 31, 1995(i)
--------- --------- -----------------------
<S> <C> <C> <C>
Net asset value, beginning of period................. $ 19.36 $ 17.43 $ 10.00
--------- --------- -------
Net investment loss.................................. (0.03) (0.03)(ii) (0.03)
Net realized and unrealized gain on investments ..... 3.84 2.14 7.46
--------- --------- -------
Total from investment operations................. 3.81 2.11 7.43
Distribution from net realized gains................. -- (0.18) --
--------- --------- -------
Net asset value, end of period....................... $ 23.17 $ 19.36 $ 17.43
========= ========= =======
Total Return......................................... 19.68% 12.04% 74.30%
========= ========= =======
Ratios and Supplemental Data:
Net assets, end of period (000's omitted).......... $ 53,488 $ 34,925 $ 5,497
========= ========= =======
Ratio of expenses excluding interest to
average net assets.............................. 0.96% 1.06% 1.50%
========= ========= =======
Ratio of expenses including interest to
average net assets.............................. 1.00% 1.09% 1.56%
========= ========= =======
Decrease reflected in above expense ratios
due to expense reimbursements.................... -- -- 2.36%
========= ========= =======
Ratio of net investment loss to average net assets. (0.17%) (0.15%) (0.71%)
========= ========= =======
Portfolio Turnover Rate............................ 164.27% 102.10% 178.23%
========= ========= =======
Amount of debt outstanding at end of period.......... -- -- --
========= ========= =======
Average amount of debt outstanding
during the period................................. $ 201,644 $ 76,079 $ 8,122
========= ========= =======
Average daily number of shares outstanding
during the period................................. 2,135,458 1,107,187 75,460
========= ========= =======
Average amount of debt per share during the period... $ 0.09 $ 0.07 $ 0.11
========= ========= =======
Average Commission
Rate Paid....................................... $ .0703 $ .0682
========= =========
(i) Ratios have been annualized; total return has not been annualized.
(ii) Amount was computed based on average shares outstanding during the period.
</TABLE>
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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. 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.
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 Plans. Individuals cannot
invest in a Portfolio directly but may do so only through a VA contract or VLI
policy or 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 Board of
Trustees intends 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 of the Portfolios and the investment restrictions
summarized in the next paragraph are fundamental, which means that they may not
be changed without shareholder approval. All investment policies and practices
described elsewhere in this Prospectus, and not explicitly identified as
fundamental, 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 illiquid by virtue of legal or contractual restrictions on
resale or the absence of a readily available market; (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 that it may borrow money or pledge its
assets in an amount up to 10% of its total assets for temporary or emergency
purposes and that the Alger American Leveraged AllCap Portfolio may borrow for
investment purposes as described below under "Alger American Leveraged AllCap
Portfolio." The Statement of Additional Information contains additional
investment restrictions.
ALGER AMERICAN BALANCED PORTFOLIO
The investment objectives of the Portfolio are 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 Fred Alger
Management, Inc. ("Alger Management"), the Fund's investment manager, to be of
comparable quality to instruments so rated.
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The Portfolio may invest up to 35% of its total assets in money market
instruments and repurchase agreements, and in excess of that amount (up to 100%
of its total 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 investment 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 total
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 ("Russell Index") or the S&P
SmallCap 600 Index ("S&P Index"), updated quarterly. Both indexes are broad
indexes of small capitalization stocks. As of March 31, 1998, the range of
market capitalization of the companies in the Russell Index was $20 million to
$4.25 billion; the range of market capitalization of the companies in the S&P
Index at that date was $31 million to $3.7 billion. The combined range as of
that date was $20 million to $4.25 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 of this combined range, 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.
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 Rtrack the performance of medium capitalization
companies. As of March 31, 1998, the range of market capitalization of the
companies within the S&P MidCap 400 Index was $201 million to $14.3 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 total 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."
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<PAGE>
IN GENERAL
Alger American Small Capitalization Portfolio, Alger American MidCap Growth
Portfolio, Alger American Growth Portfolio, Alger American Leveraged AllCap
Portfolio, Alger American Income and Growth Portfolio and the equity portion of
Alger American Balanced Portfolio seek to achieve their investment 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 or to meet redemptions, they may each hold up to 15% (or a
higher percentage where so stated) of their total assets in money market
instruments and repurchase agreements and in excess of that amount (up to 100%
of their total assets) during temporary defensive periods. These amounts may be
higher than those 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 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 of 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 smaller companies by the other
Portfolios.
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 in effect is held as collateral for a loan to the other party,
and the Portfolio might incur a loss if the value of the collateral held
declines during this period.
ILLIQUID AND RESTRICTED SECURITIES
An investment may be illiquid because of the absence of an active trading
market, making it difficult to sell promptly at an acceptable price. A
restricted security is one that has a contractual restriction on its resale or
which cannot be sold publicly until it is registered under the Securities Act of
1933. Each Portfolio may purchase securities eligible for resale pursuant to
Rule 144A under the Securities Act of 1933. This rule permits otherwise
restricted securities to be sold to certain institutional buyers. Under the
policies and procedures established by the Fund's Board of Trustees, Alger
Management determines the liquidity of the Portfolios' Rule 144A investments.
LENDING OF PORTFOLIO SECURITIES
In order to generate income and to offset expenses, each Portfolio may lend
portfolio securities with a value up to 33 1/3% of the Portfolio's total assets
including collateral on such loans, less liabilities exclusive of the obligation
to return such collateral, to brokers, dealers and other financial
organizations. Any such loan will be continuously secured by collateral at least
equal to the value of the securities loaned. Default by the borrower could
result in delays, costs and/or losses in disposing of the collateral or
recover-
3
<PAGE>
ing the loaned securities and, should the borrower fail financially,
possible loss of rights in the collateral.
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"), American
Depositary Shares ("ADSs"), or U.S. dollar-denominated securities of foreign
issuers, none of which are included in the 20% foreign securities limitation.
ADRs and ADSs are traded in the U.S. securities markets and represent the
securities of foreign issuers. While ADRs and ADSs may not necessarily be
denominated in the same currency as the foreign securities they represent, many
of the risks associated with foreign securities may also apply to ADRs and ADSs.
LEVERAGE THROUGH BORROWING
Alger American Leveraged AllCap Portfolio may borrow money from banks and use
it to purchase additional securities. This borrowing is known as leveraging.
Leveraging increases both investment opportunity and investment risk. If the
investment gains on securities purchased with borrowed money exceed the interest
paid on the borrowing, the net asset value of the 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
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. Hedging transactions are intended to reduce the risk of price
fluctuations. The Portfolio may write an option on a security only if the option
is "covered" (for a discussion of covered options, see the Statement of
Additional Information). 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 are highly specialized activities which
involve 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
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.
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.
Increased portfolio turnover will have the effect of increasing the Portfolios'
brokerage and custodial expenses.
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<PAGE>
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,
variable rate master demand notes, firm commitment agreements and "when-issued"
purchases; and the Alger American Balanced Portfolio may engage in reverse
repurchase agreements. 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 Fund'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 Fred Alger &
Company, Incorporated ("Alger Inc.") in connection with its creation and initial
capitalization, the Fund intends to distribute shares of the Portfolios only to
Participating Insurance Companies and 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, 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 March 31, 1998, had approximately $8.9 billion
under management, $5.1 billion in mutual
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<PAGE>
fund accounts and $3.8 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 since 1971 as Executive Vice President and Director
of Research until 1995, and as President since 1995. Ms. Khoo has been employed
by Alger Management since 1989 as a senior research analyst until 1995, and as a
Senior Vice President since 1995. Mr. Tartaro has been employed by Alger
Management since 1990 as a senior research analyst until 1995, and as a Senior
Vice President since 1995. 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. Mr. Alger, Ms. Khoo, Mr. Tartaro and Mr. Thumm 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 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%.
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 .50% of the net asset value of shares held by those customers, will be
paid from Alger Management's or its affiliates' 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 Alger American
Balanced Portfolio or Alger American Income and Growth Portfolio exceed 1.25%,
or such expenses of Alger American Small Capitalization Portfolio, Alger
American Growth Portfolio, Alger American MidCap Growth Portfolio, or Alger
American Leveraged AllCap Portfolio exceed 1.50%, of the average daily net
assets of the applicable Portfolio for any fiscal year. Any such expense
reimbursements will be estimated and reconciled daily and paid on a monthly
basis. 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 also contains information about the
Fund's brokerage policies and practices.
DISTRIBUTOR
Alger Inc. serves as the Fund's distributor and also distributes the shares
of other mutual funds managed by Alger Management.
TRANSFER AGENT
Alger Shareholder Services, Inc., an affiliate of Alger Management, serves as
transfer agent for the Fund.
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<PAGE>
YEAR 2000 READINESS
The Fund relies on computer systems for most of its operations. Like those of
other financial institutions, many of the computer systems it relies on need to
be adjusted to accommodate the changeover to the Year 2000. These adjustments
are necessary for the Fund to be able to continue to operate without disruption
after Year 2000. As is the case with most system conversion projects, risks and
uncertainties exist due in part to reliance on third party vendors and service
providers, and a project could be delayed. The Fund expects that the necessary
changes will be completed on time and in a way that will result in no disruption
to its operations. However, there can be no guarantee at this point that the
Fund's expectation will be realized in all respects and that its operations and
services to shareholders will not be adversely affected.
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 as of the close of business (normally 4:00 p.m. Eastern time) on each
day the New York Stock Exchange ("NYSE") is open.
PURCHASES AND REDEMPTIONS
Contract or policy holders or Plan participants will 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
and redeem 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.
Under unusual circumstances, shares of a Portfolio may be redeemed "in kind",
which means that the redemption proceeds will be paid with securities which are
held by the Portfolio. Please refer to the Statement of Additional Information
for more details.
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 at net asset value on the payment date for each shareholder's account
in additional shares of the Portfolio that paid the dividend or distribution or,
in the case of VA contracts and VLI policies, will be paid in cash at the
election of the Participating Insurance Company. Any 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 and
Plans 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
7
<PAGE>
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 realized 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 be
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 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 to 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>
THE|
ALGER|
AMERICAN|
FUND|
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
COUNSEL:
Hollyer Brady Smith Troxell
Barrett Rockett Hines & Mone LLP
551 Fifth Avenue
New York, NY 10176
<PAGE>
PROSPECTUS
- ----------
THE|
ALGER| 75 Maiden Lane
AMERICAN| New York, New York 10038
FUND| (800) 992-FUND (992-3863)
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 five 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 five Portfolios discussed in this Prospectus are:
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 are also
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, 1998 containing further information about
the Fund has been filed with the Securities and Exchange Commission and is
incorporated by reference into this Prospectus. It is available at no charge by
contacting the Fund at the address or phone number above.
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, 1998
<PAGE>
- --------------------------------------------------------------------------------
CONTENTS
Page
-----
Portfolio Expenses............................. iii
Financial Highlights........................... iv
The Alger American Fund........................ 1
Participating Insurance Companies and Plans.... 1
Investment Objectives and Policies............. 1
Alger American Income and Growth
Portfolio.................................. 1
Alger American Small Capitalization
Portfolio.................................. 2
Alger American Growth Portfolio.............. 2
Alger American MidCap Growth
Portfolio.................................. 2
Alger American Leveraged AllCap
Portfolio.................................. 2
Investment Practices........................... 3
Management of the Fund......................... 5
Net Asset Value................................ 7
Purchases and Redemptions...................... 7
Dividends and Distributions.................... 7
Taxes.......................................... 7
Performance.................................... 8
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 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 a Portfolio. 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
American American Alger American American
Income and Small American MidCap Leveraged
Growth Capitalization Growth Growth AllCap
Portfolio Portfolio Portfolio Portfolio Portfolio
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases.......... None None None None None
Maximum Sales Load Imposed
on Reinvested Dividends........................ None None None None None
Deferred Sales Load.............................. None None None None None
Redemption Fees.................................. None None None None None
Exchange Fees.................................... None None None None None
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees.................................. .625% .85% .75% .80% .85%
12b-1 Fees....................................... -- -- -- -- --
Other Expenses................................... .115% 04% .04% .04% .15%*
---- --- --- --- ----
Total Fund Operating Expenses ................... .74% .89% .79% .84% 1.00%
==== === === === ====
*Included in Other Expenses of the Alger American Leveraged AllCap Portfolio
is 0.04% of interest expense.
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......................................... $ 8 $ 9 $ 8 $ 9 $ 10
Three Years...................................... 24 28 25 27 32
Five Years....................................... 41 49 44 47 55
Ten Years........................................ 92 110 98 104 122
</TABLE>
- --------------------------------------------------------------------------------
iii
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The Financial Highlights for the years ended December 31, 1990 through 1997
have been audited by Arthur Andersen LLP, the Fund's independent public
accountants. This information should be read in conjunction with the financial
statements of the Fund as contained in its Statement of Additional Information.
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
Fund's Annual Report contains additional performance information and is
available upon request and without charge by contacting the Fund at (800)
992-3863.
THE ALGER AMERICAN FUND
GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989(ii)
---------- -------- -------- -------- ------- ------- ------- ------ --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year ..... $ 34.33 $ 31.16 $ 23.13 $ 24.67 $ 20.17 $ 18.00 $ 12.86 $12.41 $10.00
---------- -------- -------- -------- ------- ------- ------- ------ ------
Net investment income . 0.13 0.12 0.02 0.07 0.03 0.03 0.08(i) 0.07 0.09
Net realized and
unrealized gain
on investments ...... 8.66 4.00 8.33 0.15 4.50 2.19 5.11 0.44 2.32
---------- -------- -------- -------- ------- ------- ------- ------ ------
Total from
investment
operations ....... 8.79 4.12 8.35 0.22 4.53 2.22 5.19 0.51 2.41
---------- -------- -------- -------- ------- ------- ------- ------ ------
Dividends from
net investment
income............... (0.13) (0.02) (0.07) (0.03) (0.03) (0.03) (0.05) (0.06) --
Distributions from
net realized
gains............... (0.23) (0.93) (0.25) (1.73) -- (0.02) -- -- --
---------- -------- -------- -------- ------- ------- ------- ------ ------
Total Distributions.. (0.36) (0.95) (0.32) (1.76) (0.03) (0.05) (0.05) (0.06) --
---------- -------- -------- -------- ------- ------- ------- ------ ------
Net asset value,
end of year ........ $ 42.76 $ 34.33 $ 31.16 $ 23.13 $ 24.67 $ 20.17 $ 18.00 $12.86 $12.41
========== ======== ======== ======== ======= ======= ======= ====== ======
Total Return .......... 25.75% 13.35% 36.37% 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) ..... $1,072,529 $991,028 $502,974 $150,390 $74,878 $30,316 $10,094 $1,228 $ 171
========== ======== ======== ======== ======= ======= ======= ====== ======
Ratio of expenses
to average
net assets ........ 0.79% 0.79% 0.85% 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 .... 0.27% 0.50% 0.18% 0.48% 0.25% 0.33% 0.52% 1.69% 1.30%
========== ======== ======== ======== ======= ======= ======= ====== ======
Portfolio
Turnover Rate ...... 129.50% 82.86% 118.33% 111.76% 112.64% 63.91% 58.95% 86.77% 79.59%
========== ======== ======== ======== ======= ======= ======= ====== ======
Average Commission
Rate Paid........... $ .0697 $ .0683
========== ========
(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.
</TABLE>
- --------------------------------------------------------------------------------
iv
<PAGE>
- --------------------------------------------------------------------------------
THE ALGER AMERICAN FUND
SMALL CAPITALIZATION PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------------
1997 1996 1995 1994 1993
-------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of year ...... $ 40.91 $ 39.41 $ 27.31 $ 30.88 $ 27.26
-------- ---------- -------- -------- --------
Net investment
income (loss) .......... (0.05)(i) (0.04)(i) (0.09) (0.03)(i) (0.05)
Net realized and
unrealized gain
(loss) on investments .. 4.45 1.70 12.19 (1.45) 3.67
-------- ---------- -------- -------- --------
Total from investment
operations ........... 4.40 1.66 12.10 (1.48) 3.62
-------- ---------- -------- -------- --------
Dividends from net
investment income ...... -- -- -- -- --
Distributions from net
realized gains ........ (1.56) (0.16) -- (2.09) --
-------- ---------- -------- -------- --------
Total Distributions .... (1.56) (0.16) -- (2.09) --
-------- ---------- -------- -------- --------
Net asset value, end
of year ................ $ 43.75 $ 40.91 $ 39.41 $27.31 $ 30.88
======== ========== ======== ======== ========
Total Return ............. 11.39% 4.18% 44.31% (4.38%) 13.28%
======== ========== ======== ======== ========
Ratios and
Supplemental Data:
Net assets, end of year
(000's omitted) ...... $997,586 $1,469,518 $984,212 $397,037 $238,850
======== ========== ======== ======== ========
Ratio of expenses to
average net assets .. 0.89% 0.88% 0.92% 0.96% 1.03%
======== ========== ======== ======== ========
Decrease reflected in
above expense ratios
due to expense
reimbursements ....... -- -- -- -- --
======== ========== ======== ======== ========
Ratio of net investment
income (loss) to
average net assets ... (0.12%) (0.09%) (0.48%) (0.10%) (0.35%)
======== ========== ======== ======== ========
Portfolio Turnover
Rate ................. 104.43% 110.04% 80.66% 117.61% 148.07%
======== ========== ======== ======== ========
Average Commission
Rate Paid ............ $ .0640 $ .0591
======== ==========
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------
1992 1991 1990 1989 1988(iii)
------ ------ ------ ------ -----
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of year ...... $ 26.79 $ 17.02 $ 15.79 $ 9.60 $10.00
-------- -------- ------- ------- ------
Net investment
income (loss) .......... (0.06) (0.03) 0.02 0.04 0.06
Net realized and
unrealized gain
(loss) on investments .. 0.91 9.82 1.35 6.15 (0.40)
------ -------- ------- ------- ------
Total from investment
operations ........... 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 ........ (0.38) -- (0.13) -- --
------ -------- ------- ------- ------
Total Distributions .... (0.38) (0.02) (0.14) -- (0.06)
------ -------- ------- ------- ------
Net asset value, end
of year ................ $27.26 $ 26.79 $ 17.02 $ 15.79 $ 9.60
====== ======== ======= ======= ======
Total Return ............. 3.55% 57.54% 8.71% 64.48%(ii) (3.35%)(ii)
====== ======== ======= ======= ======
Ratios and
Supplemental Data:
Net assets, end of year
(000's omitted) ...... $135,718 $ 56,798 $ 7,149 $ 569 $ 39
======== ======== ======= ======= ======
Ratio of expenses to
average net assets .. 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 ... (0.37%) (0.12%) 0.50% 1.11% 2.27%
======== ======== ======= ======= ======
Portfolio Turnover
Rate ................. 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,
--------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of year .............. $ 8.42 $ 17.79 $ 13.30 $ 15.31 $ 13.93
------- ------- ------- -------- --------
Net investment income ............. 0.03 0.09(iii) 0.11(iii) 0.17 0.07
Net realized and
unrealized gain (loss)
on investments ................. 2.94 1.87 4.54 (1.47) 1.37
------- ------- ------- -------- --------
Total from investment
operations ..................... 2.97 1.96 4.65 (1.30) 1.44
------- ------- ------- -------- --------
Dividends from net
investment income .............. (0.04) (0.33) (0.16) (0.15) (0.06)
Distributions from net
realized gains ................. (0.36) (11.00) -- (0.56) --
------- ------- ------- -------- --------
Total Distributions ............. (0.40) (11.33) (0.16) (0.71) (0.06)
------- ------- ------- -------- --------
Net asset value,
end of year .................. $ 10.99 $ 8.42 $ 17.79 $ 13.30 $ 15.31
======= ======= ======= ======== ========
Total Return ...................... 36.29% 19.68% 35.13% (8.28%) 10.34%
======= ======= ======= ======== ========
Ratios and
Supplemental Data:
Net assets, end of year
(000's omitted) .............. $47,399 $20,910 $ 8,639 $ 29,135 $ 31,895
======= ======= ======= ======== ========
Ratio of expenses to
average net assets ........... 0.74% 0.81% 0.75% 0.75% 0.97%
======= ======= ======= ======== ========
Decrease reflected in
above expense ratios
due to expense
reimbursements ............... -- -- -- -- --
======= ======= ======= ======== ========
Ratio of net investment
income to average
net assets ................... 0.56% 0.94% 0.61% 1.22% 1.51%
======= ======= ======= ======== ========
Portfolio Turnover Rate ......... 150.09% 121.60% 164.05% 177.97% 105.80%
======= ======= ======= ======== ========
Average Commission
Rate Paid....................... $ .0724 $ .0728
======= =======
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------
1992 1991 1990 1989 1988(ii)
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of year ................... $13.08 $10.67 $10.74 $10.00 $10.00
------ ------ ------ ------ ------
Net investment income .................. 0.08 0.09 0.11 0.18 0.10
Net realized and
unrealized gain (loss)
on investments ...................... 1.02 2.41 (0.08) 0.56 --
------ ------ ------ ------ ------
Total from investment
operations .......................... 1.10 2.50 0.03 0.74 0.10
------ ------ ------ ------ ------
Dividends from net
investment income ................... (0.12) (0.09) (0.10) -- (0.10)
Distributions from net
realized gains ...................... (0.13) -- -- -- --
------ ------ ------ ------ ------
Total Distributions .................. (0.25) (0.09) (0.10) -- (0.10)
------ ------ ------ ------ ------
Net asset value, end of year ........... $13.93 $13.08 $10.67 $10.74 $10.00
====== ====== ====== ====== ======
Total Return ........................... 8.64% 23.51% 0.28% 7.40%(i) 0.95%(i)
====== ====== ====== ====== ======
Ratios and
Supplemental Data:
Net assets, end of year
(000's omitted) ................... $8,671 $2,663 $ 436 $ 98 $ 28
====== ====== ====== ====== ======
Ratio of expenses to
average net assets ................ 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 ........................ 1.62% 2.54% 3.61% 7.36% 7.30%
====== ====== ====== ====== ======
Portfolio Turnover Rate .............. 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.
(iii) Amount was computed based on average shares outstanding during the period.
- --------------------------------------------------------------------------------
vi
<PAGE>
- --------------------------------------------------------------------------------
THE ALGER AMERICAN FUND
MIDCAP GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
FROM MAY 3, 1993
YEAR ENDED DECEMBER 31, (COMMENCEMENT OF
----------------------------------------------------- OPERATIONS)
1997 1996 1995 1994 TO DECEMBER 31, 1993(i)
------ ----- ------ ----- -----------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ........... $ 21.35 $ 19.44 $ 13.46 $ 13.72 $ 10.00
-------- -------- -------- ------- -------
Net investment income (loss) ................. (0.04) 0.03 (0.03) 0.00(ii) (0.02)
Net realized and unrealized gain
(loss) on investments ...................... 3.20 2.29 6.01 (0.21) 3.88
-------- -------- -------- ------- -------
Total from investment operations ......... 3.16 2.32 5.98 (0.21) 3.86
-------- -------- -------- ------- -------
Dividends from net investment income ....... (0.01) -- -- -- --
Distributions from net realized gains ...... (0.32) (0.41) -- (0.05) (0.14)
-------- -------- -------- ------- -------
Total Distributions ...................... (0.33) (0.41) -- (0.05) (0.14)
-------- -------- -------- ------- -------
Net asset value, end of period ............... $ 24.18 $ 21.35 $ 19.44 $ 13.46 $ 13.72
======== ======== ======== ======= =======
Total Return ................................. 15.01% 11.90% 44.45% (1.54%) 38.67%
======== ======== ======== ======= =======
RATIOS AND SUPPLEMENTAL DATA:
Net assets, end of period
(000's omitted) ......................... $444,967 $394,847 $185,349 $62,178 $21,301
======== ======== ======== ======= =======
Ratio of expenses to
average net assets ....................... 0.84% 0.84% 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 .................... (0.15%) 0.08% (0.25%) 0.03% (0.58%)
======== ======== ======== ======= =======
Portfolio Turnover Rate .................... 151.98% 90.97% 104.74% 83.96% 67.22%
======== ======== ======== ======= =======
Average Commission
Rate Paid................................. $ .0676 $ .0663
======== ========
</TABLE>
(i) Ratios have been annualized; total return has not been annualized.
(ii)Amount was computed based on average shares outstanding during the period.
- --------------------------------------------------------------------------------
vii
<PAGE>
- --------------------------------------------------------------------------------
THE ALGER AMERICAN FUND
LEVERAGED ALLCAP PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
FROM JANUARY 25, 1995
(COMMENCEMENT OF
YEAR ENDED DECEMBER 31, OPERATIONS)
1997 1996 TO DECEMBER 31, 1995(I)
---------- ---------- -----------------------
<S> <C> <C> <C>
Net asset value, beginning of period................. $ 19.36 $ 17.43 $ 10.00
---------- ---------- ---------
Net investment loss.................................. (0.03) (0.03)(ii) (0.03)
Net realized and unrealized gain on investments ..... 3.84 2.14 7.46
---------- ---------- ---------
Total from investment operations................. 3.81 2.11 7.43
Distribution from net realized gains................. -- (0.18) --
---------- ---------- ---------
Net asset value, end of period....................... $ 23.17 $ 19.36 $ 17.43
========== ========== =========
Total Return......................................... 19.68% 12.04% 74.30%
========== ========== =========
Ratios and Supplemental Data:
Net assets, end of period (000's omitted).......... $ 53,488 $ 34,925 $ 5,497
========== ========== =========
Ratio of expenses excluding interest to
average net assets.............................. 0.96% 1.06% 1.50%
========== ========== =========
Ratio of expenses including interest to
average net assets.............................. 1.00% 1.09% 1.56%
========== ========== =========
Decrease reflected in above expense ratios
due to expense reimbursements.................... -- -- 2.36%
========== ========== =========
Ratio of net investment loss to average net assets. (0.17%) (0.15%) (0.71%)
========== ========== =========
Portfolio Turnover Rate............................ 164.27% 102.10% 178.23%
========== ========== =========
Amount of debt outstanding at end of period.......... -- -- --
========== ========== =========
Average amount of debt outstanding
during the period................................. $ 201,644 $ 76,079 $ 8,122
========== ========== =========
Average daily number of shares outstanding
during the period................................. 2,135,458 1,107,187 75,460
========== ========== =========
Average amount of debt per share during the period... $ 0.09 $ 0.07 $ 0.11
========== ========== =========
Average Commission
Rate Paid....................................... $ .0703 $ .0682
========== ==========
</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
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. 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.
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 Plans. Individuals cannot
invest in a Portfolio directly but may do so only through a VA contract or VLI
policy or 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 Board of
Trustees intends 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 of the Portfolios and the investment restrictions
summarized in the next paragraph are fundamental, which means that they may not
be changed without shareholder approval. All investment policies and practices
described elsewhere in this Prospectus, and not explicitly identified as
fundamental, 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 illiquid by virtue of legal or contractual restrictions on
resale or the absence of a readily available market; (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 that it may borrow money or pledge its
assets in an amount up to 10% of its total assets for temporary or emergency
purposes and that the Alger American Leveraged AllCap Portfolio may borrow for
investment purposes as described below under "Alger American Leveraged AllCap
Portfolio." The Statement of Additional Information contains additional
investment restrictions.
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 investment 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 total
assets) during temporary defensive periods.
1
<PAGE>
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 ("Russell Index") or the S&P
SmallCap 600 Index ("S&P Index"), updated quarterly. Both indexes are broad
indexes of small capitalization stocks. As of March 31, 1998, the range of
market capitalization of the companies in the Russell Index was $20 million to
$4.25 billion; the range of market capitalization of the companies in the S&P
Index at that date was $31 million to $3.7 billion. The combined range as of
that date was $20 million to $4.25 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 of this combined range, 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.
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 March 31, 1998, the range of market capitalization of the
companies within the S&P MidCap 400 Index was $201 million to $14.3 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 gains 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 total 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
Alger American Small Capitalization Portfolio, Alger American MidCap Growth
Portfolio, Alger American Growth Portfolio, Alger American Leveraged AllCap
Portfolio and Alger American Income and Growth Portfolio seek to achieve their
investment 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 invest-
2
<PAGE>
ments in accordance with their investment objectives or to meet redemptions,
they may each hold up to 15% (or a higher percentage where so stated) of their
total assets in money market instruments and repurchase agreements and in excess
of that amount (up to 100% of their total assets) during temporary defensive
periods. These amounts may be higher than those 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 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 of 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 smaller companies by the other
Portfolios.
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 in effect is held as collateral for a loan to the other party,
and the Portfolio might incur a loss if the value of the collateral held
declines during this period.
ILLIQUID AND RESTRICTED SECURITIES
An investment may be illiquid because of the absence of an active trading
market, making it difficult to sell promptly at an acceptable price. A
restricted security is one that has a contractual restriction on its resale or
which cannot be sold publicly until it is registered under the Securities Act of
1933. Each Portfolio may purchase securities eligible for resale pursuant to
Rule 144A under the Securities Act of 1933. This rule permits otherwise
restricted securities to be sold to certain institutional buyers. Under policies
and procedures established by the Fund's Board of Trustees, Alger Management
determines the liquidity of the Portfolios' Rule 144A investments.
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
including collateral on such loans, less liabilities exclusive of the obligation
to return such collateral, to brokers, dealers and other financial
organizations. Any such loan will be continuously secured by collateral at least
equal to the value of the securities loaned. Default by the borrower could
result in delays, costs and/or losses in disposing of the collateral or
recovering the loaned securities and, should the borrower fail financially,
possible loss of rights in the collateral.
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"), American
Depositary Shares ("ADSs"), or U.S. dollar-denominated securities of foreign
issuers, none of which are included in the 20% foreign securities limitation.
ADRs and
3
<PAGE>
ADSs are traded in the U.S. securities markets and represent the securities of
foreign issuers. While ADRs and ADSs may not necessarily be denominated in the
same currency as the foreign securities they represent, many of the risks
associated with foreign securities may also apply to ADRs and ADSs.
LEVERAGE THROUGH BORROWING
Alger American Leveraged AllCap Portfolio may borrow money from banks and use
it to purchase additional securities. This borrowing is known as leveraging.
Leveraging increases both investment opportunity and investment risk. If the
investment gains on securities purchased with borrowed money exceed the interest
paid on the borrowing, the net asset value of the 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
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. Hedging transactions are intended to reduce the risk of price
fluctuations. The Portfolio may write an option on a security only if the option
is "covered" (for a discussion of covered options, see the Statement of
Additional Information). 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 are highly specialized activities which
involve 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
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.
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.
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,
variable rate master demand notes, firm commitment agreements and "when-issued"
purchases. See "Investment Objectives and Policies" in the Statement of
Additional Information.
4
<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 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 Fund'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 Fred Alger &
Company, Incorporated ("Alger Inc.") in connection with its creation and initial
capitalization, the Fund intends to distribute shares of the Portfolios only to
Participating Insurance Companies and 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, 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 March 31, 1998, had approximately $8.9 billion
under management, $5.1 billion in mutual fund accounts and $3.8 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 since 1971 as Executive Vice President and Director
of Research
5
<PAGE>
until 1995, and as President since 1995. Ms. Khoo has been employed by Alger
Management since 1989 as a senior research analyst until 1995, and as a Senior
Vice President since 1995. Mr. Tartaro has been employed by Alger Management
since 1990 as a senior research analyst until 1995, and as a Senior Vice
President since 1995. 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 Income and
Growth Portfolio-.625%; Alger American Small Capitalization Portfolio and Alger
American Leveraged AllCap Portfolio-.85%; Alger American MidCap Growth
Portfolio-.80% and Alger American Growth Portfolio-.75%.
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 .50% of the net asset value of shares held by those customers, will be
paid from Alger Management's or its affiliates' 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 Alger American
Income and Growth Portfolio exceed 1.25%, or such expenses of Alger American
Small Capitalization Portfolio, Alger American Growth Portfolio, Alger American
MidCap Growth Portfolio, or Alger American Leveraged AllCap Portfolio exceed
1.50%, of the average daily net assets of the applicable Portfolio for any
fiscal year. Any such expense reimbursements will be estimated and reconciled
daily and paid on a monthly basis. 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 also contains information about the
Fund's brokerage policies and practices.
DISTRIBUTOR
Alger Inc. serves as the Fund's distributor and also distributes the shares
of other mutual funds managed by Alger Management.
TRANSFER AGENT
Alger Shareholder Services, Inc., an affiliate of Alger Management, serves as
transfer agent for the Fund.
YEAR 2000 READINESS
The Fund relies on computer systems for most of its operations. Like those of
other financial institutions, many of the computer systems it relies on need to
be adjusted to accommodate the changeover to the Year 2000. These adjustments
are necessary for the Fund to be able to continue to operate without disruption
after Year 2000. As is the case with most system conversion projects, risks and
uncertainties exist due in part to reliance on third party vendors and service
providers, and a project could be delayed. The Fund expects that the necessary
changes will be completed on time and in a way that will result in no disruption
to its operations. However, there can be no guarantee at this point that the
Fund's expectation will be realized in all respects and that its operations and
services to shareholders will not be adversely affected.
6
<PAGE>
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 as of the close of business (normally 4:00 p.m. Eastern time) on each
day the New York Stock Exchange ("NYSE") is open.
PURCHASES AND REDEMPTIONS
Contract or policy holders or Plan participants will 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
and redeem 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.
Under unusual circumstances, shares of a Portfolio may be redeemed "in kind",
which means that the redemption proceeds will be paid with securities which are
held by the Portfolio. Please refer to the Statement of Additional Information
for more details.
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 at net asset value on the payment date for each shareholder's account
in additional shares of the Portfolio that paid the dividend or distribution or,
in the case of VA contracts and VLI policies, will be paid in cash at the
election of the Participating Insurance Company. Any 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 and
Plans 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 realized 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 ac-
7
<PAGE>
counts 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 be
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 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 to 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>
THE |
ALGER |
AMERICAN |
FUND |
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
COUNSEL:
Hollyer Brady Smith Troxell
Barrett Rockett Hines & Mone LLP
551 Fifth Avenue
New York, NY 10176
<PAGE>
PROSPECTUS
- ----------
THE |
ALGER | 75 Maiden Lane
AMERICAN | New York, New York 10038
FUND | (800) 992-FUND (992-3863)
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 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 are also
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 or with the Plan documents. A "Statement of
Additional Information" dated May 1, 1998 containing further information about
the Fund has been filed with the Securities and Exchange Commission and is
incorporated by reference into this Prospectus. It is available at no charge by
contacting the Fund at the address or phone number above.
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, 1998
<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
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 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 a Portfolio. 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
Exchange 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................................. .04% .04% .04% .15%*
---- --- --- ----
Total Fund Operating Expenses ................ .89% .79% .84% 1.00%
==== === === ====
* Included in Other Expenses of the Alger American Leveraged AllCap Portfolio
is 0.04% of interest expense.
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 $ 8 $ 9 $ 11
Three Years.................................... 28 25 27 32
Five Years..................................... 49 44 47 55
Ten Years...................................... 110 98 104 122
</TABLE>
- --------------------------------------------------------------------------------
iii
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The Financial Highlights for the years ended December 31, 1990 through 1997
have been audited by Arthur Andersen LLP, the Fund's independent public
accountants. This information should be read in conjunction with the financial
statements of the Fund as contained in its Statement of Additional Information.
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
Fund's Annual Report contains additional performance information and is
available upon request and without charge by contacting the Fund at (800)
992-3863.
THE ALGER AMERICAN FUND
GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989(ii)
---------- -------- -------- -------- -------- ------- -------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 34.33 $ 31.16 $ 23.13 $ 24.67 $ 20.17 $ 18.00 $ 12.86 $ 12.41 $ 10.00
---------- -------- -------- -------- -------- ------- -------- ------- --------
Net investment income......... 0.13 0.12 0.02 0.07 0.03 0.03 0.08(i) 0.07 0.09
Net realized and unrealized gain
on investments.............. 8.66 4.00 8.33 0.15 4.50 2.19 5.11 0.44 2.32
---------- -------- -------- -------- -------- ------- -------- ------- --------
Total from investment
operations............... 8.79 4.12 8.35 0.22 4.53 2.22 5.19 0.51 2.41
---------- -------- -------- -------- -------- ------- -------- ------- --------
Dividends from net investment
income...................... (0.13) (0.02) (0.07) (0.03) (0.03) (0.03) (0.05) (0.06) --
Distributions from net realized
gains...................... (0.23) (0.93) (0.25) (1.73) -- (0.02) -- -- --
---------- -------- -------- -------- -------- ------- -------- ------- --------
Total Distributions......... (0.36) (0.95) (0.32) (1.76) (0.03) (0.05) (0.05) (0.06) --
---------- -------- -------- -------- -------- ------- -------- ------- --------
Net asset value, end of year.. $ 42.76 $ 34.33 $ 31.16 $ 23.13 $ 24.67 $ 20.17 $ 18.00 $ 12.86 $ 12.41
========== ======== ======== ======== ======== ======= ======== ======= ========
Total Return.................. 25.75% 13.35% 36.37% 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)........... $1,072,529 $991,028 $502,974 $150,390 $ 74,878 $ 30,316 $ 10,094 $ 1,228 $ 171
========== ======== ======== ======== ======== ======= ======== ======= ========
Ratio of expenses to average
net assets................ 0.79% 0.79% 0.85% 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..... 0.27% 0.50% 0.18% 0.48% 0.25% 0.33% 0.52% 1.69% 1.30%
========== ======== ======== ======== ======== ======= ======== ======= ========
Portfolio Turnover Rate..... 129.50% 82.86% 118.33% 111.76% 112.64% 63.91% 58.95% 86.77% 79.59%
========== ======== ======== ======== ======== ======= ======== ======= ========
</TABLE>
(i) Amount was computed based on average shares outstanding during the period.
(ii) For the period January 9, 1989 (commencement of operations) to December
31, 1989. Ratios have been annualized; total return has not been
annualized.
(iii) Unaudited.
- -------------------------------------------------------------------------------
iv
<PAGE>
- -------------------------------------------------------------------------------
THE ALGER AMERICAN FUND
SMALL CAPITALIZATION PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988(iii)
------- ---------- --------- -------- -------- ------- -------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year... $ 40.91 $ 39.41 $ 27.31 $ 30.88 $ 27.26 $ 26.79 $ 17.02 $ 15.79 $ 9.60 $ 10.00
-------- ---------- -------- -------- -------- ------- -------- ------- ------- -------
Net investment
income (loss)....... (0.05)(i) (0.04)(i) (0.09) (0.03)(i) (0.05) (0.06) (0.03) 0.02 0.04 0.06
Net realized and
unrealized gain
(loss) on investments 4.45 1.70 12.19 (1.45) 3.67 0.91 9.82 1.35 6.15 (0.40)
-------- ---------- -------- -------- -------- ------- -------- ------- ------- --------
Total from investment
operations........ 4.40 1.66 12.10 (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..... (1.56) (0.16) -- (2.09) -- (0.38) -- (0.13) -- --
-------- ---------- -------- -------- -------- ------- -------- ------- ------- --------
Total Distributions. (1.56) (0.16) -- (2.09) -- (0.38) (0.02) (0.14) -- (0.06)
-------- ---------- -------- -------- -------- ------- -------- ------- ------- --------
Net asset value, end
of year............. $ 43.75 $ 40.91 $ 39.41 $ 27.31 $ 30.88 $ 27.26 $ 26.79 $ 17.02 $ 15.79 $ 9.60
======== ========== ======== ======== ======== ======= ======== ======= ======= =======
Total Return.......... 11.39% 4.18% 44.31% (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)... $997,586 $1,469,518 $984,212 $397,037 $238,850 $135,718 $ 56,798 $ 7,149 $ 569 $ 39
======== ========== ======== ======== ======== ======== ======== ======= ======= =======
Ratio of expenses to
average net assets 0.89% 0.88% 0.92% 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 (0.12%) (0.09%) (0.48%) (0.10%) (0.35%) (0.37%) (0.12%) 0.50% 1.11% 2.27%
======= ========== ======== ======== ======== ======== ======== ======= ======= =======
Portfolio Turnover
Rate.............. 104.43% 110.04% 80.66% 117.61% 148.07% 108.06% 125.90% 132.46% 133.61% 20.86%
======== ========== ======== ======== ======== ======== ======== ======= ======= =======
Average Commission
Rate Paid......... $ .0640 $ .0591
======== ==========
</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
YEAR ENDED DECEMBER 31, DECEMBER 31, 1993(I)
------------------------------------- ----------------------
1997 1996 1995 1994
------- ------- -------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period............ $ 21.35 $ 19.44 $ 13.46 $ 13.72 $ 10.00
-------- -------- -------- -------- -------
Net investment income (loss).................... (0.04) 0.03 (0.03) 0.00(ii) (0.02)
Net realized and unrealized
gain (loss) on investments.................... 3.20 2.29 6.01 (0.21) 3.88
-------- -------- -------- -------- -------
Total from investment operations.............. 3.16 2.32 5.98 (0.21) 3.86
-------- -------- -------- -------- -------
Dividends from net investment income ........... (0.01) -- -- -- --
Distributions from net realized gains........... (0.32) (0.41) -- (0.05) (0.14)
-------- -------- -------- -------- -------
Total Distributions........................... (0.33) (0.41) -- (0.05) (0.14)
-------- -------- -------- -------- -------
Net asset value, end of year.................... $ 24.18 $ 21.35 $ 19.44 $ 13.46 $ 13.72
======== ======== ======== ======== =======
Total Return.................................... 15.01% 11.90% 44.45% (1.54%) 38.67%
======== ======== ======== ======== =======
Ratios and Supplemental Data:
Net assets, end of year (000's omitted)....... $444,967 $394,847 $185,349 $ 62,178 $21,301
======== ======== ======== ======== =======
Ratio of expenses to average net assets....... 0.84% 0.84% 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.......................... (0.15%) 0.08% (0.25%) 0.03% (0.58%)
======== ======== ======== ======== =======
Portfolio Turnover Rate....................... 151.98% 90.97% 104.74% 83.96% 67.22%
======== ======== ======== ======== =======
Average Commission
Rate Paid................................... $ .0676 $ .0663
======== ========
</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
LEVERAGED ALLCAP PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
FROM JANUARY 25, 1995
YEAR ENDED DECEMBER 31, COMMENCEMENT OF
------------------------- OPERATIONS)
1997 1996 TO DECEMBER 31, 1995(i)
----- ---- ----------------------
<S> <C> <C> <C>
Net asset value, beginning of period............................. $ 19.36 $ 17.43 $ 10.00
---------- ---------- -------
Net investment loss.............................................. (0.03) (0.03)(ii) (0.03)
Net realized and unrealized gain on investments.................. 3.84 2.14 7.46
---------- ---------- -------
Total from investment operations............................. 3.81 2.11 7.43
Distribution from net realized gains............................. -- (0.18) --
---------- ---------- -------
Net asset value, end of period................................... $ 23.17 $ 19.36 $ 17.43
========== ========== =======
Total Return..................................................... 19.68% 12.04% 74.30%
========== ========== =======
Ratios and Supplemental Data:
Net assets, end of period (000's omitted)...................... $ 53,488 $ 34,925 $ 5,497
========== ========== =======
Ratio of expenses excluding interest to average net assets..... 0.96% 1.06% 1.50%
========== ========== =======
Ratio of expenses including interest to average net assets..... 1.00% 1.09% 1.56%
========== ========== =======
Decrease reflected in above expense ratios
due to expense reimbursements................................ -- -- 2.36%
========== ========== =======
Ratio of net investment loss to average net assets............. (0.17%) (0.15%) (0.71%)
========== ========== =======
Portfolio Turnover Rate........................................ 164.27% 102.10% 178.23%
========== ========== =======
Amount of debt outstanding at end of period...................... -- -- --
========== ========== =======
Average amount of debt outstanding during the period............. $ 201,644 $ 76,079 $ 8,122
========== ========== =======
Average daily number of shares outstanding during the period..... 2,135,458 1,107,187 75,460
========== ========== =======
Average amount of debt per share during the period............... $ 0.09 $ 0.07 $ 0.11
========== ========== =======
Average Commission Rate Paid..................................... $ .0703 $ .0682
========== ==========
</TABLE>
(i) Ratios have been annualized; total return has not been annualized.
(ii) Amount was computed based on average shares outstanding during the period.
- -------------------------------------------------------------------------------
vii
<PAGE>
THE PORTFOLIOS
The Portfolios are designed to permit insurance companies that issue VA
contracts and VLI policies to offer contract and policy holders the opportunity
to participate in the performance of one or more of the Portfolios. The Fund may
also be a funding vehicle for Plans which elect to make the Fund an investment
option for Plan participants.
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 Plans. Individuals cannot
invest in a Portfolio directly but may do so only through a VA contract or VLI
policy or 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 Board of
Trustees intends 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 of the Portfolios and the investment restrictions
summarized in the next paragraph are fundamental, which means that they may not
be changed without shareholder approval. All investment policies and practices
described elsewhere in this Prospectus, and not explicitly identified as
fundamental, are not fundamental, so the Fund's Board of Trustees may change
them without shareholder approval. There is no guarantee that any Portfolio's
objective 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 illiquid by virtue of legal or contractual restrictions on
resale or the absence of a readily available market; (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 that it may borrow money or pledge its
assets in an amount up to 10% of its total assets for temporary or emergency
purposes and that the Alger American Leveraged AllCap Portfolio may borrow for
investment purposes as described below under "Alger American Leveraged AllCap
Portfolio." The Statement of Additional Information contains additional
investment restrictions.
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 ("Russell Index") or the S&P
SmallCap 600 Index ("S&P Index"), updated quarterly. Both indexes are broad
indexes of small capitalization stocks. As of March 31, 1998, the range of
market capitalization of the companies in
1
<PAGE>
the Russell Index was $20 million to $4.25 billion; the range of market
capitalization of the companies in the S&P Index at that date was $31 million to
$3.7 billion. The combined range as of that date was $20 million to $4.25
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 of this combined range, 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.
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 March 31, 1998, the range of market capitalization of these
companies was $201 million to $14.3 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 total 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 investment 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 or
to meet redemptions, they may each hold up to 15% of their total assets in money
market instruments and repurchase agreements and in excess of that amount (up to
100% of their total 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 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 of 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 smaller companies by
2
<PAGE>
Alger American MidCap Growth Portfolio, Alger American Growth Portfolio and
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 in effect is held as collateral for a loan to the other party,
and the Portfolio might incur a loss if the value of the collateral held
declines during this period.
ILLIQUID AND RESTRICTED SECURITIES
An investment may be illiquid because of the absence of an active trading
market, making it difficult to sell promptly at an acceptable price. A
restricted security is one that has a contractual restriction on its resale or
which cannot be sold publicly until it is registered under the Securities Act of
1933. Each Portfolio may purchase securities eligible for resale pursuant to
Rule 144A under the Securities Act of 1933. This rule permits otherwise
restricted securities to be sold to certain institutional buyers. Under policies
and procedures established by the Fund's Board of Trustees, Fred Alger
Management, Inc. ("Alger Management") determines the liquidity of the
Portfolios' Rule 144A investments.
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
including collateral on such loans, less liabilities exclusive of the obligation
to return such collateral, to brokers, dealers and other financial
organizations. Any such loan will be continuously secured by collateral at least
equal to the value of the securities loaned. Default by the borrower could
result in delays, costs and/or losses in disposing of the collateral or
recovering the loaned securities and, should the borrower fail financially,
possible loss of rights in the collateral.
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"), American
Depositary Shares ("ADSs"), or U.S. dollar-denominated securities of foreign
issuers none of which are included in the 20% foreign securities limitation.
ADRs and ADSs are traded in the U.S. securities markets and represent the
securities of foreign issuers. While ADRs and ADSs may not necessarily be
denominated in the same currency as the foreign securities they represent, many
of the risks associated with foreign securities may also apply to ADRs and ADSs.
LEVERAGE THROUGH BORROWING
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.
3
<PAGE>
OPTIONS
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. Hedging transactions are intended to reduce the risk of price
fluctuations. The Portfolio may write an option on a security only if the option
is "covered" (for a discussion of covered options, see the Statement of
Additional Information). 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 are highly specialized activities which
involve 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
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.
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.
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,
firm commitment agreements, "when issued" purchases, and variable rate master
demand notes. 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 Fund'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 Fred Alger &
Company, Incorporated ("Alger Inc.") in connection with its creation and initial
capitalization, the Fund intends to distribute shares of the Portfolios only to
Participating Insurance Companies and 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
4
<PAGE>
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, 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 March 31, 1998, had approximately $8.9 billion
under management, $5.1 billion in mutual fund accounts and $3.8 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 since 1971 as Executive Vice President and Director
of Research until 1995, and as President since 1995. Ms. Khoo has been employed
by Alger Management since 1989 as a senior research analyst until 1995, and as a
Senior Vice President since 1995. Mr. Tartaro has been employed by Alger
Management since 1990 as a senior research analyst until 1995, and as a Senior
Vice President since 1995. 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%.
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 .50% of the net asset value of shares
5
<PAGE>
held by those customers will be paid from Alger Management's or its affiliates'
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
expenses of any Portfolio if its annual operating expenses (excluding interest,
taxes, fees for brokerage services and extraordinary expenses) exceed 1.50% of
its average daily net assets for any fiscal year. Any such expense reimbursement
will be estimated and reconciled daily and paid on a monthly basis. 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 also contains information about the
Fund's brokerage policies and practices.
DISTRIBUTOR
Alger Inc. serves as the Fund's distributor and also distributes the shares
of other mutual funds managed by Alger Management.
TRANSFER AGENT
Alger Shareholder Services, Inc., an affiliate of Alger Management, serves as
transfer agent for the Fund.
YEAR 2000 READINESS
The Fund relies on computer systems for most of its operations. Like those of
other financial institutions, many of the computer systems it relies on need to
be adjusted to accommodate the changeover to the Year 2000. These adjustments
are necessary for the Fund to be able to continue to operate without disruption
after Year 2000. As is the case with most system conversion projects, risks and
uncertainties exist due in part to reliance on third party vendors and service
providers, and a project could be delayed. The Fund expects that the necessary
changes will be completed on time and in a way that will result in no disruption
to its operations. However, there can be no guarantee at this point that the
Fund's expectation will be realized in all respects and that its operations and
services to shareholders will not be adversely affected.
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 as of the close of business (normally 4:00 p.m. Eastern time) on each
day the New York Stock Exchange ("NYSE") is open.
PURCHASES AND REDEMPTIONS
Contract or policy holders or Plan participants will 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
and redeem 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
6
<PAGE>
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.
Under unusual circumstances, shares of a Portfolio may be redeemed "in kind",
which means that the redemption proceeds will be paid with securities which are
held by the Portfolio. Please refer to the Statement of Additional Information
for more details.
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 at net asset value on the payment date for each shareholder's account
in additional shares of the Portfolio that paid the dividend or distribution or,
in the case of VA contracts and VLI policies, will be paid in cash at the
election of the Participating Insurance Company. Any 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 and
Plans 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 realized 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 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 deduc-
7
<PAGE>
tion 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 to 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>
THE |
ALGER | MEETING THE CHALLENGE
AMERICAN | OF INVESTING
FUND |
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
COUNSEL:
Hollyer Brady Smith Troxell
Barrett Rockett Hines & Mone LLP
551 Fifth Avenue
New York, New York 10176
<PAGE>
PROSPECTUS
- ----------
THE | 75 Maiden Lane
ALGER | New York, New York 10038
AMERICAN | (800) 992-FUND (992-3863)
FUND |
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 three 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 three Portfolios discussed in this Prospectus are:
o Alger American Income and Growth Portfolio
o Alger American Small Capitalization Portfolio
o Alger American Growth 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 are also
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, 1998 containing further information about
the Fund has been filed with the Securities and Exchange Commission and is
incorporated by reference into this Prospectus. It is available at no charge by
contacting the Fund at the address or phone number above.
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, 1998
<PAGE>
- --------------------------------------------------------------------------------
CONTENTS
Page
-----
Portfolio Expenses............................. iii
Financial Highlights........................... iv
The Alger American Fund........................ 1
Participating Insurance Companies and Plans.... 1
Investment Objectives and Policies............. 1
Alger American Income and Growth
Portfolio.................................. 1
Alger American Small Capitalization
Portfolio.................................. 1
Alger American Growth Portfolio.............. 2
Investment Practices........................... 2
Management of the Fund......................... 3
Net Asset Value................................ 5
Purchases and Redemptions...................... 5
Dividends and Distributions.................... 6
Taxes.......................................... 6
Performance.................................... 6
Investor and Shareholder Information........... 7
- --------------------------------------------------------------------------------
ii
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO EXPENSES
The Table below is designed to assist you in understanding the various costs
and expenses that you will bear as a shareholder. The 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 a Portfolio. 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
AMERICAN AMERICAN ALGER
INCOME AND SMALL AMERICAN
GROWTH CAPITALIZATION GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- ---------
<S> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on Purchases....................... None None None
Maximum Sales Load Imposed on Reinvested
Dividends.................................................. None None None
Deferred Sales Load........................................... None None None
Redemption Fees............................................... None None None
Exchange Fees................................................. None None None
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees............................................... .625% .85% .75%
12b-1 Fees.................................................... -- -- --
Other Expenses................................................ .115% .04% .04%
---- --- ---
Total Fund Operating Expenses ................................ .74% .89% .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...................................................... $ 8 $ 9 $ 8
Three Years................................................... 24 28 25
Five Years.................................................... 41 49 44
Ten Years..................................................... 92 110 98
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
iii
<PAGE>
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The Financial Highlights for the years ended December 31, 1990 through 1997
have been audited by Arthur Andersen LLP, the Fund's independent public
accountants. This information should be read in conjunction with the financial
statements of the Fund as contained in its Statement of Additional Information.
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
Fund's Annual Report contains additional performance information and is
available upon request and without charge by contacting the Fund at (800)
992-3863.
THE ALGER AMERICAN FUND
GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------------------
1997 1996 1995 1994 1993
---------- -------- -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of year .................. $ 34.33 $ 31.16 $ 23.13 $ 24.67 $ 20.17
---------- -------- -------- ---------- ---------
Net investment income ................. 0.13 0.12 0.02 0.07 0.03
Net realized and unrealized gain
on investments ...................... 8.66 4.00 8.33 0.15 4.50
---------- -------- -------- ---------- ---------
Total from investment
operations ....................... 8.79 4.12 8.35 0.22 4.53
---------- -------- -------- ---------- ---------
Dividends from net investment
income .............................. (0.13) (0.02) (0.07) (0.03) (0.03)
Distributions from net realized
gains .............................. (0.23) (0.93) (0.25) (1.73) --
---------- -------- -------- ---------- ---------
Total Distributions ................. (0.36) (0.95) (0.32) (1.76) (0.03)
---------- -------- -------- ---------- ---------
Net asset value, end of year .......... $ 42.76 $ 34.33 $ 31.16 $23.13 $24.67
========== ======== ======== ========== =========
Total Return .......................... 25.75% 13.35% 36.37% 1.45% 22.47%
========== ======== ======== ========== =========
Ratios and Supplemental Data:
Net assets, end of year
(000's omitted) ................... $1,072,529 $991,028 $502,974 $ 150,390 $ 74,878
========== ======== ======== ========== =========
Ratio of expenses to average
net assets ........................ 0.79% 0.79% 0.85% 0.86% 0.97%
========== ======== ======== ========== =========
Decrease reflected in above
expense ratios due to
expense reimbursements ............ -- -- -- -- --
========== ======== ======== ========== =========
Ratio of net investment income
to average net assets ............. 0.27% 0.50% 0.18% 0.48% 0.25%
========== ======== ======== ========== =========
Portfolio Turnover Rate ............. 129.50% 82.86% 118.33% 111.76% 112.64%
========== ======== ======== ========== =========
Average Commission
Rate Paid................. $ .0697 $ .0683
========== ========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
1992 1991 1990 1989(ii)
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net asset value,
beginning of year ............................. $18.00 $12.86 $12.41 $10.00
------ ------ ------ ------
Net investment income ............................ 0.03 0.08(i) 0.07 0.09
Net realized and unrealized gain
on investments ................................. 2.19 5.11 0.44 2.32
------ ------ ------ ------
Total from investment
operations .................................. 2.22 5.19 0.51 2.41
------ ------ ------ ------
Dividends from net investment
income ......................................... (0.03) (0.05) (0.06) --
Distributions from net realized
gains ......................................... (0.02) -- -- --
------ ------ ------ ------
Total Distributions ............................ (0.05) (0.05) (0.06) --
------ ------ ------ ------
Net asset value, end of year ..................... $20.17 $18.00 $12.86 $12.41
====== ====== ====== ======
Total Return ..................................... 12.38% 40.39% 4.14% 24.10%(iii)
====== ====== ====== ======
Ratios and Supplemental Data:
Net assets, end of year
(000's omitted) .............................. $30,316 $10,094 $1,228 $171
======= ======= ====== ======
Ratio of expenses to average
net assets ................................... 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 ........................ 0.33% 0.52% 1.69% 1.30%
====== ====== ====== ======
Portfolio Turnover Rate ........................ 63.91% 58.95% 86.77% 79.59%
====== ====== ====== ======
Average Commission
Rate Paid.................
(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.
</TABLE>
- -------------------------------------------------------------------------------
iv
<PAGE>
- -------------------------------------------------------------------------------
THE ALGER AMERICAN FUND
SMALL CAPITALIZATION PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of year ............. $ 40.91 $ 39.41 $ 27.31 $ 30.88 $27.26
-------- ---------- -------- -------- ------
Net investment
income (loss) ................. (0.05)(i) (0.04)(i) (0.09) (0.03)(i) (0.05)
Net realized and
unrealized gain
(loss) on investments ......... 4.45 1.70 12.19 (1.45) 3.67
-------- ---------- -------- -------- ------
Total from investment
operations .................. 4.40 1.66 12.10 (1.48) 3.62
-------- ---------- -------- -------- ------
Dividends from net
investment income ............. -- -- -- -- --
Distributions from net
realized gains ............... (1.56) (0.16) -- (2.09) --
-------- ---------- -------- -------- ------
Total Distributions ........... (1.56) (0.16) -- (2.09) --
-------- ---------- -------- -------- ------
Net asset value, end
of year ....................... $ 43.75 $ 40.91 $39.41 $ 27.31 $30.88
======== ========== ======== ======== ======
Total Return .................... 11.39% 4.18% 44.31% (4.38%) 13.28%
======== ========== ======== ======== ======
Ratios and
Supplemental Data:
Net assets, end of year
(000's omitted) ............. $997,586 $1,469,518 $984,212 $397,037 $238,850
======== ========== ======== ======== ========
Ratio of expenses to
average net assets ......... 0.89% 0.88% 0.92% 0.96% 1.03%
======== ========== ======== ======== ======
Decrease reflected in
above expense ratios
due to expense
reimbursements .............. -- -- -- -- --
======== ========== ======== ======== ======
Ratio of net investment
income (loss) to
average net assets .......... (0.12%) (0.09%) (0.48%) (0.10%) (0.35%)
======== ========== ======== ======== ======
Portfolio Turnover
Rate ........................ 104.43% 110.04% 80.66% 117.61% 148.07%
======== ========== ======== ======== ======
Average Commission
Rate Paid........... $ .0640 $ .0591
======== ==========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------
1992 1991 1990 1989 1988(iii)
------ ------ ------ ------ -----
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of year ................. $ 26.79 $ 17.02 $15.79 $ 9.60 $10.00
-------- ------- ------ ------ ------
Net investment
income (loss) ..................... (0.06) (0.03) 0.02 0.04 0.06
Net realized and
unrealized gain
(loss) on investments ............. 0.91 9.82 1.35 6.15 (0.40)
-------- ------- ------ ------ ------
Total from investment
operations ...................... 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 ................... (0.38) -- (0.13) -- --
-------- ------- ------ ------ ------
Total Distributions ............... (0.38) (0.02) (0.14) -- (0.06)
-------- ------- ------ ------ ------
Net asset value, end
of year ........................... $ 27.26 $ 26.79 $17.02 $15.79 $ 9.60
======== ======= ====== ====== ======
Total Return ........................ 3.55% 57.54% 8.71% 64.48%(ii) (3.35%)(ii)
======== ======= ====== ====== ======
Ratios and
Supplemental Data:
Net assets, end of year
(000's omitted) ................. $135,718 $56,798 $7,149 $ 569 $ 39
======== ======= ====== ====== ======
Ratio of expenses to
average net assets ............. 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 .............. (0.37%) (0.12%) 0.50% 1.11% 2.27%
======== ======= ====== ====== ======
Portfolio Turnover
Rate ............................ 108.06% 125.90% 132.46% 133.61% 20.86%
======== ======= ====== ====== ======
Average Commission
Rate Paid.........
</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,
--------------------------------------------------------------------------------
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of year ................... $ 8.42 $ 17.79 $13.30 $15.31 $13.93
------- ------- ------ ------ ------
Net investment income .................. 0.03 0.09(iii) 0.11(iii) 0.17 0.07
Net realized and
unrealized gain (loss)
on investments ...................... 2.94 1.87 4.54 (1.47) 1.37
------- ------- ------ ------ ------
Total from investment
operations .......................... 2.97 1.96 4.65 (1.30) 1.44
------- ------- ------ ------ ------
Dividends from net
investment income ................... (0.04) (0.33) (0.16) (0.15) (0.06)
Distributions from net
realized gains ...................... (0.36) (11.00) -- (0.56) --
------- ------- ------ ------ ------
Total Distributions .................. (0.40) (11.33) (0.16) (0.71) (0.06)
------- ------- ------ ------ ------
Net asset value, end of year ........... $ 10.99 $ 8.42 $17.79 $13.30 $15.31
======= ======= ====== ====== ======
Total Return ........................... 36.29% 19.68% 35.13% (8.28%) 10.34%
======= ======= ====== ====== ======
Ratios and
Supplemental Data:
Net assets, end of year
(000's omitted) ................... $47,399 $20,910 $8,639 $29,135 $31,895
======= ======= ====== ======= =======
Ratio of expenses to
average net assets ................ 0.74% 0.81% 0.75% 0.75% 0.97%
======= ======= ====== ====== ======
Decrease reflected in
above expense ratios
due to expense
reimbursements .................... -- -- -- -- --
======= ======= ====== ====== ======
Ratio of net investment
income to average
net assets ........................ 0.56% 0.94% 0.61% 1.22% 1.51%
======= ======= ====== ====== ======
Portfolio Turnover Rate .............. 150.09% 121.60% 164.05% 177.97% 105.80%
======= ======= ====== ====== ======
Average Commission
Rate Paid............. $ .0724 $ .0728
======= =======
</TABLE>
<TABLE>
<CAPTION>
1992 1991 1990 1989 1988(ii)
---- ---- ---- ---- --------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of year ................... $13.08 $10.67 $10.74 $10.00 $10.00
------ ------ ------ ------ ------
Net investment income .................. 0.08 0.09 0.11 0.18 0.10
Net realized and
unrealized gain (loss)
on investments ...................... 1.02 2.41 (0.08) 0.56 --
------ ------ ------ ------ ------
Total from investment
operations .......................... 1.10 2.50 0.03 0.74 0.10
------ ------ ------ ------ ------
Dividends from net
investment income ................... (0.12) (0.09) (0.10) -- (0.10)
Distributions from net
realized gains ...................... (0.13) -- -- -- --
------ ------ ------ ------ ------
Total Distributions .................. (0.25) (0.09) (0.10) -- (0.10)
------ ------ ------ ------ ------
Net asset value, end of year ........... $13.93 $13.08 $10.67 $10.74 $10.00
====== ====== ====== ====== ======
Total Return ........................... 8.64% 23.51% 0.28% 7.40%(i) 0.95%(i)
====== ====== ====== ====== ======
Ratios and
Supplemental Data:
Net assets, end of year
(000's omitted) ................... $8,671 $2,663 $436 $98 $28
====== ====== ====== ====== ======
Ratio of expenses to
average net assets ................ 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 ........................ 1.62% 2.54% 3.61% 7.36% 7.30%
====== ====== ====== ====== ======
Portfolio Turnover Rate .............. 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.
(iii) Amount was computed based on average shares outstanding during the period.
- ------------------------------------------------------------------------------
vi
<PAGE>
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. 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.
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 Plans. Individuals cannot
invest in a Portfolio directly but may do so only through a VA contract or VLI
policy or 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 Board of
Trustees intends 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 of the Portfolios and the investment restrictions
summarized in the next paragraph are fundamental, which means that they may not
be changed without shareholder approval. All investment policies and practices
described elsewhere in this Prospectus, and not explicitly identified as
fundamental, 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% of
its net assets in securities that are illiquid by virtue of legal or contractual
restrictions on resale or the absence of a readily available market; (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 that it may
borrow money or pledge its assets in an amount up to 10% of its total assets for
temporary or emergency purposes. The Statement of Additional Information
contains additional investment restrictions.
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 investment 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 total
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%
1
<PAGE>
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 ("Russell Index") or the S&P
SmallCap 600 Index ("S&P Index"), updated quarterly. Both indexes are broad
indexes of small capitalization stocks. As of March 31, 1998, the range of
market capitalization of the companies in the Russell Index was $20 million to
$4.25 billion; the range of market capitalization of the companies in the S&P
Index at that date was $31 million to $3.7 billion. The combined range as of
that date was $20 million to $4.25 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 of this combined range, 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.
IN GENERAL
Alger American Small Capitalization Portfolio, Alger American Growth
Portfolio, and Alger American Income and Growth Portfolio seek to achieve their
investment 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 or to meet redemptions, they may
each hold up to 15% (or a higher percentage where so stated) of their total
assets in money market instruments and repurchase agreements and in excess of
that amount (up to 100% of their total assets) during temporary defensive
periods. These amounts may be higher than those 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 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 of 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 smaller companies by the other
Portfolios.
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 in effect is held as collateral for a
loan to the other party, and the Portfolio might incur a loss if the value of
the collateral held declines during this period.
ILLIQUID AND RESTRICTED SECURITIES
An investment may be illiquid because of the absence of an active trading
market, making it difficult to sell promptly at an acceptable price. A
restricted security is one that has a contractual restriction on its resale or
which cannot be sold publicly until it is registered under the Securities Act of
1933. Each Portfolio
2
<PAGE>
may purchase securities eligible for resale pursuant to Rule 144A under the
Securities Act of 1933. This rule permits otherwise restricted securities to be
sold to certain institutional buyers. Under policies and procedures established
by the Fund's Board of Trustees, Alger Management determines the liquidity of
the Portfolios' Rule 144A investments.
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
including collateral on such loans, less liabilities exclusive of the obligation
to return such collateral, to brokers, dealers and other financial
organizations. Any such loan will be continuously secured by collateral at least
equal to the value of the securities loaned. Default by the borrower could
result in delays, costs and/or losses in disposing of the collateral or
recovering the loaned securities and, should the borrower fail financially,
possible loss of rights in the collateral.
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"), American
Depositary Shares ("ADSs"), or U.S. dollar-denominated securities of foreign
issuers, none of which are included in the 20% foreign securities limitation.
ADRs and ADSs are traded in the U.S. securities markets and represent the
securities of foreign issuers. While ADRs and ADSs may not necessarily be
denominated in the same currency as the foreign securities they represent, many
of the risks associated with foreign securities may also apply to ADRs and ADSs.
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 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,
variable rate master demand notes, firm commitment agreements and "when-issued"
purchases. See "Investment Objectives and Policies" in the Statement of
Additional Information.
MANAGEMENT OF THE FUND
ORGANIZATION
The Fund was organized on April 6, 1988 as a multi-series Massachusetts
business trust. The Fund offers an unlimited number of shares of six series,
representing the shares of the Portfolios.
Although the Fund is not required by law to hold annual shareholder meetings,
it may hold meetings from time to time on important matters, and shareholders
have the right to call a meeting to remove a Trustee or to take other action
described in the Fund'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 Fred Alger &
Company, Incorporated ("Alger Inc.") in connection with its creation and initial
capitalization, the Fund intends to distribute shares of the Portfolios only to
Participating Insurance Companies and 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.
3
<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 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, 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 March 31, 1998, had approximately $8.9 billion
under management, $5.1 billion in mutual fund accounts and $3.8 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 since 1971, as Executive Vice President and
Director of Research until 1995 and as President since 1995. Ms. Khoo has been
employed by Alger Management since 1989, as a senior research analyst until 1995
and as a Senior Vice President since 1995. Mr. Tartaro has been employed by
Alger Management since 1990, as a senior research analyst until 1995 and as a
Senior Vice President since 1995. 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 Income and
Growth Portfolio-.625%; Alger American Small Capitalization Portfolio-.85%;
Alger American Growth Portfolio-.75%.
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
4
<PAGE>
services. This compensation, which may be paid at a rate of up to .50% of the
net asset value of shares held by those customers, will be paid from Alger
Management's or its affiliates' 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 Alger American
Income and Growth Portfolio exceed 1.25%, or such expenses of Alger American
Small Capitalization Portfolio or Alger American Growth Portfolio exceed 1.50%,
of the average daily net assets of the applicable Portfolio for any fiscal year.
Any such expense reimbursements will be estimated and reconciled daily and paid
on a monthly basis. 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 also contains information about the
Fund's brokerage policies and practices.
DISTRIBUTOR
Alger Inc. serves as the Fund's distributor and also distributes the shares
of other mutual funds managed by Alger Management.
TRANSFER AGENT
Alger Shareholder Services, Inc., an affiliate of Alger Management, serves as
transfer agent for the Fund.
YEAR 2000 READINESS
The Fund relies on computer systems for most of its operations. Like those of
other financial institutions, many of the computer systems it relies on need to
be adjusted to accommodate the changeover to the Year 2000. These adjustments
are necessary for the Fund to be able to continue to operate without disruption
after Year 2000. As is the case with most system conversion projects, risks and
uncertainties exist due in part to reliance on third party vendors and service
providers, and a project could be delayed. The Fund expects that the necessary
changes will be completed on time and in a way that will result in no disruption
to its operations. However, there can be no guarantee at this point that the
Fund's expectation will be realized in all respects and that its operations and
services to shareholders will not be adversely affected.
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 as of the close of business (normally 4:00 p.m. Eastern time) on each
day the New York Stock Exchange ("NYSE") is open.
PURCHASES AND REDEMPTIONS
Contract or policy holders or Plan participants will 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
and redeem 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
5
<PAGE>
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.
Under unusual circumstances, shares of a Portfolio may be redeemed "in kind",
which means that the redemption proceeds will be paid with securities which are
held by the Portfolio. Please refer to the Statement of Additional Information
for more details.
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 at net asset value on the payment date for each shareholder's account
in additional shares of the Portfolio that paid the dividend or distribution or,
in the case of VA contracts and VLI policies, will be paid in cash at the
election of the Participating Insurance Company. Any 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 and
Plans 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 realized 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 be
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 use "aggregate" total return figures for various periods,
representing the cumulative change in value of an investment in the
6
<PAGE>
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 to 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.
7
<PAGE>
THE |
ALGER |
AMERICAN |
FUND |
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
COUNSEL:
Hollyer Brady Smith Troxell
Barrett Rockett Hines & Mone LLP
551 Fifth Avenue
New York, NY 10176
<PAGE>
PROSPECTUS
- ----------
THE |
ALGER | 75 MAIDEN LANE
AMERICAN | NEW YORK, NEW YORK 10038
FUND | (800) 992-FUND (992-3863)
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 three 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 three Portfolios discussed in this Prospectus are:
o Alger American Small Capitalization Portfolio
o Alger American Growth Portfolio
o Alger American MidCap Growth 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 are also
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 or with the Plan documents. A "Statement of
Additional Information" dated May 1, 1998 containing further information about
the Fund has been filed with the Securities and Exchange Commission and is
incorporated by reference into this Prospectus. It is available at no charge by
contacting the Fund at the address or phone number above.
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, 1998
<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
Investment Practices........................... 2
Management of the Fund......................... 3
Net Asset Value................................ 5
Purchases and Redemptions...................... 5
Dividends and Distributions.................... 6
Taxes.......................................... 6
Performance.................................... 6
Investor and Shareholder Information........... 7
- --------------------------------------------------------------------------------
ii
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO EXPENSES
The Table below is designed to assist you in understanding the various costs
and expenses that you will bear as a shareholder. THE 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 a Portfolio. 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
AMERICAN ALGER AMERICAN
SMALL AMERICAN MIDCAP
CAPITALIZATION GROWTH GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- ---------
<S> <C> <C> <C>
Shareholder Transaction Expenses
Maximum Sales Load Imposed on
Purchases................................................. None None None
Maximum Sales Load Imposed
on Reinvested Dividends................................... None None None
Deferred Sales Load......................................... None None None
Redemption Fees............................................. None None None
Exchange Fees............................................... None None None
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees............................................. .85% .75% .80%
12b-1 Fees.................................................. -- -- --
Other Expenses.............................................. .04% .04% .04%
--- --- ---
Total Fund Operating Expenses .............................. .89% .79% .84%
=== === ===
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 $ 8 $ 9
Three Years................................................. 28 25 27
Five Years.................................................. 49 44 47
Ten Years................................................... 110 98 104
</TABLE>
- --------------------------------------------------------------------------------
iii
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The Financial Highlights for the years ended December 31, 1990 through 1997
have been audited by Arthur Andersen LLP, the Fund's independent public
accountants. This information should be read in conjunction with the financial
statements of the Fund as contained in its Statement of Additional Information.
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
Fund's Annual Report contains additional performance information and is
available upon request and without charge by contacting the Fund at (800)
992-3863.
THE ALGER AMERICAN FUND
GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------
1997 1996 1995 1994 1993
---------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ...... $ 34.33 $ 31.16 $ 23.13 $ 24.67 $ 20.17
---------- -------- -------- ------- -------
Net investment income.................... 0.13 0.12 0.02 0.07 0.03
Net realized and unrealized gain
on investments......................... 8.66 4.00 8.33 0.15 4.50
---------- -------- -------- ------- -------
Total from investment
operations.......................... 8.79 4.12 8.35 0.22 4.53
---------- -------- -------- ------- -------
Dividends from net investment
income................................. (0.13) (0.02) (0.07) (0.03) (0.03)
Distributions from net realized
gains................................. (0.23) (0.93) (0.25) (1.73) --
---------- -------- -------- ------- -------
Total Distributions.................... (0.36) (0.95) (0.32) (1.76) (0.03)
---------- -------- -------- ------- -------
Net asset value, end of year $ 42.76 $ 34.33 $ 31.16 $ 23.13 $ 24.67
========== ======== ======== ======== =======
Total Return............................. 25.75% 13.35% 36.37% 1.45% 22.47%
========== ======== ======== ======== =======
Ratios and Supplemental Data:
Net assets, end of year
(000's omitted)...................... $1,072,529 $991,028 $502,974 $150,390 $74,878
========== ======== ======== ======== =======
Ratio of expenses to average
net assets........................... 0.79% 0.79% 0.85% 0.86% 0.97%
========== ======== ======== ======== =======
Decrease reflected in above
expense ratios due to
expense reimbursements. -- -- -- -- --
========== ======== ======== ======== =======
Ratio of net investment income
to average net assets.. ............. 0.27% 0.50% 0.18% 0.48% 0.25%
========== ======== ======== ======== =======
Portfolio Turnover Rate................ 129.50% 82.86% 118.33% 111.76% 112.64%
========== ======== ======== ======== =======
Average Commission
Rate Paid............................ $ .0697 $ .0683
========== ========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------
1992 1991 1990 1989(II)
------ ------ ------ ---------
<S> <C> <C> <C> <C>
Net asset value, beginning of year ...... $ 18.00 $ 12.86 $12.41 $10.00
------- ------- ------ ------
Net investment income.................... 0.03 0.08(i) 0.07 0.09
Net realized and unrealized gain
on investments......................... 2.19 5.11 0.44 2.32
------- ------- ------ ------
Total from investment
operations.......................... 2.22 5.19 0.51 2.41
------- ------- ------ ------
Dividends from net investment
income................................. (0.03) (0.05) (0.06) --
Distributions from net realized
gains................................. (0.02) -- -- --
------- ------- ------ ------
Total Distributions.................... (0.05) (0.05) (0.06) --
------- ------- ------ ------
Net asset value, end of year ............ $ 20.17 $ 18.00 $12.86 $12.41
======= ======= ====== ======
Total Return............................. 12.38% 40.39% 4.14% 24.10%(iii)
======= ======= ====== ======
Ratios and Supplemental Data:
Net assets, end of year
(000's omitted)...................... $30,316 $10,094 $1,228 $ 171
======= ======= ====== ======
Ratio of expenses to average
net assets........................... 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................ 0.33% 0.52% 1.69% 1.30%
======= ======= ====== ======
Portfolio Turnover Rate................ 63.91% 58.95% 86.77% 79.59%
======= ======= ====== ======
</TABLE>
(i) Amount was computed based on average shares outstanding during the period.
(ii) For the period January 9, 1989 (commencement of operations) to December
31, 1989. Ratios have been annualized; total return has not been
annualized.
(iii) Unaudited.
- --------------------------------------------------------------------------------
iv
<PAGE>
- --------------------------------------------------------------------------------
THE ALGER AMERICAN FUND
SMALL CAPITALIZATION PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------
1997 1996 1995 1994 1993
---------- ---------- --------- ------- --------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of year...................... $ 40.91 $ 39.41 $ 27.31 $ 30.88 $ 27.26
-------- ---------- -------- -------- --------
Net investment
income (loss).......................... (0.05)(i) (0.04)(i) (0.09) (0.03)(i) (0.05)
Net realized and
unrealized gain
(loss) on investments ................. 4.45 1.70 12.19 (1.45) 3.67
-------- ---------- -------- -------- --------
Total from investment
operations........................... 4.40 1.66 12.10 (1.48) 3.62
-------- ---------- -------- -------- --------
Dividends from net
investment income...................... -- -- -- -- --
Distributions from net
realized gains........................ (1.56) (0.16) -- (2.09) --
-------- ---------- -------- -------- --------
Total Distributions ................... (1.56) (0.16) -- (2.09) --
-------- ---------- -------- -------- --------
Net asset value, end
of year................................ $ 43.75 $ 40.91 $ 39.41 $ 27.31 $ 30.88
======== ========== ======== ======== ========
Total Return............................. 11.39% 4.18% 44.31% (4.38%) 13.28%
======== ========== ======== ======== ========
Ratios and
Supplemental Data:
Net assets, end of year
(000's omitted)...................... $997,586 $1,469,518 $984,212 $397,037 $238,850
======== ========== ======== ======== ========
Ratio of expenses to
average net assets ................. 0.89% 0.88% 0.92% 0.96% 1.03%
======== ========== ======== ======== ========
Decrease reflected in
above expense ratios
due to expense
reimbursements........................ -- -- -- -- --
======== ========== ======== ======== ========
Ratio of net investment
income (loss) to
average net assets .................. (0.12%) (0.09%) (0.48%) (0.10%) (0.35%)
======== ========== ======== ======== ========
Portfolio Turnover
Rate................................. 104.43% 110.04% 80.66% 117.61% 148.07%
======== ========== ======== ======== ========
Average Commission
Rate Paid............................ $ .0640 $ .0591
======== ==========
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------
1992 1991 1990 1989 1988(III)
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of year...................... $ 26.79 $ 17.02 $ 15.79 $ 9.60 $ 10.00
-------- ------- ------- ------- -------
Net investment
income (loss).......................... (0.06) (0.03) 0.02 0.04 0.06
Net realized and
unrealized gain
(loss) on investments ................. 0.91 9.82 1.35 6.15 (0.40)
-------- ------- ------- ------- -------
Total from investment
operations........................... 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........................ (0.38) -- (0.13) -- --
-------- ------- ------- ------- -------
Total Distributions ................... (0.38) (0.02) (0.14) -- (0.06)
-------- ------- ------- ------- -------
Net asset value, end
of year................................ $ 27.26 $ 26.79 $ 17.02 $ 15.79 $ 9.60
======== ======= ======= ======= =======
Total Return............................. 3.55% 57.54% 8.71% 64.48%(ii) (3.35%)(ii)
======== ======= ======= ======= =======
Ratios and
Supplemental Data:
Net assets, end of year
(000's omitted)...................... $135,718 $56,798 $ 7,149 $ 569 $ 39
======== ======= ======= ======= =======
Ratio of expenses to
average net assets ................. 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 .................. (0.37%) (0.12%) 0.50% 1.11% 2.27%
======== ======= ======= ======= =======
Portfolio Turnover
Rate................................. 108.06% 125.90% 132.46% 133.61% 20.86%
======== ======= ======= ======= =======
Average Commission
Rate Paid............................ $ .0640 $ .0591
======== =======
</TABLE>
(i) Amount was computed based on average shares outstanding during the period.
(ii) Unaudited.
(iii) For the period September 21, 1988 (commencement of operations) to December
31, 1988. Ratios have been annualized; total return has not been
annualized.
- --------------------------------------------------------------------------------
v
<PAGE>
- --------------------------------------------------------------------------------
THE ALGER AMERICAN FUND
MIDCAP GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
FROM MAY 3, 1993
YEAR ENDED DECEMBER 31, (COMMENCEMENT OF
---------------------------------- OPERATIONS)
1997 1996 1995 1994 TO DECEMBER 31, 1993(I)
------ ------ ------ ------ -----------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year............. $ 21.35 $ 19.44 $ 13.46 $ 13.72 $ 10.00
-------- -------- -------- -------- -------
Net investment income (loss)................... (0.04) 0.03 (0.03) 0.00(ii) (0.02)
Net realized and unrealized gain (loss)
on investments............................... 3.20 2.29 6.01 (0.21) 3.88
-------- -------- -------- -------- -------
Total from investment operations............. 3.16 2.32 5.98 (0.21) 3.86
-------- -------- -------- -------- -------
Dividends from net investment income........... (0.01) -- -- -- --
Distributions from net realized gains.......... (0.32) (0.41) -- (0.05) (0.14)
-------- -------- -------- -------- -------
Total Distributions ....................... (0.33) (0.41) -- (0.05) (0.14)
-------- -------- -------- -------- -------
Net asset value, end of year................... $ 24.18 $ 21.35 $ 19.44 $ 13.46 $ 13.72
======== ======== ======== ======= =======
Total Return................................... 15.01% 11.90% 44.45% (1.54%) 38.67%
======== ======== ======== ======= =======
Ratios and Supplemental Data:
Net assets, end of year (000's omitted)...... $444,967 $394,847 $185,349 $62,178 $21,301
======== ======== ======== ======= =======
Ratio of expenses to average net assets...... 0.84% 0.84% 0.90% 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......................... (0.15%) 0.08% (0.25%) 0.03% (0.58%)
======== ======== ======== ======= =======
Portfolio Turnover Rate...................... 151.98% 90.97% 104.74% 83.96% 67.22%
======== ======== ======== ======= =======
Average Commission
Rate Paid.................................. $ .0676 $ .0663
======== ========
</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 PORTFOLIOS
The Portfolios are designed to permit insurance companies that issue VA
contracts and VLI policies to offer contract and policy holders the opportunity
to participate in the performance of one or more of the Portfolios. The Fund may
also be a funding vehicle for Plans which elect to make the Fund an investment
option for Plan participants.
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 Plans. Individuals cannot
invest in a Portfolio directly but may do so only through a VA contract or VLI
policy or 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 Board of
Trustees intends 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 of the Portfolios and the investment restrictions
summarized in the next paragraph are fundamental, which means that they may not
be changed without shareholder approval. All investment policies and practices
described elsewhere in this Prospectus, and not explicitly identified as
fundamental, are not fundamental, so the Fund's Board of Trustees may change
them without shareholder approval. There is no guarantee that any Portfolio's
objective 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% of
its net assets in securities that are illiquid by virtue of legal or contractual
restrictions on resale or the absence of a readily available market; (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 that it may
borrow money or pledge its assets in an amount up to 10% of its total assets for
temporary or emergency purposes. The Statement of Additional Information
contains additional investment restrictions.
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 ("Russell Index") or the S&P
SmallCap 600 Index ("S&P Index"), updated quarterly. Both indexes are broad
indexes of small capitalization stocks. As of March 31, 1998, the range of
market capitalization of the companies in the Russell Index was $20 million to
$4.25 billion; the range of market capitalization of the companies in the S&P
Index at that date was $31 million to $3.7 billion. The combined range as of
that date was $20 million to $4.25 billion. The Portfolio may invest up to
1
<PAGE>
35% of its total assets in equity securities of companies that, at the time of
purchase, have total market capitalization outside of this combined range, 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.
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 March 31, 1998, the range of market capitalization of these
companies was $201 million to $14.3 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 Portfolios seek to achieve their investment 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 or
to meet redemptions, they may each hold up to 15% of their total assets in money
market instruments and repurchase agreements and in excess of that amount (up to
100% of their total 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 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 of 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 smaller companies by Alger American
MidCap Growth Portfolio and Alger American Growth 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 in effect is held as collateral for a loan to the other party,
and the Portfolio might incur a loss if the value of the collateral held
declines during this period.
ILLIQUID AND RESTRICTED SECURITIES
An investment may be illiquid because of the absence of an active trading
market, making it difficult to sell promptly at an acceptable price. A
restricted security is one that has a contractual restriction on its resale or
which cannot be sold publicly until it is registered under the Securities Act of
1933. Each Portfolio may purchase securities eligible for resale
2
<PAGE>
pursuant to Rule 144A under the Securities Act of 1933. This rule permits
otherwise restricted securities to be sold to certain institutional buyers.
Under the policies and procedures established by the Fund's Board of Trustees,
Fred Alger Management, Inc. ("Alger Management") determines the liquidity of the
Portfolios' Rule 144A investments.
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
including collateral on such loans, less liabilities exclusive of the obligation
to return such collateral, to brokers, dealers and other financial
organizations. Any such loan will be continuously secured by collateral at least
equal to the value of the securities loaned. Default by the borrower could
result in delays, costs and/or losses in disposing of the collateral or
recovering the loaned securities and, should the borrower fail financially,
possible loss of rights in the collateral.
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"), American
Depositary Shares ("ADSs"), or U.S. dollar-denominated securities of foreign
issuers, none of which are included in the 20% foreign securities limitation.
ADRs and ADSs are traded in the U.S. securities markets and represent the
securities of foreign issuers. While ADRs and ADSs may not necessarily be
denominated in the same currency as the foreign securities they represent, many
of the risks associated with foreign securities may also apply to ADRs and ADSs.
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 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, firm
commitment agreements, "when issued" purchases, 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.
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 Fund'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 Fred Alger &
Company, Incorporated ("Alger Inc.") in connection with its creation and initial
capitalization, the Fund intends to distribute shares of the Portfolios only to
Participating Insurance Companies and Plans, so that only Participating
Insurance Companies and their separate accounts and Plans will be considered
shareholders of the Portfolios. Although the Participating Insurance Companies
and their separate accounts and the Plans are the shareholders or investors, the
Participating Insurance Companies will pass through voting rights to their VA
contract and VLI policy holders. Plan sponsors may or may not pass through
voting rights to Plan participants, depending on the terms of the Plan's
governing documents. For a discussion of voting rights please refer to the
Participating Insurance Companies' prospectuses or the Plan documents.
When matters are submitted for shareholder vote, shareholders of each
Portfolio will have one vote for each full share held and proportionate,
fractional votes for fractional shares held. A separate vote of a portfolio of
the Fund is required on any matter affecting the portfolio on which shareholders
are en-
3
<PAGE>
titled 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, 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 March 31, 1998, had approximately $8.9 billion
under management, $5.1 billion in mutual fund accounts and $3.8 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 since 1971 as Executive Vice President and Director
of Research until 1995, and as President since 1995. Ms. Khoo has been employed
by Alger Management since 1989 as a senior research analyst until 1995, and as a
Senior Vice President since 1995. Mr. Tartaro has been employed by Alger
Management since 1990 as a senior research analyst until 1995, and as a Senior
Vice President since 1995. 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-.85%; Alger American MidCap Growth Portfolio-.80%;
Alger American Growth Portfolio-.75%.
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 .50% of the net asset value of shares held by those customers, will be
paid from Alger Management's or its affiliates' resources and not from the
assets of the Fund.
4
<PAGE>
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
expenses of any Portfolio if its annual operating expenses (excluding interest,
taxes, fees for brokerage services and extraordinary expenses) exceed 1.50% of
its average daily net assets for any fiscal year. Any such expense
reimbursements will be estimated and reconciled daily and paid on a monthly
basis. 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 also contains information about the
Fund's brokerage policies and practices.
DISTRIBUTOR
Alger Inc. serves as the Fund's distributor and also distributes the shares
of other mutual funds managed by Alger Management.
TRANSFER AGENT
Alger Shareholder Services, Inc., an affiliate of Alger Management, serves as
transfer agent for the Fund.
YEAR 2000 READINESS
The Fund relies on computer systems for most of its operations. Like those of
other financial institutions, many of the computer systems it relies on need to
be adjusted to accommodate the changeover to the Year 2000. These adjustments
are necessary for the Fund to be able to continue to operate without disruption
after Year 2000. As is the case with most system conversion projects, risks and
uncertainties exist due in part to reliance on third party vendors and service
providers, and a project could be delayed. The Fund expects that the necessary
changes will be completed on time and in a way that will result in no disruption
to its operations. However, there can be no guarantee at this point that the
Fund's expectation will be realized in all respects and that its operations and
services to shareholders will not be adversely affected.
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 as of the close of business (normally 4:00 p.m. Eastern time) on each
day the New York Stock Exchange ("NYSE") is open.
PURCHASES AND REDEMPTIONS
Contract or policy holders or Plan participants will 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
and redeem 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
5
<PAGE>
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.
Under unusual circumstances, shares of a Portfolio may be redeemed "in kind",
which means that the redemption proceeds will be paid with securities which are
held by the Portfolio. Please refer to the Statement of Additional Information
for more details.
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 at net asset value on the payment date for each shareholder's account
in additional shares of the Portfolio that paid the dividend or distribution or,
in the case of VA contracts and VLI policies, will be paid in cash at the
election of the Participating Insurance Company. Any 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 and
Plans 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 realized 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 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,
6
<PAGE>
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 to 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.
7
<PAGE>
THE |
ALGER | MEETING THE CHALLENGE
AMERICAN | OF INVESTING
FUND |
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
COUNSEL:
Hollyer Brady Smith Troxell
Barrett Rockett Hines & Mone LLP
551 Fifth Avenue
New York, New York 10176
<PAGE>
PROSPECTUS
- ----------
THE | 75 Maiden Lane
ALGER | New York, New York 10038
AMERICAN | (800) 992-FUND (992-3863)
FUND |
ALGER AMERICAN INCOME AND 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 Income and Growth Portfolio (the
"Portfolio"). The Portfolio seeks primarily to provide a high level of dividend
income by investing primarily in a diversified, actively managed portfolio of
dividend paying equity securities, and, to a lesser extent, in money market
instruments and repurchase agreements. Capital appreciation is a secondary
objective of the Portfolio.
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 are also
offered directly to qualified pension and retirement plans (the "Plans"). See
"Alger American Income and 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, 1998 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, 1998
<PAGE>
- --------------------------------------------------------------------------------
CONTENTS
Page
----
Portfolio Expenses ............................... iii
Financial Highlights ............................. iv
Alger American Income & 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.
<TABLE>
<CAPTION>
<S> <C>
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
Exchange Fees ............................................................................................ None
ANNUAL PORTFOLIO OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees .......................................................................................... .625%
12b-1 Fees ............................................................................................... --
Other Expenses ........................................................................................... .115%
----
Total Portfolio Operating Expenses ....................................................................... .740%
====
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 ................................................................................................. $ 8
Three Years .............................................................................................. 24
Five Years ............................................................................................... 41
Ten Years ................................................................................................ 92
</TABLE>
- --------------------------------------------------------------------------------
iii
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The Financial Highlights for the years ended December 31, 1990 through 1997
have been audited by Arthur Andersen LLP, the Fund's independent public
accountants. This information should be read in conjunction with the financial
statements of the Fund as contained in its Statement of Additional Information.
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
Fund's Annual Report contains additional performance information and is
available upon request and without charge by contacting the Fund at (800)
992-3863.
THE ALGER AMERICAN FUND
INCOME AND GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988(ii)
-------- ------- ------- -------- ------- ------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of year...... $ 8.42 $ 17.79 $ 13.30 $ 15.31 $ 13.93 $ 13.08 $ 10.67 $ 10.74 $ 10.00 $ 10.00
------- ------- -------- -------- ------- ------- -------- ------- ------- -------
Net investment income.... 0.03 0.09(iii) 0.11(iii) 0.17 0.07 0.08 0.09 0.11 0.18 0.10
Net realized and
unrealized
gain (loss)
on investments......... 2.94 1.87 4.54 (1.47) 1.37 1.02 2.41 (0.08) 0.56 --
-------- ------- -------- -------- ------- ------- -------- ------- ------- -------
Total from investment
operations............. 2.97 1.96 4.65 (1.30) 1.44 1.10 2.50 0.03 0.74 0.10
-------- ------- -------- -------- ------- ------- -------- ------- ------- -------
Dividends from net
investment income...... (0.04) (0.33) (0.16) (0.15) (0.06) (0.12) (0.09) (0.10) -- (0.10)
Distributions from net
realized gains......... (0.36) (11.00) -- (0.56) -- (0.13) -- -- -- --
-------- ------- -------- -------- ------- ------- -------- ------- ------- -------
Total Distributions.... (0.40) (11.33) (0.16) (0.71 (0.06) (0.25) (0.09) (0.10) -- (0.10)
-------- ------- -------- -------- ------- ------- -------- ------- ------- -------
Net asset value, end of year 10.99 $ 8.42 $ 17.79 $ 13.30 $ 15.31 $ 13.93 $ 13.08 $ 10.67 $ 10.74 $ 10.00
======== ======= ======== ======== ======= ======= ======== ======= ======= =======
Total Return............. 36.29% 19.68% 35.13% (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)...... $ 47,399 $ 20.910 8.639 $ 29.135 $ 31.895 $ 8.671 $ 2.663 $ 436 $ 98 $ 28
======== ======== ======== ======== ======== ======= ======== ======= ======= =======
Ratio of expenses to
average net assets... 0.74% 0.81% 0.75% 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........... 0.56% 0.94% 0.61% 1.22% 1.51% 1.62% 2.54% 3.61% 7.36% 7.30%
======= ======== ======= ======== ======= ======= ======== ====== ====== =======
Portfolio Turnover Rate 150.09% 121.60% 164.05% 177.97% 105.80% 100.62% 61.11% 56.90% -- --
======= ======== ======= ======== ======= ======= ======== ======= ====== =======
Average Commission
Rate Paid.............. $ .0724 $ .0728
======== ========
</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.
(iii) Amount was computed based on average shares outstanding during the
period.
- -------------------------------------------------------------------------------
iv
<PAGE>
ALGER AMERICAN INCOME
AND GROWTH PORTFOLIO
The Portfolio is designed to permit insurance companies that issue VA
contracts and VLI policies to offer contract and policy holders the opportunity
to participate in the performance of the Portfolio. The Portfolio may also be a
funding vehicle for Plans which elect to make the Portfolio an investment option
for Plan participants.
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 Plans. Individuals cannot
invest in the Portfolio directly but may do so only through a VA contract or VLI
policy or 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 Board of
Trustees intends 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 of the Portfolio and the investment restrictions
summarized in the next paragraph are fundamental, which means that they may not
be changed without shareholder approval. All investment policies and practices
described elsewhere in this Prospectus, and not explicitly identified as
fundamental, 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 illiquid by virtue of legal or
contractual restrictions on resale or the absence of a readily available market;
(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 that
it may borrow or pledge its assets in an amount up to 10% of its total assets
for temporary or emergency purposes. The Statement of Additional Information
contains additional investment restrictions.
The primary investment objective of the Portfolio is to provide a high level
of dividend income. Capital appreciation is a secondary investment 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, Fred Alger Management, Inc.
("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 total assets) during temporary defensive periods.
IN GENERAL
The Portfolio seeks to achieve its investment 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
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 objectives or to
meet redemptions, it may hold up to 15% of its total assets in money market
instruments and repurchase agreements and in excess of that amount (up to 100%
of its total assets) during temporary defensive periods. This amount may be
higher than that maintained by other funds with similar investment objectives.
1
<PAGE>
Investing in smaller, newer issuers generally involves greater risk than
investing in larger, more established issuers. Smaller, newer issuers may have
limited product lines, markets or financial resources and may lack management
depth. The securities of 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 in effect is held as collateral for a loan to the other party,
and the Portfolio might incur a loss if the value of the collateral held
declines during this period.
ILLIQUID AND RESTRICTED SECURITIES
An investment may be illiquid because of the absence of an active trading
market, making it difficult to sell promptly at an acceptable price. A
restricted security is one that has a contractual restriction on its resale or
which cannot be sold publicly until it is registered under the Securities Act of
1933. The Portfolio may purchase securities eligible for resale pursuant to Rule
144A under the Securities Act of 1933. This rule permits otherwise restricted
securities to be sold to certain institutional buyers. Under the policies and
procedures established by the Fund's Board of Trustees, Alger Management
determines the liquidity of the Portfolio's Rule 144A investments.
LENDING OF PORTFOLIO SECURITIES
In order to generate income and to offset expenses, the Portfolio may lend
portfolio securities with a value up to 33 1/3% of the Portfolio's total assets
including collateral on such loans, less liabilities exclusive of the obligation
to return such collateral, to brokers, dealers and other financial
organizations. Any such loan will be continuously secured by collateral at least
equal to the value of the securities loaned. Default by the borrower could
result in delays, costs and/or losses in disposing of the collateral or
recovering the loaned securities and, should the borrower fail financially,
possible loss of rights in the collateral.
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"), American
Depositary Shares ("ADSs"), or U.S. dollar-denominated securities of foreign
issuers, none of which are included in the 20% foreign securities limitation.
ADRs and ADSs are traded in the U.S. securities markets and represent the
securities of foreign issuers. While ADRs and ADSs may not necessarily be
denominated in the same currency as the foreign securities they represent, many
of the risks associated with foreign securities may also apply to ADRs and ADSs.
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, firm
commitment agreements, "when issued" purchases, 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 Fund'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 Fred Alger &
Company, Incorporated ("Alger Inc.") in connection with its creation and initial
capitalization,
2
<PAGE>
the Fund intends to distribute shares of the Portfolio only to Participating
Insurance Companies and 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 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, 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 March 31, 1998, had approximately $8.9 billion
under management, $5.1 billion in mutual fund accounts and $3.8 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 since 1971 as Executive Vice President and Director
of Research until 1995, and as President since 1995. Ms. Khoo has been employed
by Alger Management since 1989 as a senior research analyst until 1995, and as a
Senior Vice President since 1995. Mr. Tartaro has been employed by Alger
Management since 1990 as a senior research analyst until 1995, and as a Senior
Vice President since 1995. 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 .625% of the value of the Portfolio's average daily
net assets.
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 .50% of the net asset value of shares held by those customers, will be
paid from Alger Management's or its affiliates' resources and not from the
assets of the Portfolio.
3
<PAGE>
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 its annual operating expenses (excluding interest,
taxes, fees for brokerage services and extraordinary expenses) exceed 1.25% of
its average daily net assets for any fiscal year. Any expense reimbursements
will be estimated and reconciled daily and paid on a monthly basis. 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 also contains information about the
Fund's brokerage policies and practices.
DISTRIBUTOR
Alger Inc. serves as the Fund's distributor and also distributes the shares
of other mutual funds managed by Alger Management.
TRANSFER AGENT
Alger Shareholder Services, Inc., an affiliate of Alger Management, serves as
transfer agent for the Fund.
YEAR 2000 READINESS
The Fund relies on computer systems for most of its operations. Like those of
other financial institutions, many of the computer systems it relies on need to
be adjusted to accommodate the changeover to the Year 2000. These adjustments
are necessary for the Fund to be able to continue to operate without disruption
after Year 2000. As is the case with most system conversion projects, risks and
uncertainties exist due in part to reliance on third party vendors and service
providers, and a project could be delayed. The Fund expects that the necessary
changes will be completed on time and in a way that will result in no disruption
to its operations. However, there can be no guarantee at this point that the
Fund's expectation will be realized in all respects and that its operations and
services to shareholders will not be adversely affected.
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 as of the close of business (normally 4:00 p.m. Eastern time) on each
day the New York Stock Exchange ("NYSE") is open.
PURCHASES AND REDEMPTIONS
Contract or policy holders or Plan participants will 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
and redeem 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 net asset value
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.
Under unusual circumstances, shares of a Portfolio may be redeemed "in kind",
which means that the redemption proceeds will be paid with securities which are
held by the Portfolio. Please refer to the Statement of Additional Information
for more details.
DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions will be automatically reinvested at net asset
value on the payment date for each shareholder's account in additional shares of
the Portfolio or, in the case of VA contracts and VLI policies, will be paid
4
<PAGE>
in cash at the election of the Participating Insurance Company. Any 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 and Plans 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 realized 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 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 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 to 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 which is hereby incorporated by reference. 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>
THE
ALGER | MEETING THE CHALLENGE
AMERICAN | OF INVESTING
FUND |
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
COUNSEL:
Hollyer Brady Smith Troxell
Barrett Rockett Hines & Mone LLP
551 Fifth Avenue
New York, New York 10176
<PAGE>
PROSPECTUS
- ----------
THE |
ALGER | 75 MAIDEN LANE
AMERICAN | NEW YORK, NEW YORK 10038
FUND | (800) 992-FUND (992-3863)
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
================================================================================
The Alger American Fund (the "Fund") is a registered investment company--a
mutual fund--that presently offers interests in six portfolios. This Prospectus
sets forth information about the Alger American Small Capitalization Portfolio
(the "Portfolio"). The Portfolio seeks long-term capital appreciation by
investing in a diversified, actively managed portfolio of equity securities,
primarily of companies with total market capitalization within the range of
companies included in the Russell 2000 Growth Index or the S&P SmallCap 600
Index, updated quarterly.
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 are also
offered directly to qualified pension and retirement plans (the "Plans"). See
"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, 1998 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, 1998
<PAGE>
- --------------------------------------------------------------------------------
CONTENTS
Page
----
Portfolio Expenses ................................ iii
Financial Highlights .............................. iv
Alger American Small Capitalization
Portfolio ....................................... 1
Participating Insurance Companies and Plans ....... 1
Investment Objective and Policies ................. 1
Investment Practices .............................. 2
Management of the Fund ............................ 2
Net Asset Value ................................... 4
Purchases and Redemptions ......................... 4
Dividends and Distributions ....................... 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.
<TABLE>
<CAPTION>
<S> <C>
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
Exchange Fees ................................................................................................ None
ANNUAL PORTFOLIO OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees .............................................................................................. .85%
12b-1 Fees ................................................................................................... --
Other Expenses ............................................................................................... .04%
----
Total Portfolio Operating Expenses ........................................................................... .89%
====
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 .................................................................................................. 28
Five Years ................................................................................................... 49
Ten Years .................................................................................................... 110
</TABLE>
- --------------------------------------------------------------------------------
iii
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The Financial Highlights for the years ended December 31, 1990 through 1997
have been audited by Arthur Andersen LLP, the Fund's independent public
accountants. This information should be read in conjunction with the financial
statements of the Fund as contained in its Statement of Additional Information.
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
Fund's Annual Report contains additional performance information and is
available upon request and without charge by contacting the Fund at (800)
992-3863.
THE ALGER AMERICAN FUND
SMALL CAPITALIZATION PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1997 1996 1995 1994 1993
-------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of year............... $ 40.91 $ 39.41 $ 27.31 $ 30.88 $ 27.26
-------- ---------- -------- -------- --------
Net investment income (loss) (0.05)(i) (0.04)(i) (0.09) (0.03)(i) (0.05)
Net realized and unrealized
gain (loss)
on investments........ 4.45 1.70 12.19 (1.45) 3.67
-------- ---------- -------- -------- --------
Total from investment
operations.......... 4.40 1.66 12.10 (1.48) 3.62
-------- ---------- -------- -------- --------
Dividends from net
investment income..... -- -- -- -- --
Distributions from
net realized gains.... (1.56) (0.16) -- (2.09) --
-------- ---------- -------- -------- --------
Total Distributions... (1.56) (0.16) -- (2.09) --
-------- ---------- -------- -------- --------
Net asset value, end of year $ 43.75 $ 40.91 $ 39.41 $ 27.31 $ 30.88
======== ========== ======== ======== ========
Total Return ........... 11.39% 4.18% 44.31% (4.38%) 13.28%
======== ========== ======== ======== ========
Ratios and Supplemental Data:
Net assets, end of year
(000's omitted)..... $997,586 $1,469,518 $984,212 $397,037 $238,850
======== ========== ======== ======== ========
Ratio of expenses to average
net assets.......... 0.89% 0.88% 0.92% 0.96% 1.03%
======== ========== ======== ======== ========
Decrease reflected in above
expense ratios due to expense
reimbursements...... -- -- -- -- --
======== ========== ======== ======== ========
Ratio of net investment income
(loss) to average net assets (0.12%) (0.09%) (0.48%) (0.10%) (0.35%)
======== ========== ========= ======== ========
Portfolio Turnover Rate 104.43% 110.04% 80.66% 117.61% 148.07%
======== ========== ========= ======== ========
Average Commission
Rate Paid........... $ .0640 $ .0591
======== ==========
</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.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------
1992 1991 1990 1989 1988(iii)
------- ------- ------- ------- ---------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of year............... $ 26.79 $ 17.02 $15.79 $ 9.60 $10.00
-------- ------- ------ ------ ------
Net investment income (loss) (0.06) (0.03) 0.02 0.04 0.06
Net realized and unrealized
gain (loss)
on investments........ 0.91 9.82 1.35 6.15 (0.40)
-------- ------- ------ ------ ------
Total from investment
operations.......... 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.... (0.38) -- (0.13) -- --
-------- ------- ------ ------ ------
Total Distributions... (0.38) (0.02) (0.14) -- (0.06)
-------- ------- ------ ------ ------
Net asset value, end of year $ 27.26 $ 26.79 $17.02 $15.79 $ 9.60
======== ======= ====== ====== ======
Total Return ........... 3.55% 57.54% 8.71% 64.48%(ii) (3.35%)(ii)
======== ======= ====== ====== ======
Ratios and Supplemental Data:
Net assets, end of year
(000's omitted)..... $135,718 $56,798 $7,149 $ 569 $ 39
======== ======= ====== ====== ======
Ratio of expenses to average
net assets.......... 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 (0.37%) (0.12%) 0.50% 1.11% 2.27%
======== ======= ====== ====== ======
Portfolio Turnover Rate 108.06% 125.90% 132.46% 133.61% 20.86%
======== ======= ====== ====== ======
Average Commission
Rate Paid...........
(i) Amount was computed based on average shares outstanding during the period.
(ii) Unaudited.
(iii) For the period September 21, 1988 (commencement of operations) to December
31, 1988. Ratios have been annualized; total return has not been
annualized.
</TABLE>
- -------------------------------------------------------------------------------
iv
<PAGE>
ALGER AMERICAN SMALL
CAPITALIZATION PORTFOLIO
The Portfolio is designed to permit insurance companies that issue VA
contracts and VLI policies to offer contract and policy holders the opportunity
to participate in the performance of the Portfolio. The Portfolio may also be a
funding vehicle for Plans which elect to make the Portfolio an investment option
for Plan participants.
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 Plans. Individuals cannot
invest in the Portfolio directly but may do so only through a VA contract or VLI
policy or 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 Board of
Trustees intends 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 OBJECTIVE AND POLICIES
The investment objective of the Portfolio and the investment restrictions
summarized in the next paragraph are fundamental, which means that they may not
be changed without shareholder approval. All investment policies and practices
described elsewhere in this Prospectus, and not explicitly identified as
fundamental, are not fundamental, so the Fund's Board of Trustees may change
them without shareholder approval. There is no guarantee that the Portfolio's
objective 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 illiquid by virtue of legal or
contractual restrictions on resale or the absence of a readily available market;
(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 that
it may borrow or pledge its assets in an amount up to 10% of its total assets
for temporary or emergency purposes. The Statement of Additional Information
contains additional investment restrictions.
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 ("Russell Index") or the S&P
SmallCap 600 Index ("S&P Index"), updated quarterly. Both indexes are broad
indexes of small capitalization stocks. As of March 31, 1998, the range of
market capitalization of the companies in the Russell Index was $20 million to
$4.25 billion; the range of market capitalization of the companies in the S&P
index at that date was $31 million to $3.7 billion. The combined range as of
that date was $20 million to $4.25 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 of this combined range, and
in excess of that amount (up to 100% of its assets) during temporary defensive
periods.
IN GENERAL
The Portfolio seeks to achieve its investment 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 or to
meet redemptions, it may hold up to 15% of its total assets in money market
1
<PAGE>
instruments and repurchase agreements and in excess of that amount (up to 100%
of its total 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 of 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 in effect is held as collateral for a loan to the other party,
and the Portfolio might incur a loss if the value of the collateral held
declines during this period.
ILLIQUID AND RESTRICTED SECURITIES
An investment may be illiquid because of the absence of an active trading
market, making it difficult to sell promptly at an acceptable price. A
restricted security is one that has a contractual restriction on its resale or
which cannot be sold publicly until it is registered under the Securities Act of
1933. The Portfolio may purchase securities eligible for resale pursuant to Rule
144A under the Securities Act of 1933. This rule permits otherwise restricted
securities to be sold to certain institutional buyers. Under policies and
procedures established by the Fund's Board of Trustees, Fred Alger Management,
Inc. ("Alger Management") determines the liquidity of the Portfolio's Rule 144A
investments.
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
including collateral on such loans, less liabilities exclusive of the obligation
to return such collateral, to brokers, dealers and other financial
organizations. Any such loan will be continuously secured by collateral at least
equal to the value of the securities loaned. Default by the borrower could
result in delays, costs and/or losses in disposing of the collateral or
recovering the loaned securities and, should the borrower fail financially,
possible loss of rights in the collateral.
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"), American
Depositary Shares ("ADSs"), or U.S. dollar-denominated securities of foreign
issuers, none of which are included in the 20% foreign securities limitation.
ADRs and ADSs are traded in the U.S. securities markets and represent the
securities of foreign issuers. While ADRs and ADSs may not necessarily be
denominated in the same currency as the foreign securities they represent, many
of the risks associated with foreign securities may also apply to ADRs and ADSs.
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, firm
commitment agreements, "when issued" purchases, 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
2
<PAGE>
to call a meeting to remove a Trustee or to take other action described in the
Fund'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 Fred Alger &
Company, Incorporated ("Alger Inc.") in connection with its creation and initial
capitalization, the Fund intends to distribute shares of the Portfolio only to
Participating Insurance Companies and 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, 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 March 31, 1998, had approximately $8.9 billion
under management, $5.1 billion in mutual fund accounts and $3.8 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 since 1971 as Executive Vice President and Director
of Research until 1995, and as President since 1995. Ms. Khoo has been employed
by Alger Management since 1989 as a senior research analyst until 1995, and as a
Senior Vice President since 1995. Mr. Tartaro has been employed by Alger
Management since 1990 as a senior research analyst until 1995, and as a Senior
Vice President since 1995. 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.
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
3
<PAGE>
of record-keeping, administrative, marketing and/or shareholder support
services. This compensation, which may be paid at a rate of up to .50% of the
net asset value of shares held by those customers, will be paid from Alger
Management's or its affiliates' 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 its annual operating expenses (excluding interest,
taxes, fees for brokerage services and extraordinary expenses) exceed 1.50% of
its average daily net assets for any fiscal year. Any such expense
reimbursements will be estimated and reconciled daily and paid on a monthly
basis. 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 also contains information about the
Fund's brokerage policies and practices.
DISTRIBUTOR
Alger Inc. serves as the Fund's distributor and also distributes the shares
of other mutual funds managed by Alger Management.
TRANSFER AGENT
Alger Shareholder Services, Inc., an affiliate of Alger Management, serves as
transfer agent for the Fund.
YEAR 2000 READINESS
The Fund relies on computer systems for most of its operations. Like those of
other financial institutions, many of the computer systems it relies on need to
be adjusted to accommodate the changeover to the Year 2000. These adjustments
are necessary for the Fund to be able to continue to operate without disruption
after Year 2000. As is the case with most system conversion projects, risks and
uncertainties exist due in part to reliance on third party vendors and service
providers, and a project could be delayed. The Fund expects that the necessary
changes will be completed on time and in a way that will result in no disruption
to its operations. However, there can be no guarantee at this point that the
Fund's expectation will be realized in all respects and that its operations and
services to shareholders will not be adversely affected.
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 as of the close of business (normally 4:00 p.m. Eastern time) on each
day the New York Stock Exchange ("NYSE") is open.
PURCHASES AND REDEMPTIONS
Contract or policy holders or Plan participants will 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
and redeem 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 net asset value
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.
Under unusual circumstances, shares of the Portfolio may be redeemed "in
kind", which means that the redemption proceeds will be paid with securities
which are held by the
4
<PAGE>
Portfolio. Please refer to the Statement of Additional Information for more
details.
DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions will be automatically reinvested at net asset
value on the payment date for each shareholder's account in additional shares of
the Portfolio or, in the case of VA contracts and VLI policies, will be paid in
cash at the election of the Participating Insurance Company. Any 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 and Plans 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 realized 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 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 to 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>
THE |
ALGER | MEETING THE CHALLENGE
AMERICAN | OF INVESTING
FUND |
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
COUNSEL:
Hollyer Brady Smith Troxell
Barrett Rockett Hines & Mone LLP
551 Fifth Avenue
New York, New York 10176
<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 are also
offered directly to qualified pension and retirement plans (the "Plans"). See
"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, 1998 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, 1998
<PAGE>
- --------------------------------------------------------------------------------
CONTENTS
Page
----
Portfolio Expenses ................................ iii
Financial Highlights .............................. iv
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
Exchange Fees ....................................................... None
ANNUAL PORTFOLIO OPERATING EXPENSES (AS A PERCENTAGE
OF AVERAGE NET ASSETS)
Management Fees ..................................................... .75%
12b-1 Fees .......................................................... --
Other Expenses ...................................................... .04%
----
Total Portfolio Operating Expenses .................................. .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 ............................................................ $ 8
Three Years ......................................................... 25
Five Years .......................................................... 44
Ten Years ........................................................... 98
- -------------------------------------------------------------------------------
iii
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The Financial Highlights for the years ended December 31, 1990 through 1997
have been audited by Arthur Andersen LLP, the Fund's independent public
accountants. This information should be read in conjunction with the financial
statements of the Fund as contained in its Statement of Additional Information.
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 Fund's
Annual Report contains additional performance information and is available upon
request and without charge by contacting the Fund at (800) 992-3863.
THE ALGER AMERICAN FUND
GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989(ii)
---------- --------- --------- -------- -------- -------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning
of year....................... $ 34.33 $ 31.16 $ 23.13 $ 24.67 $ 20.17 $ 18.00 $ 12.86 $ 12.41 $ 10.00
---------- --------- --------- --------- ------- -------- ------- ------- -------
Net investment income........... 0.13 0.12 0.02 0.07 0.03 0.03 0.08(i) 0.07 0.09
Net realized and unrealized
gain on investments........... 8.66 4.00 8.33 0.15 4.50 2.19 5.11 0.44 2.32
---------- --------- --------- --------- ------- -------- ------- ------- -------
Total from investment
operations.................. 8.79 4.12 8.35 0.22 4.53 2.22 5.19 0.51 2.41
---------- --------- --------- --------- ------- -------- ------- ------- -------
Dividends from net investment
income........................ (0.13) (0.02) (0.07) (0.03) (0.03) (0.03) (0.05) (0.06) --
Distributions from net realized
gains......................... (0.23) (0.93) (0.25) (1.73) -- (0.02) -- -- --
---------- --------- --------- --------- ------- -------- ------- ------- -------
Total Distributions........... (0.36) (0.95) (0.32) (1.76) (0.03) (0.05) (0.05) (0.06) --
---------- --------- --------- --------- ------- -------- ------- ------- -------
Net asset value, end of year.... $ 42.76 $ 34.33 $ 31.16 $ 23.13 $ 24.67 $ 20.17 $ 18.00 $ 12.86 $ 12.41
========== ========= ========= ========= ======= ======== ======= ======= =======
Total Return.................... 25.75% 13.35% 36.37% 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)............. $1,072,529 $ 991,028 $ 502,974 $ 150,390 $ 74,878 $ 30,316 $ 10,094 $ 1,228 $ 171
========== ========= ========= ========= ======== ======== ======== ======= =======
Ratio of expenses to average
net assets.................. 0.79% 0.79% 0.85% 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....... 0.27% 0.50 0.18% 0.48% 0.25% 0.33% 0.52% 1.69% 1.30%
========== ========= ======== ========= ======== ======== ======== ======= =======
Portfolio Turnover Rate....... 129.50% 82.86% 118.33% 111.76% 112.64% 63.91% 58.95% 86.77% 79.59%
========== ========= ======= ========= ======== ======== ======== ======= =======
Average Commission Rate Paid.. $ .0697 $ .0683
========== =========
</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>
ALGER AMERICAN GROWTH
PORTFOLIO
The Portfolio is designed to permit insurance companies that issue VA
contracts and VLI policies to offer contract and policy holders the opportunity
to participate in the performance of the Portfolio. The Portfolio may also be a
funding vehicle for Plans which elect to make the Portfolio an investment option
for Plan participants.
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 Plans. Individuals cannot
invest in the Portfolio directly but may do so only through a VA contract or VLI
policy or 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 Board of
Trustees intends 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 OBJECTIVE AND POLICIES
The investment objective of the Portfolio and the investment restrictions
summarized in the next paragraph are fundamental, which means that they may not
be changed without shareholder approval. All investment policies and practices
described elsewhere in this Prospectus, and not explicitly identified as
fundamental, are not fundamental, so the Fund's Board of Trustees may change
them without shareholder approval. There is no guarantee that the Portfolio's
objective 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 illiquid by virtue of legal or
contractual restrictions on resale or the absence of a readily available market;
(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 that
it may borrow or pledge its assets in an amount up to 10% of its total assets
for temporary or emergency purposes. The Statement of Additional Information
contains additional investment restrictions.
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.
IN GENERAL
The Portfolio seeks to achieve its investment 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 or to
meet redemptions, it may hold up to 15% of its total assets in money market
instruments and repurchase agreements and in excess of that amount (up to 100%
of its total 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. Smaller, newer issuers may have
limited product lines, markets or financial resources and may lack management
depth. The securities of such companies may have lim-
1
<PAGE>
ited 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.
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 in effect is held as collateral for a loan to the other party,
and the Portfolio might incur a loss if the value of the collateral held
declines during this period.
ILLIQUID AND RESTRICTED SECURITIES
An investment may be illiquid because of the absence of an active trading
market, making it difficult to sell promptly at an acceptable price. A
restricted security is one that has a contractual restriction on its resale or
which cannot be sold publicly until it is registered under the Securities Act of
1933. The Portfolio may purchase securities eligible for resale pursuant to Rule
144A under the Securities Act of 1933. This rule permits otherwise restricted
securities to be sold to certain institutional buyers. Under the policies and
procedures established by the Fund's Board of Trustees, Fred Alger Management,
Inc. ("Alger Management") determines the liquidity of the Portfolio's Rule 144A
investments.
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
including collateral on such loans, less liabilities exclusive of the obligation
to return such collateral, to brokers, dealers and other financial
organizations. Any such loan will be continuously secured by collateral at least
equal to the value of the securities loaned. Default by the borrower could
result in delays, costs and/or losses in disposing of the collateral or
recovering the loaned securities and, should the borrower fail financially,
possible loss of rights in the collateral.
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"), American
Depositary Shares ("ADSs"), or U.S. dollar-denominated securities of foreign
issuers, none of which are included in the 20% foreign securities limitation.
ADRs and ADSs are traded in the U.S. securities markets and represent the
securities of foreign issuers. While ADRs and ADSs may not necessarily be
denominated in the same currency as the foreign securities they represent, many
of the risks associated with foreign securities may also apply to ADRs and ADSs.
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, firm
commitment agreements, "when issued" purchases, 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 Fund'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 Fred Alger &
Company, Incorporated ("Alger Inc.") in connection with its creation and initial
capitalization, the Fund intends to distribute shares of the Portfolio only to
Participating Insurance Companies and Plans, so that only Participating
Insurance Companies and their separate accounts and Plans will be considered
shareholders
2
<PAGE>
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 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, 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 March 31, 1998, had approximately $8.9 billion
under management, $5.1 billion in mutual fund accounts and $3.8 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 since 1971 as Executive Vice President and Director
of Research until 1995, and as President since 1995. Ms. Khoo has been employed
by Alger Management since 1989 as a senior research analyst until 1995, and as a
Senior Vice President since 1995. Mr. Tartaro has been employed by Alger
Management since 1990 as a senior research analyst until 1995, and as a Senior
Vice President since 1995. 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.
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 .50% of the net asset value of shares held by those customers, will be
paid from Alger Management's own resources and not from the assets of the
Portfolio.
3
<PAGE>
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 its annual operating expenses (excluding interest,
taxes, fees for brokerage services and extraordinary expenses) exceed 1.50% of
its average daily net assets for any fiscal year. Any such expense
reimbursements will be estimated and reconciled daily and paid on a monthly
basis. 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 also contains information about the
Fund's brokerage policies and practices.
DISTRIBUTOR
Alger Inc. serves as the Fund's distributor and also distributes the shares
of other mutual funds managed by Alger Management.
TRANSFER AGENT
Alger Shareholder Services, Inc., an affiliate of Alger Management, serves as
transfer agent for the Fund.
YEAR 2000 READINESS
The Fund relies on computer systems for most of its operations. Like those of
other financial institutions, many of the computer systems it relies on need to
be adjusted to accommodate the changeover to the Year 2000. These adjustments
are necessary for the Fund to be able to continue to operate without disruption
after Year 2000. As is the case with most system conversion projects, risks and
uncertainties exist due in part to reliance on third party vendors and service
providers, and a project could be delayed. The Fund expects that the necessary
changes will be completed on time and in a way that will result in no disruption
to its operations. However, there can be no guarantee at this point that the
Fund's expectation will be realized in all respects and that its operations and
services to shareholders will not be adversely affected.
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 as of the close of business (normally 4:00 p.m. Eastern time) on each
day the New York Stock Exchange ("NYSE") is open.
PURCHASES AND REDEMPTIONS
Contract or policy holders or Plan participants will 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
and redeem 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 net asset value
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.
Under unusual circumstances, shares of the Portfolio may be redeemed "in
kind", which means that the redemption proceeds will be paid with securities
which are held by the Portfolio. Please refer to the Statement of Additional
Information for more details.
DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions will be automatically reinvested at net asset
value on the payment date for each shareholder's account in additional shares of
the Portfolio
4
<PAGE>
or, in the case of VA contracts and VLI policies, will be paid in cash at the
election of the Participating Insurance Company. Any 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
and Plans 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 realized 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 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 to 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>
THE |
ALGER | MEETING THE CHALLENGE
AMERICAN | OF INVESTING
FUND |
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
COUNSEL:
Hollyer Brady Smith Troxell
Barrett Rockett Hines & Mone LLP
551 Fifth Avenue
New York, New York 10176
<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 are also
offered directly to qualified pension and retirement plans (the "Plans"). See
"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, 1998 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, 1998
<PAGE>
- --------------------------------------------------------------------------------
CONTENTS
Page
----
Portfolio Expenses .................................. iii
Financial Highlights ................................ iv
Alger American MidCap
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 ......................... 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
Exchange Fees ................................................... None
ANNUAL PORTFOLIO OPERATING EXPENSES (AS A PERCENTAGE
OF AVERAGE NET ASSETS)
Management Fees ................................................. .80%
12b-1 Fees ...................................................... --
Other Expenses .................................................. .04%
----
Total Portfolio Operating Expenses .............................. .84%
====
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 ...................................................... 47
Ten Years ....................................................... 104
- --------------------------------------------------------------------------------
iii
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The Financial Highlights for the years ended December 31, 1993 through 1997
have been audited by Arthur Andersen LLP, the Fund's independent public
accountants. This information should be read in conjunction with the financial
statements of the Fund as contained in its Statement of Additional Information.
The Fund's Annual Report contains additional performance information and is
available upon request and without charge by contacting the Fund at (800)
992-3863.
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)
1997 1996 1995 1994 TO DECEMBER 31, 1993(I)
-------- -------- -------- ------- -----------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of year ..................... $ 21.35 $ 19.44 $ 13.46 $ 13.72 $ 10.00
-------- -------- -------- ------- -------
Net investment income (loss) ............ (0.04) 0.03 (0.03) 0.00(ii) (0.02)
Net realized and unrealized
gain (loss) on investments ............ 3.20 2.29 6.01 (0.21) 3.88
-------- -------- -------- ------- -------
Total from investment
operations .......................... 3.16 2.32 5.98 (0.21) 3.86
Dividends from net
investment income ................... (0.01) -- -- -- --
Distributions from
net realized gains .................... (0.32) (0.41) -- (0.05) (0.14)
-------- -------- -------- ------- -------
Total Distributions ..................... (0.33) (0.41) -- (0.05) (0.14)
-------- -------- -------- ------- -------
Net asset value, end of year ............ $ 24.18 $ 21.35 $ 19.44 $ 13.46 $ 13.72
======== ======== ======== ======= =======
Total Return ............................ 15.01% 11.90% 44.45% (1.54%) 38.67%
======== ======== ======== ======= =======
Ratios and Supplemental Data:
Net assets, end of year
(000's omitted) ..................... $444,967 $394,847 $185,349 $62,178 $21,301
======== ======== ======== ======= =======
Ratio of expenses to
average net assets .................. 0.84% 0.84% 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 ........ (0.15%) 0.08% (0.25%) 0.03% (0.58%)
======== ======== ======== ======= =======
Portfolio Turnover Rate ............... 151.98% 90.97% 104.74% 83.96% 67.22%
======== ======== ======== ======= =======
Average Commission Rate Paid .......... $ .0676 $ .0663
======== ========
</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>
ALGER AMERICAN MIDCAP
GROWTH PORTFOLIO
The Portfolio is designed to permit insurance companies that issue VA
contracts and VLI policies to offer contract and policy holders the opportunity
to participate in the performance of the Portfolio. The Portfolio may also be a
funding vehicle for Plans which elect to make the Portfolio an investment option
for Plan participants.
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 Plans. Individuals cannot
invest in the Portfolio directly but may do so only through a VA contract or VLI
policy or 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 Board of
Trustees intends 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 OBJECTIVE AND POLICIES
The investment objective of the Portfolio and the investment restrictions
summarized in the next paragraph are fundamental, which means that they may not
be changed without shareholder approval. All investment policies and practices
described elsewhere in this Prospectus, and not explicitly identified as
fundamental, are not fundamental, so the Fund's Board of Trustees may change
them without shareholder approval. There is no guarantee that the Portfolio's
objective 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 illiquid by virtue of legal or
contractual restrictions on resale or the absence of a readily available market;
(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 that
it may borrow money or pledge its assets in an amount up to 10% of its total
assets for temporary or emergency purposes. The Statement of Additional
Information contains additional investment restrictions.
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 March 31, 1998, the range of market capitalization of these
companies was $201 million to $14.3 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 investment 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 or to
meet redemptions, it may hold up to 15% of its total assets in money market
instruments and repurchase agreements and in excess of that amount (up to 100%
of its total assets) during temporary defensive periods. This amount may be
higher than that maintained by other funds with similar investment objectives.
1
<PAGE>
Investing in smaller, newer issuers generally involves greater risk than
investing in larger, more established issuers. Smaller, newer issuers may have
limited product lines, markets or financial resources and may lack management
depth. The securities of 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.
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 in effect is held as collateral for a loan to the other party,
and the Portfolio might incur a loss if the value of the collateral held
declines during this period.
ILLIQUID AND RESTRICTED SECURITIES
An investment may be illiquid because of the absence of an active trading
market, making it difficult to sell promptly at an acceptable price. A
restricted security is one that has a contractual restriction on its resale or
which cannot be sold publicly until it is registered under the Securities Act of
1933. The Portfolio may purchase securities eligible for resale pursuant to Rule
144A under the Securities Act of 1933. This rule permits otherwise restricted
securities to be sold to certain institutional buyers. Under policies and
procedures established by the Fund's Board of Trustees, Fred Alger Management,
Inc. ("Alger Management") determines the liquidity of the Portfolio's Rule 144A
investments.
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
including collateral on such loans, less liabilities exclusive of the obligation
to return such collateral, to brokers, dealers and other financial
organizations. Any such loan will be continuously secured by collateral at least
equal to the value of the securities loaned. Default by the borrower could
result in delays, costs and/or losses in disposing of the collateral or
recovering the loaned securities and, should the borrower fail financially,
possible loss of rights in the collateral.
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"), American
Depositary Shares ("ADSs"), or U.S. dollar-denominated securities of foreign
issuers, none of which are included in the 20% foreign securities limitation.
ADRs and ADSs are traded in the U.S. securities markets and represent the
securities of foreign issuers. While ADRs and ADSs may not necessarily be
denominated in the same currency as the foreign securities they represent, many
of the risks associated with foreign securities may also apply to ADRs and ADSs.
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, firm
commitment agreements, "when issued" purchases, 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 Fund'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 Fred Alger &
Company, Incorporated ("Alger Inc.")
2
<PAGE>
in connection with its creation and initial capitalization, the Fund intends to
distribute shares of the Portfolio only to Participating Insurance Companies and
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, 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 March 31, 1998, had approximately $8.9 billion
under management, $5.1 billion in mutual fund accounts and $3.8 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 since 1971 as Executive Vice President and Director
of Research until 1995, and as President since 1995. Ms. Khoo has been employed
by Alger Management since 1989 as a senior research analyst until 1995, and as a
Senior Vice President since 1995. Mr. Tartaro has been employed by Alger
Management since 1990 as a senior research analyst until 1995, and as a Senior
Vice President since 1995. 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 .80% of the value of the Portfolio's average daily
net assets.
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 .50% of the net asset value of shares held by those customers, will be
paid from Alger Management's or its affiliates' resources and not from the
assets of the Portfolio.
3
<PAGE>
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 its annual operating expenses (excluding interest,
taxes, fees for brokerage services and extraordinary expenses) exceed 1.50% of
its average daily net assets for any fiscal year. Any such expense
reimbursements will be estimated and reconciled daily and paid on a monthly
basis. 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 also contains information about the
Fund's brokerage policies and practices.
DISTRIBUTOR
Alger Inc. serves as the Fund's distributor and also distributes the shares
of other mutual funds managed by Alger Management.
TRANSFER AGENT
Alger Shareholder Services, Inc., an affiliate of Alger Management, serves as
transfer agent for the Fund.
YEAR 2000 READINESS
The Fund relies on computer systems for most of its operations. Like those of
other financial institutions, many of the computer systems it relies on need to
be adjusted to accommodate the changeover to the Year 2000. These adjustments
are necessary for the Fund to be able to continue to operate without disruption
after Year 2000. As is the case with most system conversion projects, risks and
uncertainties exist due in part to reliance on third party vendors and service
providers, and a project could be delayed. The Fund expects that the necessary
changes will be completed on time and in a way that will result in no disruption
to its operations. However, there can be no guarantee at this point that the
Fund's expectation will be realized in all respects and that its operations and
services to shareholders will not be adversely affected.
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 as of the close of business (normally 4:00 p.m. Eastern time) on each
day the New York Stock Exchange ("NYSE") is open.
PURCHASES AND REDEMPTIONS
Contract or policy holders or Plan participants will 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
and redeem 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 net asset value
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.
Under unusual circumstances, shares of the Portfolio may be redeemed "in
kind", which means that the redemption proceeds will be paid with securities
which are held by the Portfolio. Please refer to the Statement of Additional
Information for more details.
DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions will be automatically reinvested at net asset
value on the payment date for each
4
<PAGE>
shareholder's account in additional shares of the Portfolio or, in the case of
VA contracts and VLI policies, will be paid in cash at the election of the
Participating Insurance Company. Any 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 and Plans 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 realized 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 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 to 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>
THE |
ALGER | MEETING THE CHALLENGE
AMERICAN | OF INVESTING
FUND |
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
COUNSEL:
Hollyer Brady Smith Troxell
Barrett Rocket Hines & Mone LLP
551 Fifth Avenue
New York, New York 10176
<PAGE>
PROSPECTUS
- ----------
THE |
ALGER | 75 Maiden Lane
AMERICAN | New York, New York 10038
FUND | (800) 992-FUND (992-3863)
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
================================================================================
The Alger American Fund (the "Fund") is a registered investment company--a
mutual fund--that presently offers interests in six portfolios. This Prospectus
sets forth information about the Alger American Leveraged AllCap Portfolio (the
"Portfolio"). The Portfolio seeks long-term capital appreciation by investing in
a diversified, actively managed portfolio of equity securities. The Portfolio
may engage in leveraging (up to 331/3% of its assets) and options and futures
transactions, which are deemed to be speculative and which may cause the
Portfolio's net asset value to be more volatile than the net asset value of a
fund that does not engage in these activities.
Shares of the Portfolio are offered as a pooled funding vehicle for
insurance companies writing all types of variable annuity contracts ("VA
contracts") and variable life insurance policies ("VLI policies") and are also
offered directly to qualified pension and retirement plans (the "Plans"). See
"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, 1998 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, 1998
<PAGE>
- --------------------------------------------------------------------------------
CONTENTS
Page
----
Portfolio Expenses ................................ iii
Financial Highlights .............................. iv
Alger American Leveraged
AllCap Portfolio ............................... 1
Participating Insurance Companies and Plans ....... 1
Investment Objective and Policies ................. 1
Investment Practices .............................. 2
Management of the Fund ............................ 3
Net Asset Value ................................... 5
Purchases and Redemptions ......................... 5
Dividends and Distributions ....................... 5
Taxes ............................................. 6
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 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
Exchange Fees .......................................................... None
ANNUAL PORTFOLIO OPERATING EXPENSES (AS A PERCENTAGE OF AVERAGE NET ASSETS)
Management Fees ........................................................ .85%
12b-1 Fees ----
Other Expenses ......................................................... .15%*
----
Total Portfolio Operating Expenses ..................................... 1.00%
====
* Included in Other Expenses of the Alger American Leveraged AllCap
Portfolio is 0.04% of interest expense.
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 ............................................................ 32
Five Years ............................................................. 55
Ten Years .............................................................. 122
- --------------------------------------------------------------------------------
iii
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
The Financial Highlights for the years ended December 31, 1995 and 1997
have been audited by Arthur Andersen LLP, the Fund's independent public
accountants. This information should be read in conjunction with the financial
statements of the Fund as contained in its Statement of Additional Information.
The Fund's Annual Report contains additional performance information and is
available upon request and without charge by contacting the Fund at (800)
992-3863.
THE ALGER AMERICAN FUND
LEVERAGED ALLCAP PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
FROM JANUARY 25, 1995
YEAR ENDED DECEMBER 31, (COMMENCEMENT OF
----------------------- OPERATIONS)
1997 1996 TO DECEMBER 31, 1995(I)
--------- --------- -----------------------
<S> <C> <C> <C>
Net asset value, beginning of period.......................... $ 19.36 $ 17.43 $ 10.00
--------- ---------- -------
Net investment loss........................................... (0.03) (0.03)(ii) (0.03)
Net realized and unrealized gain on investments............... 3.84 2.14 7.46
--------- ---------- -------
Total from investment operations.......................... 3.81 2.11 7.43
Distribution from net realized gains.......................... -- (0.18) --
--------- ---------- -------
Net asset value, end of period................................ $ 23.17 $ 19.36 $ 17.43
========= ========== =======
Total Return.................................................. 19.68% 12.04% 74.30%
========= ========== =======
Ratios and Supplemental Data:
Net assets, end of period (000's omitted)................... $ 53,488 $ 34,925 $ 5,497
========= ========== =======
Ratio of expenses excluding interest to average net assets.. 0.96% 1.06% 1.50%
========= ========== =======
Ratio of expenses including interest to average net assets.. 1.00% 1.09% 1.56%
========= ========== =======
Decrease reflected in above expense ratios
due to expense reimbursements............................. -- -- 2.36%
========= ========== =======
Ratio of net investment loss to average net assets.......... (0.17%) (0.15%) (0.71%)
========= ========== =======
Portfolio Turnover Rate..................................... 164.27% 102.10% 178.23%
========= ========== =======
Amount of debt outstanding at end of period................... -- -- --
========= ========== =======
Average amount of debt outstanding during the period.......... $ 201,644 $ 76,079 $ 8,122
========= ========== =======
Average daily number of shares outstanding during the period.. 2,135,458 1,107,187 75,460
========= ========== =======
Average amount of debt per share during the period............ $ 0.09 $ 0.07 $ 0.11
========= ========== =======
Average Commission Rate Paid.................................. $ .0703 $ .0682
========= ==========
</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>
ALGER AMERICAN LEVERAGED
ALLCAP PORTFOLIO
The Portfolio is designed to permit insurance companies that issue VA
contracts and VLI policies to offer contract and policy holders the opportunity
to participate in the performance of the Portfolio. The Portfolio may also be a
funding vehicle for Plans which elect to make the Portfolio an investment option
for Plan participants.
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 Plans. Individuals cannot
invest in the Portfolio directly but may do so only through a VA contract or VLI
policy or 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 Board of
Trustees intends 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 OBJECTIVE AND POLICIES
The investment objective of the Portfolio and the investment restrictions
summarized in the next paragraph are fundamental, which means that they may not
be changed without shareholder approval. All investment policies and practices
described elsewhere in this Prospectus, and not explicitly identified as
fundamental, are not fundamental, so the Fund's Board of Trustees may change
them without shareholder approval. There is no guarantee that the Portfolio's
objective 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
15% of its net assets in securities that are illiquid by virtue of legal or
contractual restrictions on resale or the absence of a readily available market;
(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 that
it may borrow money or pledge its assets in an amount up to 10% of its total
assets for temporary or emergency purposes and in an amount exceeding 10% of its
total assets for investment purposes as set forth below under "Leverage Through
Borrowing." The Statement of Additional Information contains additional
investment restrictions.
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 total 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 investment 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
1
<PAGE>
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 or to
meet redemptions, 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. Smaller, newer issuers may have
limited product lines, markets or financial resources and may lack management
depth. The securities of 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.
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 in effect is held as collateral for a loan to the other party,
and the Portfolio might incur a loss if the value of the collateral held
declines during this period.
ILLIQUID AND RESTRICTED SECURITIES
An investment may be illiquid because of the absence of an active trading
market, making it difficult to sell promptly at an acceptable price. A
restricted security is one that has a contractual restriction on its resale or
which cannot be sold publicly until it is registered under the Securities Act of
1933. The Portfolio may purchase securities eligible for resale pursuant to Rule
144A under the Securities Act of 1933. This rule permits otherwise restricted
securities to be sold to certain institutional buyers. Under policies and
procedures established by the Fund's Board of Trustees, Fred Alger Management,
Inc. ("Alger Management") determines the liquidity of the Portfolio's Rule 144A
investments.
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
including collateral on such loans, less liabilities exclusive of the obligation
to return such collateral, to brokers, dealers and other financial
organizations. Any such loan will be continuously secured by collateral at least
equal to the value of the securities loaned. Default by the borrower could
result in delays, costs and/or losses in disposing of the collateral or
recovering the loaned securities and, should the borrower fail financially,
possible loss of rights in the collateral.
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"), American
Depositary Shares ("ADSs"), or U.S. dollar-denominated securities of foreign
issuers, none of which are included in the 20% foreign securities limitation.
ADRs and ADSs are traded in the U.S. securities markets and represent the
securities of foreign issuers. While ADRs and ADSs may not necessarily be
denominated in the same currency as the foreign securities they represent, many
of the risks associated with foreign securities may also apply to ADRs and ADSs.
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
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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. Hedging
transactions are intended to reduce the risk of price fluctuations. The
Portfolio may write an option on a security only if the option is "covered" (for
a discussion of covered options, see the Statement of Additional Information.)
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 are highly specialized activities which
involve 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.
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, firm
commitment agreements, "when issued" purchases, 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 Fund'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 Fred Alger &
Company, Incorporated ("Alger Inc.") in connection with its creation and initial
capitalization, the Fund intends to distribute shares of the Portfolio only to
Participating Insurance Companies and 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
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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, 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 March 31, 1998, had approximately $8.9 billion
under management, $5.1 billion in mutual fund accounts and $3.8 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 since 1971 as Executive Vice President and Director
of Research until 1995, and as President since 1995. Ms. Khoo has been employed
by Alger Management since 1989 as a senior research analyst until 1995, and as a
Senior Vice President since 1995. Mr. Tartaro has been employed by Alger
Management since 1990 as a senior research analyst until 1995, and as a Senior
Vice President since 1995. 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.
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 .50% of the net asset value of shares held by those customers will be paid
from Alger Management's or its affiliates' 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 its annual operating expenses (excluding interest,
taxes, fees for brokerage services and extraordinary expenses) exceed 1.50% of
its average daily net assets for any fiscal year. Any such expense
reimbursements will be estimated and reconciled daily and paid on a monthly
basis. 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
retain-
4
<PAGE>
ing 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 also contains information about the
Fund's brokerage policies and practices.
DISTRIBUTOR
Alger Inc. serves as the Fund's distributor and also distributes the shares
of other mutual funds managed by Alger Management.
TRANSFER AGENT
Alger Shareholder Services, Inc., an affiliate of Alger Management, serves as
transfer agent for the Fund.
YEAR 2000 READINESS
The Fund relies on computer systems for most of its operations. Like those of
other financial institutions, many of the computer systems it relies on need to
be adjusted to accommodate the changeover to the Year 2000. These adjustments
are necessary for the Fund to be able to continue to operate without disruption
after Year 2000. As is the case with most system conversion projects, risks and
uncertainties exist due in part to reliance on third party vendors and service
providers, and a project could be delayed. The Fund expects that the necessary
changes will be completed on time and in a way that will result in no disruption
to its operations. However, there can be no guarantee at this point that the
Fund's expectation will be realized in all respects and that its operations and
services to shareholders will not be adversely affected.
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 as of the close of business (normally 4:00 p.m. Eastern time) on each
day the New York Stock Exchange ("NYSE") is open.
PURCHASES AND REDEMPTIONS
Contract or policy holders or Plan participants will 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
and redeem 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 net asset value
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.
Under unusual circumstances, shares of the Portfolio may be redeemed "in
kind", which means that the redemption proceeds will be paid with securities
which are held by the Portfolio. Please refer to the Statement of Additional
Information for more details.
DIVIDENDS AND DISTRIBUTIONS
Dividends and distributions will be automatically reinvested at net asset
value on the payment date for each shareholder's account in additional shares of
the Portfolio or, in the case of VA contracts and VLI policies, will be paid in
cash at the election of the Participating Insurance Company. Any 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
5
<PAGE>
Insurance Companies and Plans 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 realized 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 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 to 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.
6
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THE |
ALGER | MEETING THE CHALLENGE
AMERICAN | OF INVESTING
FUND |
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
COUNSEL:
Hollyer Brady Smith Troxell
Barrett Rockett Hines & Mone LLP
551 Fifth Avenue
New York, New York 10176
<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, 1998
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. The Fund also offers
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 Fund and supplements information in
the Prospectus dated May 1, 1998. It should be read together with the Prospectus
which may be obtained free of charge by writing or calling the Fund at the
address or toll-free number shown above.
CONTENTS
Investment 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......................................................... 15
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 debt 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 Fred
Alger Management, Inc. ("Alger Management"), 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, 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
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<PAGE>
liquidity 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 were to default 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 consisting of cash
or liquid securities that at all times are in an amount equal to their
obligations under reverse repurchase agreements. The Portfolio will invest the
proceeds in 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 less liabilities other
than the repurchase obligation.
FIRM COMMITMENT AGREEMENTS AND
WHEN-ISSUED PURCHASES
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 a 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. A
Portfolio will not use these transactions for leveraging purposes and,
accordingly, will segregate cash or liquid securities 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 governed by Rule 144A under
the Securities Act of 1933, as amended. In adopting Rule 144A, the Securities
and Exchange Commission (the "SEC") specifically stated
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that restricted securities traded under Rule 144A may be treated as liquid for
purposes of investment limitations if the board of trustees (or the fund's
adviser acting subject to the board's supervision) determines that the
securities are in fact liquid. The Board of Trustees has delegated its
responsibility to Alger Management to determine the liquidity of each restricted
security purchased pursuant to the Rule, subject to the Board of Trustees'
oversight and review. Examples of factors that will be taken into account in
evaluating the liquidity of a Rule 144A security, both with respect to the
initial purchase and on an ongoing basis, include, among others: (1) the
frequency of trades and quotes for the security; (2) the number of dealers
willing to purchase or sell the security and the number of other potential
purchasers; (3) dealer undertakings to make a market in the security; and (4)
the nature of the security and the nature of the marketplace trades (e.g., the
time needed to dispose of the security, the method of soliciting offers and the
mechanics of transfer). If institutional trading in restricted securities were
to decline to limited levels, the liquidity of the Fund's Portfolio could be
adversely affected.
SHORT SALES
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 or letters of credit 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, American Depositary
Shares or U.S. dollar-denominated securities of foreign issuers). Foreign
securities investments may be affected by changes in currency rates or exchange
control regulations, changes in governmental administration or economic or
monetary policy (in the United States and abroad) or changed circumstances in
dealing 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 on a security is a contract that gives the holder of the option
the right, in return for a premium paid, to buy from the writer (seller) of the
call option the security underlying the option at a specified exercise price at
any time during the term of the option. The writer of the call option has the
obligation upon exercise of the option to deliver the underlying security upon
payment of the exercise price during the option period. A put option on a
security is a contract that, in return for the premium, gives the holder of the
option the right to sell to the writer (seller) the underlying security at a
specified price during the term of the option. The writer of the put, who
receives the premium, has the obligation to buy the underlying security upon
exercise at the exercise price during the option period.
A call option written by the Portfolio on a security 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) 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
written by the Portfolio 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, 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 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.
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The Portfolio will not purchase these options unless Alger Management is
satisfied with the development, depth and liquidity of the market and Alger
Management believes the options can be closed out.
Price movements in the 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.
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
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
as-
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sets (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 12 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 13 through 19 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.
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.
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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, except that the Alger American Leveraged AllCap
Portfolio may purchase or sell stock index futures contracts and related options
thereon if, thereafter, no more than 5% of its total assets are invested in
margin and premiums.
11. Investing more than 10
percent (15 percent in the case of Alger American Leveraged AllCap Portfolio) 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 limit stated above.
12. Issuing senior securities, except that the Alger American Leveraged AllCap
Portfolio may borrow from banks for investment purposes so long as the Portfolio
maintains the required asset coverage.
13. 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.
14. Writing or selling puts, calls, straddles, spreads or combinations thereof,
except that Alger American Leveraged AllCap Portfolio may buy and sell (write)
options.
15. 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.
16. 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.
17. Making investments for the purpose of exercising control or management.
18. 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.
19. 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 and as may be otherwise stated, the percentage limitations
contained in the foregoing restrictions and in the Fund's other investment
policies 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
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
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<PAGE>
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,
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. During the fiscal year ended December 31, 1996, the Fund paid an
aggregate of approximately $4,066,005 in commissions to broker-dealers in
connection with portfolio transactions, of which $3,802,749 (93.53%) was paid to
Alger Inc. During the fiscal year ended December 31, 1996, 91.52% of the
aggregate dollar amount of the Fund's transactions involving the payment of
brokerage commissions were effected through Alger Inc. During the fiscal year
ended December 31, 1997, the Fund paid an aggregate of approximately $7,837,883
in commissions to broker-dealers in connection with portfolio transactions of
which $7,712,699 (98.40%) was paid to Alger Inc. During the fiscal year ended
December 31, 1997, 97.92% of the aggregate dollar amount of the Fund's
transactions involving the payment of brokerage commissions were effected
through Alger Inc. Alger Inc. does not engage in principal transactions with the
Fund and, accordingly, received no compensation in connection with securities
purchased or sold in that manner, which includes securities traded in the
over-the-counter markets, money market investments and most debt securities.
Portfolio Turnover
The portfolio turnover rates of all of the Portfolios except Alger American
Small Capitalization Portfolio were significantly higher in 1997 than in 1996.
(See "Financial Highlights" in the Prospectus.) This was due primarily to the
fact that the markets for the types of securities in which the Portfolios
typically invest were substantially more volatile, resulting in more frequent
trading by the Portfolios, in 1997 than in 1996; the contrast between the two
years was heightened by the fact that turnover rates for 1996 tended to be lower
on average than in other recent years.
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 (the "NYSE") is currently open on each Monday through Friday,
except (i) January 1st, Dr. Martin Luther King, Jr. Day, Presidents' Day (the
third Monday in February), Good Friday, Memorial Day (the last Monday in May),
July 4th, Labor Day (the first Monday in September), Thanksgiving Day (the
fourth Thursday in November) and 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 fol-
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<PAGE>
lowing is a description of the procedures used by the Fund in valuing the
Portfolios' assets.
The assets of the Portfolios are generally valued on the basis of market
quotations. Securities whose principal market is on an exchange or in the
over-the-counter market are valued at the last reported sales price or, in the
absence of reported sales, at the mean between the bid and asked price or, in
the absence of a recent bid or asked price, the equivalent as obtained from one
or more of the major market makers for the securities to be valued. Bonds and
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 certain life insurance companies ("Participating Insurance
Companies") and 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.
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.
Payment for shares tendered for redemption is ordinarily made in cash. However,
if the Board of Trustees of the Fund determines that it would be detrimental to
the best interest of the remaining shareholders of a Portfolio to make payment
of a redemption order wholly or partly in cash, the Portfolio may pay the
redemption proceeds in whole or in part by a distribution "in kind" of
securities from the Portfolio, in lieu of cash, in conformity with applicable
rules of the Securities and Exchange Commission. The Fund has elected to be
governed by Rule 18f-1 under the Act, pursuant to which a Portfolio is obligated
to redeem shares solely in cash up to the lesser of $250,000 or 1% of the net
assets of the Portfolio, during any 90-day period for any one shareholder. If
shares are redeemed in kind, the redeeming shareholder might incur brokerage or
other costs in selling the securities for cash. The method of valuing securities
used to make redemptions in kind will be the same as the method the Fund uses to
value its portfolio securities and such valuation will be made as of the time
the redemption price is determined.
MANAGEMENT
TRUSTEES AND OFFICERS OF THE FUND
Certain information about the Trustees and officers of the Fund is set forth
below. Each of the officers of the Fund is also an officer, and each of the
Trustees is also a director or trustee, as the case may be, of Castle
Convertible Fund, Inc., a registered closed-end investment company, and The
Alger Fund, The Alger Retirement Fund and Spectra Fund, registered open-end
management investment companies, for all of which Alger Management serves as
investment adviser. Fred M. Alger III and David D. Alger are "interested
persons" of the Fund, as defined in the Act. Fred M. Alger III and David D.
Alger are brothers. Unless otherwise noted, the address of each person named
below is 75 Maiden Lane, New York, New York 10038.
-10-
<PAGE>
<TABLE>
<CAPTION>
NAME, AGE AND POSITION
WITH THE FUND AND ADDRESS PRINCIPAL OCCUPATIONS
<S> <C> <C>
Fred M. Alger III (63) Chairman of the Board of Alger Associates, Inc. ("Associates"), Alger Inc.,
Chairman of the Board Alger Management, Alger Properties, Inc. ("Properties"), Alger Shareholder Services, Inc.
("Services"), Alger Life Insurance Agency, Inc. ("Agency") Fred Alger International Advisory
S.A. ("International"), The Alger American Asset Growth Fund ("Asset Growth") and Analysts
Resources, Inc. ("ARI").
David D. Alger (54) President and Director of Associates, Alger Management, Alger Inc.,
President and Trustee Properties, Services, International and Agency; Executive Vice President and Director of ARI.
Gregory S. Duch (46) Executive Vice President, Treasurer and Director of Alger Management
Treasurer Properties and Associates; Executive Vice President and Treasurer of Alger Inc., ARI, Services
and Agency; Director and Treasurer of International.
Mary E. Marsden-Cochran (45) Vice President, General Counsel and Secretary of Associates, Alger
Secretary Management, Alger Inc., Properties, ARI, Services and Agency (2/96-present); Secretary of
International (7/96-present); Associate General Counsel and Vice President of Smith Barney Inc.
(12/94-2/96); Blue Sky Attorney, AMT Capital (1/94-11/94).
Frederick A. Blum (44) Senior Vice President of Alger Inc.
Assistant Secretary &
Assistant Treasurer
Arthur M. Dubow (64) Trustee of the Arthur Dubow Foundation; private investor since 1985;
Trustee Director of Coolidge Investment Corporation; formerly Chairman of the
P.O. Box 969 Board of Institutional Shareholder Services, Inc. and President of
Wainscott, NY 11975 Fourth Estate, Inc.
Stephen E. O'Neil (65) Of counsel to the law firm of Kohler & Barnes P.C.;
Trustee private investor since 1981; Director of Nova Care, Inc. and
805 Third Avenue Brown-Forman Distillers Corporation; formerly President and
New York, NY 10022 Vice Chairman of City Investing Company and Director of
Centerre Bancorporation and Syntro Corporation.
Nathan E. Saint-Amand, M. D. (60) Medical doctor in private practice.
Trustee
2 East 88th Street
New York, NY 10128
John T. Sargent (73) Private investor since 1987; Director of Atlantic Mutual Insurance Co.;
Trustee formerly Director of River Bank America.
5 Beekman Place
New York, NY 10022
</TABLE>
-11-
<PAGE>
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 "Disinterested Trustee") 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, 1997. The following table provides compensation amounts paid to
Disinterested Trustees of the Fund for the fiscal year ended December 31, 1997.
<TABLE>
<CAPTION>
COMPENSATION TABLE
TOTAL COMPENSATION PAID TO TRUSTEES FROM
THE ALGER RETIREMENT FUND,
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
------------------------ ---------------- ---------------------------------------
<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.
During the fiscal years ended December 31, 1995, 1996 and 1997 Alger Management
earned under the terms of the Management Agreements $235,434, $92,934 and
$217,844 respectively, in respect of Alger American Income and Growth Portfolio;
$5,628,002, $10,617,051 and $12,582,027 respectively, in respect of Alger
American Small Capitalization Portfolio; $1,894,223, $5,604,710 and $8,988,054
respectively, in respect of Alger American Growth Portfolio; $96,391, $55,775
and $103,223 respectively, in respect of Alger American Balanced Portfolio; and
$900,673, $2,330,374 and $3,536,454 respectively, in respect of Alger American
MidCap Growth Portfolio. For the period from January 25, 1995 (commencement of
operations) through December 31, 1995 and for the fiscal years ended December
31, 1996 and 1997 Alger Management earned $9,604 and $177,612 and $399,269
respectively, under the terms of the Management Agreement in respect of the
Alger American Leveraged AllCap Portfolio. Certain of these fees, however, were
offset by various expense reimbursements.
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
-12-
<PAGE>
year from dividends, interest, payments with respect to securities loans and
gains from the sale or other disposition of stock or securities; and (b) 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 realized capital gains that it
distributes to its shareholders, provided that at least 90% of its net
investment income and net realized short-term capital gains for the taxable year
is distributed. All net investment income and net realized 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.
The Fund distributes shares in the Portfolios 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.
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 currently 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.
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. At April 2, 1998, Aetna Life Insurance & Annuity owned beneficially
or of record 28.0% of Alger American Income and Growth Portfolio and 31.9% of
Alger American Balanced Portfolio. On the same date, Ameritas Variable Life
Insurance Co. Separate Account VA-2 Variable Annuity owned beneficially or of
record 54.0% of Alger American Income and Growth Portfolio and 51.7% of Alger
American Balanced Portfolio. On the same date, American Skandia Life Assurance
Company owned beneficially or of record 60.8% of Alger American Small
Capitalization Portfolio, 62.2% of Alger American Growth Portfolio and 78.7% of
Alger American MidCap Growth Portfolio. The shareholders identified above may be
deemed to control the specified Portfolios, which may have the effect of
proportionately diminishing the voting power of other shareholders of these
Portfolios.
The following table contains information regarding persons known by the Fund to
own beneficially or of record 5% or more of the shares of any Portfolio. All
holdings are expressed as a percentage of a Portfolio's outstanding shares as of
April 2, 1998 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>
American Skandia */-- 60.8%/-- 62.2%/-- */-- 78.7%/-- */--
Life Assurance
Corporation
Class 1
Tower One
Corporate Drive
P. O. Box 883
Shelton, CT 06484
Ameritas Variable 9.1%/* */-- */-- 8.3%/-- */-- */--
Life Insurance Co.
Separate Acct V
P.O. Box 82550
Lincoln, NE 68501
Ameritas Variable 54.0%/-- 6.6%/-- 5.4%/-- 51.7%/-- 7.3%/-- 16.3%/--
Life Insurance Co.
Separate Acct. VA-2
Variable Annuity Product
P.O. Box 82550
Lincoln, NE 68501
Aetna Insurance Company 7.2%/-- */-- */-- 7.9%/-- */-- 5.2%/--
of America
151 Farmington Avenue
Hartford, CT 06156
Aetna Life Insurance 28.0%/-- */-- */-- 31.9%/-- */-- 24.0%/--
and Annuity Company
151 Farmington Avenue
Hartford, CT 06156
CG Variable Annuity */-- */-- */-- */-- */-- 15.4%/--
Separate Acct II
900 Cottage Grove Road
Hartford, CT 06152
Great American */-- */-- */-- */-- */-- 6.1%/--
Reserve Insurance
11825 North Pennsylvania St.
Carmel, IN 46032
Life Insurance Company */-- 7.9%/-- 7.1%/-- */-- */-- */--
of Virginia
Separate Acct. III
Variable Products Dept.
6610 W. Broad St.
Richmond, VA 23230
Northwestern National */-- */-- */-- */-- */-- 7.3%/--
Northern Variable Annuity
Separate Account One
Route 3842
20 Washington Avenue South
Minneapolis, MN 55401
Security Life of Denver */-- */-- */-- */-- */-- 6.5%/--
Separate Account A1
8515 East Orchard Rd.
Englewood, CO 80111
Security Life of Denver */-- */-- */-- */-- */-- 5.8%/--
Separate Account L1
8515 East Orchard Rd.
Englewood, CO 80111
Officers and --/** --/** --/** --/** --/** --/**
Trustees as a Group**
- ----------
* Indicates shareholder owns less than 5% of the Portfolio's shares.
** Indicates Group owns less than 1% of the Portfolio's shares.
</TABLE>
-14-
<PAGE>
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"). Alger American Small
Capitalization Portfolio, Alger American Income and Growth Portfolio, Alger
American Growth Portfolio, Alger American Balanced Portfolio (formerly the Alger
American Fixed Income Portfolio), Alger American MidCap Growth Portfolio and
Alger American Leveraged AllCap Portfolio commenced operations on September 21,
1988, November 15, 1988, January 9, 1989, September 5, 1989, May 3, 1993, and
January 25, 1995, respectively. The word "Alger" in the Fund's name has been
adopted pursuant to a provision contained in the Trust Agreement. 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,
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" referred to in the Prospectus as to each of the
Portfolios are computed according to formulas prescribed by the SEC. These
performance figures are calculated in the following manner:
A. Total Return--a Portfolio's average annual total return described in the
Prospectus is computed according to the following formula:
P (1+T)n=ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment made
at the beginning of the 1, 5, or 10 year periods at the end of
the 1, 5 and 10 year periods (or fractional portion thereof);
The average annual total returns for the Portfolios for the periods indicated
below were as follows:
-15-
<PAGE>
PERIOD
FIVE FROM
YEARS INCEPTION*
YEAR ENDED ENDED THROUGH
12/31/97 12/31/97 12/31/97
-------- -------- --------
Alger American Balanced
(formerly the Alger
American Fixed Income) 19.82% 11.87% 9.92%
Alger American Income &
Growth 36.29% 17.40% 13.80%
Alger American Small
Capitalization 11.39% 12.65% 19.23%
Alger American Growth 25.75% 19.28% 19.43%
Alger American MidCap
Growth 15.01% n/a 22.09%
Alger American Leveraged
AllCap 19.68% n/a 33.55%
* 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.
B. Yield--a Portfolio's net annualized yield described in the Prospectus is
computed according to the following formula:
a-b
YIELD = 2[(----- + 1)6 - 1]
cd
Where: a = dividends and interest earned during the period
b = expenses accrued for the period (net of reimbursements)
c = the average daily number of shares outstanding during the period
that were entitled to receive dividends
d = the maximum offering price per share on the last day of the period
IN GENERAL
Current performance information for the Portfolios may be obtained by calling
the Fund at (800) 992-3863. 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 to 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 with that of other mutual funds with a
similar investment objective. The performance of the Portfolios, for example,
might be compared with rankings prepared by Lipper Analytical Services Inc.,
which is a widely recognized, independent service that monitors the performance
of mutual funds, as well as with various unmanaged indexes, such as the S&P 500
Index, the Russell 2000 Growth Index, the S&P SmallCap 600 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 AMERICAN FUND
ALGER AMERICAN GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1997
================================================================================
SHARES COMMON STOCKS--90.1% VALUE
------ -----
APPLIANCES & TOOLS--3.4%
853,500 Sunbeam Corp. .................... $ 35,953,687
-----------
BROADCASTING--2.6%
942,500 CBS Corp. ........................ 27,745,315
-----------
BUILDING & CONSTRUCTION--.5%
101,000 Masco Corp. ...................... 5,138,375
-----------
BUSINESS SERVICES--1.0%
240,500 Cognizant Corp. .................. 10,717,402
-----------
COMMUNICATIONS--5.1%
308,900 America Online Inc.* ............. 27,550,172
178,300 AT&T Corp. ....................... 10,920,875
541,600 WorldCom lnc.* ................... 16,383,400
-----------
54,854,447
-----------
COMMUNICATION EQUIPMENT--5.8%
591,200 Bay Networks Inc.* ............... 15,112,846
246,800 CIENA Corporation* ............... 15,085,650
363,300 Cisco Systems, Inc.* ............. 20,253,975
230,400 Tellabs, Inc.* ................... 12,182,400
-----------
62,634,871
-----------
COMPUTER SOFTWARE--4.3%
406,000 HBO & Company .................... 19,488,000
207,500 Microsoft Corporation* ........... 26,819,375
-----------
46,307,375
-----------
CONGLOMERATE--3.4%
814,780 Tyco International Ltd. .......... 36,716,431
-----------
CONSUMER PRODUCTS--2.9%
902,200 Cendant Corp.* ................... 31,013,125
-----------
DRUG DISTRIBUTION--2.9%
242,700 Cardinal Health, Inc. ............ 18,232,838
114,400 McKesson Corp. ................... 12,376,707
-----------
30,609,545
-----------
ENERGY & ENERGY SERVICES--1.2%
168,700 Diamond Offshore Drilling Inc.+ .. 8,118,688
80,800 Halliburton Co. .................. 4,196,590
-----------
12,315,278
-----------
FINANCIAL SERVICES--13.6%
128,249 Banc One Corp. ................... 6,965,588
108,700 BankAmerica Corp. ................ 7,935,100
572,500 Bank of New York Inc. ............ 33,097,943
399,800 Federal Home Loan Mortgage
Corporation .................... 16,766,812
202,400 First Union Corp. ................ 10,373,000
48,500 Household International Inc. ..... 6,186,806
340,300 Money Store Inc. (The)+ .......... 7,146,300
569,905 Morgan Stanley, Dean Witter,
Discover & Co. .................. 33,695,633
381,850 Paine Webber Group Inc. .......... 13,197,882
263,200 Schwab (Charles) Corporation
(The) ........................... 11,038,082
-----------
146,403,146
-----------
FOOD CHAINS--1.2%
210,000 Safeway Inc.* .................... 13,282,500
-----------
FOODS & BEVERAGES--.6%
192,800 PepsiCo, Inc. .................... 7,025,246
-----------
INSURANCE--5.0%
199,850 American International Group, Inc.. 21,733,688
148,400 MGIC Investment Corp. ............. 9,868,600
413,900 Travelers Group Inc. .............. 22,298,862
-----------
53,901,150
-----------
LEISURE & ENTERTAINMENT--4.1%
443,300 Carnival Corporation Cl. A ........ 24,547,738
657,700 International Game Technology ..... 16,606,925
119,300 Mirage Resorts, Incorporated* ..... 2,714,075
-----------
43,868,738
-----------
MEDICAL DEVICES--2.4%
413,500 Guidant Corp. ..................... 25,740,375
-----------
PHARMACEUTICALS--11.0%
355,000 Bristol Myers Squibb Co. .......... 33,591,875
159,500 Eli Lilly & Company ............... 11,105,188
149,800 Pfizer Inc. ....................... 11,169,537
579,100 Schering-Plough Corporation ....... 35,976,588
206,600 Warner-Lambert Co. ................ 25,618,400
-----------
117,461,588
-----------
POLLUTION CONTROL--1.5%
400,100 USA Waste Services, Inc.* ......... 15,703,925
-----------
REAL ESTATE INVESTMENT TRUST--.9%
225,429 Equity Office Properties Trust .... 7,115,215
39,200 Starwood Lodging Trust ............ 2,268,700
-----------
9,383,915
-----------
RETAILING--8.3%
80,300 CVS Corp. ......................... 5,144,259
684,150 Home Depot, Inc. .................. 40,279,331
40,000 Nordstrom, Inc. ................... 2,415,000
100,000 Rite Aid Corp. .................... 5,868,800
1,900 Staples Inc.* ..................... 52,725
889,600 Wal-Mart Stores Inc. .............. 35,084,045
-----------
88,844,160
-----------
SEMICONDUCTORS--2.1%
358,900 Altera Corporation* ............... 11,888,562
193,000 Linear Technology Corporation ..... 11,121,625
-----------
23,010,187
-----------
TOYS--1.0%
293,900 Mattel Inc. ....................... 10,947,775
-----------
F-1
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1997 (CONT'D)
================================================================================
SHARES VALUE
------ -----
TRANSPORTATION--5.3%
325,200 AMR Corp.* ...................... $ 41,788,200
158,400 Burlington Northern Santa Fe Co.. 14,721,379
-----------
56,509,579
-----------
TOTAL COMMON STOCKS
(COST $787,788,280) ........... 966,088,135
-----------
PRINCIPAL
AMOUNT
--------
SHORT-TERM INVESTMENTS--7.0%
SHORT-TERM
CORPORATE NOTES--6.2%
$ 1,000,000 Elf Aquitaine Finance (S.A.),
6.15%, 1/7/98 ................. 998,975
15,000,000 Four Winds Funding Co.,
6.06%, 1/5/98 (a) ............. 14,989,900
26,000,000 Merrill Lynch & Co. Inc.,
6.05%, 1/9/98 ................. 25,965,044
25,000,000 Southland Corporation,
6.05%, 1/7/98 ................. 24,974,792
-----------
TOTAL SHORT-TERM CORPORATE NOTES
(COST $66,928,711) ............ 66,928,711
------------
SECURITIES HELD UNDER
REPURCHASE
AGREEMENTS--.8%
Securities Held Under Repurchase
Agreements, 6.25%, 1/2/98, with
Bear, Stearns & Co. Inc., dtd
12/31/97, repurchase price
$8,861,248; collateralized by
U.S. Treasury Strips (par value
$38,095,000 due 11/15/21) ..... 8,858,172
--------------
TOTAL SHORT-TERM INVESTMENTS
(COST $75,786,883) ............. 75,786,883
--------------
TOTAL INVESTMENTS
(COST $863,575,163) (B) ................ 97.1% 1,041,875,018
Other Assets in Excess of Liabilities .... 2.9 30,653,874
----- --------------
NET ASSETS 100.0% $1,072,528,892
===== ==============
- ----------
* 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, 1997, the net unrealized appreciation on investments, based
on cost for federal income tax purposes of $863,575,163 amounted to
$178,299,855 which consisted of aggregate gross unrealized appreciation of
$188,915,114 and gross unrealized depreciation of $10,615,259.
See Notes to Financial Statements.
F-2
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1997 1996 1995 1994 1993
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 34.33 $ 31.16 $ 23.13 $ 24.67 $ 20.17
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income 0.13 0.12 0.02 0.07 0.03
Net realized and unrealized gain on investments 8.66 4.00 8.33 0.15 4.50
- --------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 8.79 4.12 8.35 0.22 4.53
- --------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (0.13) (0.02) (0.07) (0.03) (0.03)
Distributions from net realized gains (0.23) (0.93) (0.25) (1.73) --
- --------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.36) (0.95) (0.32) (1.76) (0.03)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $ 42.76 $ 34.33 $ 31.16 $ 23.13 $ 24.67
================================================================================================================================
Total Return 25.75% 13.35% 36.37% 1.45% 22.47%
================================================================================================================================
Ratios and Supplemental Data:
Net assets, end of year (000's omitted) $1,072,529 $991,028 $502,974 $150,390 $74,878
================================================================================================================================
Ratio of expenses to average net assets 0.79% 0.79% 0.85% 0.86% 0.97%
================================================================================================================================
Ratio of net investment income to average
net assets 0.27% 0.50% 0.18% 0.48% 0.25%
================================================================================================================================
Portfolio Turnover Rate 129.50% 82.86% 118.33% 111.76% 112.64%
================================================================================================================================
Average Commission Rate Paid $ .0697 $ .0683
============================================================================================
</TABLE>
See Notes to Financial Statements.
F-3
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1997
================================================================================
SHARES COMMON STOCKS--92.5% VALUE
- ------ -----
AEROSPACE--.7%
289,600 Aviall Inc.* .......................... $ 4,326,045
30,000 Thiokol Corporation ................... 2,437,500
------------
6,763,545
------------
APPAREL--3.4%
186,100 Brylane Inc.* ......................... 9,165,425
217,200 Mens Wearhouse Inc.*+ ................. 7,547,700
234,100 Nautica Enterprises Inc.* ............. 5,442,825
299,700 St. John Knits Inc. ................... 11,988,000
------------
34,143,950
------------
APPLIANCES & TOOLS--2.3%
546,400 Sunbeam Corp. ......................... 23,017,100
------------
AUTOMOTIVE EQUIPMENT &
SERVICES--1.8%
350,600 Avis Rent A Car Inc.* ................. 11,197,463
200,000 Dollar Thrifty Automotive Group Inc.* . 4,100,000
110,000 Keystone Automotive Industries Inc.* .. 2,612,500
------------
17,909,963
------------
BIO-TECHNOLOGY--5.2%
96,700 BioChem Pharma Inc.*+ ................. 2,018,612
339,600 DEKALB Genetics Corp. Cl. B ........... 13,329,300
205,000 Genset ADR*+ .......................... 4,048,750
142,700 IDEC Pharmaceuticals Corporation* ..... 4,905,313
392,200 INCYTE Pharmaceuticals,Inc.* .......... 17,649,000
50,000 Interpore International Inc.* ......... 300,000
230,000 MedImmune Inc.*+ ...................... 9,861,250
------------
52,112,225
------------
BUILDING & CONSTRUCTION--.4%
120,000 Hirsh International Corp. Cl. A* ...... 2,640,000
159,000 Morrison Knudsen Corp.* ............... 1,550,250
------------
4,190,250
------------
BUSINESS SERVICES--1.9%
226,000 Cognizant Corp. ....................... 10,071,238
188,900 Rent-Way Inc.+ ........................ 3,494,650
130,000 WPP Group ADR ......................... 5,866,250
------------
19,432,138
------------
COMMUNICATIONS--4.5%
116,000 America Online Inc.* .................. 10,345,808
41,200 Cox Radio,Inc. Cl. A* ................. 1,658,300
347,300 Jacor Communications Inc.*+ ........... 18,450,312
274,600 Outdoor Systems, Inc.* ................ 10,537,775
67,200 Universal Outdoor Holdings Inc.* ...... 3,494,400
------------
44,486,595
------------
COMMUNICATION EQUIPMENT--3.9%
271,200 Advanced Fibre Communications Inc.* ... 7,898,700
402,200 Bay Networks Inc.* .................... 10,281,439
204,600 CIENA Corporation.* ................... 12,506,175
135,000 Gemstar International Group Ltd.* ..... 3,290,625
92,700 Tellabs, Inc.* ........................ 4,901,513
------------
38,878,452
------------
COMPUTER RELATED &
BUSINESS EQUIPMENT--.7%
217,200 Essex International Inc.* ............. 6,461,700
------------
COMPUTER SERVICES--3.1%
166,100 Keane Inc.* ........................... 6,747,813
379,200 QuickResponse Service Inc.* ........... 14,030,400
366,900 Technology Solutions Co.* ............. 9,676,988
21,900 Transaction Network Services Inc.*+ ... 377,775
------------
30,832,976
------------
COMPUTER SOFTWARE--6.0%
287,500 CBT Group PLC ADS* .................... 23,610,938
99,300 Citrix Systems, Inc.* ................. 7,546,800
160,000 HBO & Company ......................... 7,680,000
504,600 Saville Systems PLC ADR* .............. 20,940,900
------------
59,778,638
------------
COMPUTER TECHNOLOGY
4,283 Dataware Technologies Inc.* ........... 11,243
------------
CONSUMER PRODUCTS--1.4%
200,000 Central Garden & Pet Co.* ............. 5,250,000
114,650 Pittway Corp. Cl. A ................... 7,982,506
------------
13,232,506
------------
DRUG DISTRIBUTION--4.6%
123,800 AmeriSource Health Corp. Cl. A ........ 7,211,350
101,000 Bergen Brunswig Corp. Cl. A ........... 4,254,625
199,900 McKesson Corp. ........................ 21,626,781
402,500 Omnicare, Inc. ........................ 13,035,500
------------
46,128,256
------------
ENERGY & ENERGY SERVICES--2.3%
148,500 Camco International Inc. .............. 9,457,668
149,400 Diamond Offshore Drilling Inc.+ ....... 7,189,875
229,100 Hvide Marine Inc. Cl. A*+ ............. 5,899,325
------------
22,546,868
------------
FINANCIAL SERVICES--8.0%
32,700 CCB Financial Corp. ................... 3,515,250
69,800 CMAC Investment Corp. ................. 4,214,175
84,200 Colonial BancGroup Inc.+ .............. 2,899,680
89,145 Commerce Bancshares Inc. .............. 6,039,574
157,500 Compass Bancshares Inc. ............... 6,890,625
218,300 Dime Community Bancorp, Inc. .......... 6,603,575
384,900 INMC Mortgage Holdings Inc. ........... 9,021,286
57,150 Mercantile Bankshares Corp. ........... 2,235,994
410,700 Money Store Inc. (The)+ ............... 8,624,700
220,000 National Commerce Bancorp+ ............ 7,755,000
100,485 Provident Bankshares Corp. ............ 6,418,478
478,000 Sovereign Bancorp Inc. ................ 9,918,500
90,000 Wilmington Trust Corp. ................ 5,613,750
------------
79,750,587
------------
F-4
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1997 (Cont'd)
================================================================================
SHARES COMMON STOCKS--(CONTINUED) VALUE
------ -----
FOODS & BEVERAGES--5.6%
158,900 CKE Restaurants Inc.+ ................. $ 6,693,663
409,700 Earthgrains Company ................... 19,255,900
585,700 Flowers Industries Inc. ............... 12,043,749
65,500 International Home Foods Inc.* ........ 1,834,000
60,300 Interstate Bakeries Corp. ............. 2,253,713
309,500 JP Foodservice Inc.*+ ................. 11,432,311
45,900 Suiza Foods Corp.* .................... 2,733,942
------------
56,247,278
------------
FREIGHT--.2%
47,500 Expeditors International of Washington
Inc. ............................... 1,828,750
------------
HEALTH CARE--.4%
81,500 Universal Health Services Inc. Cl. B* . 4,105,563
------------
INSURANCE--3.1%
100,300 Enhance Financial Services Group
Inc.+ .............................. 5,967,850
133,500 Executive Risk Inc. ................... 9,320,036
255,500 Vesta Insurance Group Inc. ............ 15,170,312
------------
30,458,198
------------
LEISURE & ENTERTAINMENT--2.6%
40,000 Cinar Films,Inc. Cl. B* ............... 1,555,000
485,100 Family Golf Centers Inc.*+ ............ 15,220,012
347,900 International Game Technology ......... 8,784,475
------------
25,559,487
------------
MANUFACTURING--.8%
114,600 Leggett & Platt Inc. .................. 4,798,875
130,150 Palm Harbor Homes Inc.* ............... 3,676,737
------------
8,475,612
------------
MEDICAL DEVICES--5.5%
616,500 Biomet Inc. ........................... 15,797,813
371,600 ESC Medical Systems Ltd.* ............. 14,399,500
130,000 Guidant Corp. ......................... 8,092,500
278,000 Mentor Corp. .......................... 10,147,000
113,000 Safeskin Corp.*+ ...................... 6,412,750
------------
54,849,563
------------
MEDICAL SERVICES--1.9%
136,600 Express Scripts Inc. Cl. A* ........... 8,196,000
6,100 Hooper Holmes Inc. .................... 88,834
100,800 Lincare Holdings Inc.* ................ 5,745,600
91,500 Pediatrix Medical Group Inc.*+ ........ 3,911,625
117,500 Protocol Systems Inc.* ................ 1,182,402
------------
19,124,461
------------
OIL & GAS--2.3%
160,200 EVI Inc.* ............................. 8,290,350
200,000 Global Industries Ltd.* ............... 3,400,000
531,200 Varco International Inc.* ............. 11,387,865
------------
23,078,215
------------
PHARMACEUTICALS--3.1%
242,000 Dura Pharmaceuticals, Inc.* ........... 11,101,750
387,300 Elan Corp PLC-ADR*+ ................... 19,825,112
------------
30,926,862
------------
POLLUTION CONTROL--2.6%
100,000 Allied Waste Industries Inc.* ......... 2,331,300
67,500 Superior Services Inc.* ............... 1,949,062
554,572 USA Waste Services, Inc.* ............. 21,766,951
------------
26,047,313
------------
RESTAURANTS & LODGING--1.0%
300,000 Foodmaker Inc.* ....................... 4,518,900
188,703 Patriot American Hospitality Co.+ ..... 5,437,100
------------
9,956,000
------------
RETAILING--5.6%
110,200 BJ's Wholesale Club Inc.* ............. 3,457,525
387,800 Borders Group Inc.* ................... 12,143,181
115,000 Dress Barn Inc.* ...................... 3,263,125
227,100 Family Dollar Stores Inc. ............. 6,656,982
67,400 Linens'n Things Inc.* ................. 2,940,325
328,200 Michaels Stores Inc.*+ ................ 9,599,850
100,000 Office Depot Inc.* .................... 2,393,800
233,300 Proffitt's Inc.* ...................... 6,634,585
191,500 WestPoint Stevens Inc.*+ .............. 9,048,375
------------
56,137,748
------------
SEMICONDUCTORS--2.4%
304,000 Altera Corporation* ................... 10,070,000
21,810 California Micro Devices Corporation* . 117,228
239,600 Linear Technology Corporation ......... 13,806,950
------------
23,994,178
------------
SUPERMARKETS--2.1%
366,000 Fred Meyer, Inc.* ..................... 13,313,250
144,900 Whole Foods Market Inc.* .............. 7,408,013
------------
20,721,263
------------
TRANSPORTATION--3.1%
382,000 Coach USA Inc.*+ ...................... 12,797,000
229,300 Continental Airlines Inc. Cl. B*+ ..... 11,035,063
264,000 Knightsbridge Tankers Ltd. ............ 7,474,632
------------
31,306,695
------------
TOTAL COMMON STOCKS
(COST $698,953,184) ................ 922,494,178
------------
F-5
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1997 (Cont'd)
================================================================================
PRINCIPAL
AMOUNT SHORT-TERM INVESTMENTS--8.3% VALUE
------ -----
SHORT-TERM CORPORATE NOTES--7.5%
$20,000,000 Four Winds Funding Co.,
6.06%, 1/5/98 (a) ................... $ 19,986,535
35,000,000 Merrill Lynch & Co. Inc.,
6.05%, 1/9/98 ....................... 34,952,944
20,000,000 PHH Corp.,
5.85%, 1/6/98 ....................... 19,983,750
-------------
TOTAL SHORT-TERM CORPORATE NOTES
(COST $74,923,229) .................. 74,923,229
-------------
SECURITIES HELD UNDER
REPURCHASE AGREEMENTS--.8%
Securities Held Under Repurchase
Agreements, 6.25%, 1/2/98 with
Bear, Stearns & Co. Inc., dtd
12/31/97, repurchase price
$8,243,327; collateralized by U.S.
Treasury Strips (par value
$35,440,000 due 5/15/01-11/15/21) ... 8,240,465
-------------
TOTAL SHORT-TERM INVESTMENTS
(COST $83,163,694) .................. 83,163,694
-------------
TOTAL INVESTMENTS
(COST $782,116,878)(B) ................... 100.8% 1,005,657,872
Liabilities in Excess Of Other Assets ...... (.8) (8,071,964)
----- -------------
NET ASSETS ................................. 100.0% $ 997,585,908
===== =============
- --------------------------------------------------------------------------------
* Non-income producing security.
+ Security 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, 1997, the net unrealized appreciation on investments, based
on cost for federal income tax purposes of $782,116,878 amounted to
$223,540,994 which consisted of aggregate gross unrealized appreciation of
$234,546,416 and aggregate gross unrealized depreciation of $11,005,422.
See Notes to Financial Statements.
F-6
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR
================================================================================
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------
1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 40.91 $ 39.41 $ 27.31 $ 30.88 $ 27.26
- ------------------------------------------------------------------------------------------------------------------------------
Net investment loss (0.05)(i) (0.04)(i) (0.09) (0.03)(i) (0.05)
Net realized and unrealized gain
(loss) on investments 4.45 1.70 12.19 (1.45) 3.67
- ------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 4.40 1.66 12.10 (1.48) 3.62
Distributions from net realized gains (1.56) (0.16) -- (2.09) --
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $ 43.75 $ 40.91 $ 39.41 $ 27.31 $ 30.88
==============================================================================================================================
Total Return 11.39% 4.18% 44.31% (4.38%) 13.28%
==============================================================================================================================
Ratios and Supplemental Data:
Net assets, end of year (000's omitted) $997,586 $1,469,518 $984,212 $397,037 $238,850
==============================================================================================================================
Ratio of expenses to average net assets 0.89% 0.88% 0.92% 0.96% 1.03%
==============================================================================================================================
Ratio of net investment loss to
average net assets (0.12%) (0.09%) (0.48%) (0.10%) (0.35%)
===============================================================================================================================
Portfolio Turnover Rate 104.43% 110.04% 80.66% 117.61% 148.07%
===============================================================================================================================
Average Commission Rate Paid $ .0640 $ .0591
============================================================================================
</TABLE>
(i) Amount was computed based on average shares outstanding during the year.
See Notes to Financial Statements
F-7
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN INCOME AND GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1997
================================================================================
SHARES COMMON STOCKS--93.3% VALUE
------ -----
APPLIANCES & TOOLS--3.0%
10,000 Black & Decker Corp. ................... $ 390,630
24,500 Sunbeam Corp. .......................... 1,032,063
-----------
1,422,693
-----------
AUTOMOTIVE EQUIPMENT
& SERVICES--.5%
8,000 Avis Rent A Car Inc.* .................. 255,504
-----------
BIO-TECHNOLOGY--1.5%
18,000 DEKALB Genetics Corp. Cl. B ............ 706,500
-----------
BROADCASTING--1.0%
15,300 CBS Corp. .............................. 450,400
-----------
BUSINESS SERVICES--1.0%
10,400 Cognizant Corp. ........................ 463,455
-----------
COMMUNICATIONS--3.5%
10,000 America Online Inc.* ................... 891,880
3,900 AT&T Corp. ............................. 238,875
10,000 Jacor Communications Inc.* ............. 531,250
-----------
1,662,005
-----------
COMMUNICATION EQUIPMENT--1.1%
8,300 CIENA Corporation* ..................... 507,338
-----------
CONGLOMERATE--3.1%
33,004 Tyco International Ltd. ................ 1,487,259
-----------
CONSUMER PRODUCTS--.7%
10,000 Cendant Corp.* ......................... 343,750
-----------
DRUG DISTRIBUTION--2.7%
12,000 McKesson Corp. ......................... 1,298,256
-----------
ENERGY & ENERGY SERVICES--2.8%
7,300 Diamond Offshore Drilling Inc. ......... 351,313
9,500 Halliburton Co. ........................ 493,411
6,100 Schlumberger Ltd. ...................... 491,050
-----------
1,335,774
-----------
FINANCIAL SERVICES--21.7%
12,000 American Express Co. ................... 1,071,000
15,500 BankAmerica Corp. ...................... 1,131,500
21,000 Bank of New York Inc. .................. 1,214,073
5,500 Comerica Inc. .......................... 496,375
11,400 Federal Home Loan Mortgage Corporation.. 478,093
7,000 Fifth Third Bancorp 572,250
6,500 First Union Corp. ...................... 333,125
9,000 Household International Inc. ........... 1,148,067
10,000 INMC Mortgage Holdings Inc. ............ 234,380
12,000 Mellon Bank Corp. ...................... 727,500
10,015 Morgan Stanley, Dean Witter,
Discover & Co. ....................... 592,137
13,000 Norwest Corp. .......................... 502,125
16,500 Schwab (Charles) Corporation (The) ..... 691,977
15,000 SunAmerica Inc. ........................ 641,250
4,000 U.S. Bancorp Inc. ...................... 447,752
-----------
10,281,604
-----------
FOODS & BEVERAGES--3.6%
10,000 Earthgrains Company .................... 470,000
17,000 Kellogg Co. ............................ 843,625
11,200 PepsiCo, Inc. .......................... 408,106
-----------
1,721,731
-----------
INSURANCE--10.7%
5,000 Allstate Corp. ......................... 454,375
7,850 American International Group, Inc. ..... 853,688
12,000 Executive Risk Inc. .................... 837,756
15,300 MGIC Investment Corp ................... 1,017,450
17,400 Travelers Group Inc. ................... 937,425
16,000 Vesta Insurance Group Inc. ............. 950,000
-----------
5,050,694
-----------
LEISURE & ENTERTAINMENT--2.5%
15,000 Carnival Corporation Cl. A ............. 830,625
14,500 International Game Technology .......... 366,125
-----------
1,196,750
-----------
MEDICAL DEVICES--3.7%
27,800 Guidant Corp. .......................... 1,730,550
-----------
MEDICAL SERVICES--1.1%
8,500 AmeriSource Health Corp Cl. A* ......... 495,125
-----------
OIL & GAS--1.1%
2,000 Chevron Corp. .......................... 154,000
6,000 Exxon Corp. ............................ 367,128
-----------
521,128
-----------
PHARMACEUTICALS--14.0%
12,000 Bristol Myers Squibb Co. ............... 1,135,500
18,800 Eli Lilly & Company .................... 1,308,950
17,400 Pfizer Inc. ............................ 1,297,396
22,500 Schering-Plough Corporation ............ 1,397,813
12,100 Warner-Lambert Co. ..................... 1,500,400
-----------
6,640,059
-----------
F-8
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN INCOME AND GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1997 (Cont'd)
================================================================================
SHARES COMMON STOCKS--(CONTINUED) VALUE
------ -----
POLLUTION CONTROL--2.2%
27,100 USA Waste Services, Inc.* .............. $ 1,063,675
-----------
RETAILING--10.4%
16,400 CVS Corp. .............................. 1,050,633
29,350 Home Depot,Inc. ........................ 1,727,981
21,000 Rite Aid Corp. ......................... 1,232,448
23,000 Wal-Mart Stores Inc. ................... 907,074
-----------
4,918,136
-----------
SEMICONDUCTORS--1.4%
11,600 Linear Technology Corporation .......... 668,450
-----------
TOTAL COMMON STOCKS
(COST $36,963,512) ................... 44,220,836
-----------
PRINCIPAL
AMOUNT SHORT-TERM INVESTMENTS--6.9%
------
SHORT-TERM CORPORATE NOTES --5.1%
$1,100,000 Four Winds Funding Co.,
6.06%,1/5/98 (a) ..................... 1,099,259
1,300,000 Merrill Lynch & Co. Inc.,
6.05%,1/9/98 ......................... 1,298,253
-----------
TOTAL SHORT-TERM CORPORATE NOTES
(COST $2,397,512) ..................... 2,397,512
-----------
SECURITIES HELD UNDER
REPURCHASE AGREEMENTS--1.8%
Securities Held Under Repurchase
Agreements, 6.25%, 1/2/98, with
Bear, Stearns & Co. Inc., dtd
12/31/97, repurchase price
$867,452; collateralized by U.S.
Treasury Strips (par value
$3,730,000 due 11/15/21) ............. 867,151
-------------
TOTAL SHORT-TERM INVESTMENTS
(COST $3,264,663) ................... 3,264,663
-------------
TOTAL INVESTMENTS
(COST $40,228,175)(B) ............. 100.2% 47,485,499
Liabilities In Excess Of Other Assets (.2) (86,607)
----- -----------
NET ASSETS 100.0% $47,398,892
===== ===========
- --------------------------------------------------------------------------------
* Non-income producing security.
(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, 1997, the net unrealized appreciation on investments, based
on cost for federal income tax purposes of $40,228,175 amounted to
$7,257,324 which consisted of aggregate gross unrealized appreciation of
$7,321,827 and aggregate gross unrealized depreciation of $64,503.
See Notes to Financial Statements.
F-9
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN INCOME AND GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR
================================================================================
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
1997 1996 1995 1994 1993
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 8.42 $ 17.79 $ 13.30 $ 15.31 $ 13.93
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income 0.03 0.09(i) 0.11(i) 0.17 0.07
Net realized and unrealized gain
(loss) on investments 2.94 1.87 4.54 (1.47) 1.37
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.97 1.96 4.65 (1.30) 1.44
- ---------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (0.04) (0.33) (0.16) (0.15) (0.06)
Distributions from net realized gains (0.36) (11.00) -- (0.56) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.40) (11.33) (0.16) (0.71) (0.06)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $ 10.99 $ 8.42 $ 17.79 $ 13.30 $ 15.31
=================================================================================================================================
Total Return 36.29% 19.68% 35.13% (8.28%) 10.34%
=================================================================================================================================
Ratios and Supplemental Data:
Net assets, end of year (000's omitted) $ 47,399 $20,910 $ 8,639 $29,135 $31,895
=================================================================================================================================
Ratio of expenses to average net assets 0.74% 0.81% 0.75% 0.75% 0.97%
=================================================================================================================================
Ratio of net investment income to average
net assets 0.56% 0.94% 0.61% 1.22% 1.51%
=================================================================================================================================
Portfolio Turnover Rate 150.09% 121.60% 164.05% 177.97% 105.80%
=================================================================================================================================
Average Commission Rate Paid $ .0724 $ .0728
============================================================================================
(i) Amount was computed based on average shares outstanding during the year.
</TABLE>
See Notes to Financial Statements.
F-10
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1997
================================================================================
SHARES COMMON STOCKS--56.4% VALUE
------ -----
AEROSPACE--.6%
3,200 Gulfstream Aerospace Corp.* ........ $ 93,600
------------
APPLIANCES & TOOLS--1.5%
6,100 Sunbeam Corp. ...................... 256,962
------------
BROADCASTING--1.8%
10,000 CBS Corp. .......................... 294,380
------------
BUILDING & CONSTRUCTION--.6%
2,100 Masco Corp. ........................ 106,837
------------
BUSINESS SERVICES--.9%
3,500 Cognizant Corp. .................... 155,970
------------
COMMUNICATIONS--2.8%
2,200 America Online Inc.* ............... 196,214
2,000 AT&T Corp. ......................... 122,500
4,600 WorldCom Inc.* ..................... 139,150
------------
457,864
------------
COMMUNICATION EQUIPMENT--3.0%
4,400 Bay Networks Inc.* ................. 112,477
2,000 CIENA Corporation* ................. 122,250
3,300 Cisco Systems, Inc.* ............... 183,975
1,500 Tellabs, Inc.* ..................... 79,313
------------
498,015
------------
COMPUTER SOFTWARE--1.9%
2,600 HBO & Company ...................... 124,800
1,500 Microsoft Corporation* ............. 193,875
------------
318,675
------------
CONGLOMERATE--2.0%
7,250 Tyco International Ltd. ............ 326,707
------------
CONSUMER PRODUCTS--2.1%
8,550 Cendant Corp.* ..................... 293,905
1,500 Fortune Brands Inc. ................ 55,595
------------
349,500
------------
DRUG DISTRIBUTION--1.7%
2,000 AmeriSource Health Corp Cl. A* ..... 116,500
1,600 Cardinal Health, lnc. .............. 120,200
500 McKesson Corp. ..................... 54,094
------------
290,794
------------
ENERGY & ENERGY SERVICES--1.2%
1,600 Diamond Offshore Drilling Inc. ..... 77,000
2,100 Halliburton Co. .................... 109,070
------------
186,070
------------
FINANCIAL SERVICES--8.7%
2,000 Banc One Corp. ..................... 108,626
2,700 BankAmerica Corp. .................. 197,100
4,100 Bank of New York Inc. .............. 237,033
600 CoreStates Financial Corp. ......... 48,038
4,000 Federal Home Loan Mortgage
Corporation ...................... 167,752
2,000 First Union Corp. .................. 102,500
400 Household International Inc. ....... 51,025
3,000 Money Store Inc. (The) ............. 63,000
3,905 Morgan Stanley, Dean Witter,
Discover & Co. ................... 230,883
3,300 Paine Webber Group Inc. ............ 114,058
3,000 Schwab (Charles) Corporation (The) . 125,813
------------
1,445,828
------------
FOODS BEVERAGES--.5%
2,300 PepsiCo, Inc. ...................... 83,807
------------
FOOD CHAINS--1.0%
2,500 Safeway Inc.* ...................... 158,125
------------
INSURANCE--3.8%
2,400 American International Group, Inc. . 261,000
1,600 MGIC Investment Corp. .............. 106,400
4,800 Travelers Group Inc. ............... 258,600
------------
626,000
------------
LEISURE & ENTERTAINMENT--2.6%
3,200 Carnival Corporation Cl. A ......... 177,200
10,000 International Game Technology ...... 252,500
------------
429,700
------------
MEDICAL DEVICES--1.5%
4,000 Guidant Corp. ...................... 249,000
------------
PHARMACEUTICALS--6.9%
3,400 Bristol Myers Squibb Co. ........... 321,725
2,600 Eli Lilly & Company ................ 181,025
1,000 Pfizer Inc. ........................ 74,563
4,700 Schering-Plough Corporation ........ 291,988
2,200 Warner-Lambert Co. ................. 272,800
------------
1,142,101
------------
POLLUTION CONTROL--.8%
3,300 USA Waste Services, Inc.* .......... 129,525
------------
RETAILING--4.6%
1,400 CVS Corp. .......................... 89,688
5,400 Home Depot, lnc. ................... 317,925
3,600 Staples Inc.* ...................... 99,900
6,700 Wal-Mart Stores Inc. ............... 264,235
------------
771,748
------------
REAL ESTATE INVESTMENT TRUST--.3%
1,687 Equity Office Properties Trust ..... 53,247
------------
SEMICONDUCTORS--1.3%
3,100 Altera Corporation* ................ 102,688
2,100 Linear Technology Corporation ...... 121 ,013
------------
223,701
------------
TOYS--1.1%
5,000 Mattel Inc. ........................ 186,250
------------
F-11
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1997 (CONT'D)
================================================================================
SHARES COMMON STOCKS (CONTINUED) VALUE
------ -----
TRANSPORTATION--3.2%
2,300 AMR Corp.* ......................... $ 295,550
2,600 Burlington Northern Santa Fe Co. ... 241,639
------------
537,189
------------
TOTAL COMMON STOCKS
(COST $7,760,050) ................ 9,371,595
------------
PRINCIPAL
AMOUNT CORPORATE BONDS--15.2%
--------
AUTOMOTIVE--2.7%
$200,000 Ford Motor B.V.,
9.50%, 6/1/10 .................... 247,696
200,000 General Motors Acceptance Corp.,
7.125%, 6/1/99 ................... 202,568
------------
450,264
------------
COMPUTER RELATED--2.7%
440,000 International Business Machines Corp.,
6.45%, 8/1/07 .................... 439,912
------------
CONGLOMERATE--1.2%
200,000 GE Capital Corp.,
7.25%, 6/5/12 .................... 201,040
------------
ELECTRIC & GAS COMPANIES--.6%
100,000 Cincinnati Gas & Electric Co.,
7.20%, 10/1/23 ................... 102,875
------------
FINANCIAL SERVICES--4.3%
Bank America Corp.,
200,000 6.625%, 10/15/07 ................. 199,960
100,000 7.125%, 5/12/05+ 103,738
200,000 Citicorp.,
7.125%, 6/1/03 ................... 207,674
200,000 Transamerica Financial Corp.,
7.85%, 10/21/99 .................. 204,500
------------
715,872
------------
INSURANCE--.6%
100,000 Travelers Group Inc.,
7.75%, 6/15/99 ................... 102,166
------------
LEISURE & ENTERTAINMENT--1.8%
300,000 Walt Disney Corp.,
6.375%, 3/30/01+ ................. 301,947
------------
POLLUTION CONTROL--1.3%
200,000 Waste Management Inc.,
8.25%, 11/15/99 .................. 206,078
------------
TOTAL CORPORATE BONDS
(COST $2,550,180) ................ 2,520,154
------------
200,000 U.S. Treasury Notes,
7.50%, 10/31/99 .................. 206,188
400,000 Federal Home Loan Bank Corporation,
8.02%, 1/30/12 ................... 400,688
300,000 Federal Home Loan Bank Corporation,
7.58%, 7/9/12 .................... 299,940
400,000 Federal Home Loan Bank Corporation,
7.30%, 12/24/12 .................. 399,564
500,000 Federal Home Loan Mortgage Corporation,
7.00%, 3/6/07 .................... 497,265
200,000 Federal National Mortgage Association,
8.50%, 2/1/05 .................... 209,562
------------
TOTAL U.S. GOVERNMENT & AGENCY
OBLIGATIONS (COST $2,002,188) .... 2,013,207
------------
SHORT-TERM INVESTMENTS--15.7%
SHORT-TERM CORPORATE NOTES--13.8%
750,000 Dow Chemical Co.,
5.80%,1/5/98 ..................... 749,517
400,000 Elf Aquitaine Finance (S.A.),
6.15%,1/7/98 ..................... 399,590
400,000 Merrill Lynch & Co. Inc.,
6.05%,1/9/98 ..................... 399,462
750,000 PHH Corp.,
5.85%, 1/6/98 .................... 749,391
------------
TOTAL SHORT-TERM CORPORATE NOTES
(COST $2,297,960) ................ 2,297,960
------------
SECURITIES HELD UNDER
REPURCHASE AGREEMENTS--1.9%
Securities Held Under Repurchase
Agreements, 6.25%, 1/2/98, with
Bear, Stearns & Co. Inc., dtd
12/31/97, repurchase price
$313,533; collateralized by U.S.
Treasury Strips (par value
$920,000 due 8/15/15) ............ 313,424
------------
TOTAL SHORT-TERM INVESTMENTS
(COSTS $2,611,384) ............... 2,611,384
------------
TOTAL INVESTMENTS
(COST $14,923,802) (A) ............... 99.4% 16,516,340
Other Assets in Excess of Liabilities .. .6 97,410
----- ------------
NET ASSETS ............................. 100.0% $ 16,613,750
===== ============
- --------------------------------------------------------------------------------
* Non-income producing security.
+ Security partially or fully on loan.
(a) At December 31, 1997, the net unrealized appreciation on investments, based
on cost for federal income tax purposes of $14,923,802, amounted to
$1,592,538 which consisted of aggregate gross unrealized appreciation of
$1,733,778 and aggregate gross unrealized depreciation of $141,240.
See Notes to Financial Statements.
F-12
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN BALANCED PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR
================================================================================
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 9.24 $ 13.64 $ 10.80 $ 11.58 $ 10.77
- ------------------------------------------------------------------------------------------------------------------------
Net investment income 0.17 0.21(i) 0.33(i) 0.20 0.15
Net realized and unrealized gain
(loss) on investments 1.63 1.01 2.73 (0.70) 0.69
- ------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.80 1.22 3.06 (0.50) 0.84
- ------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (0.12) (0.73) (0.22) (0.13) (0.03)
Distributions from net realized gains (0.16) (4.89) -- (0.15) --
- ------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.28) (5.62) (0.22) (0.28) (0.03)
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $ 10.76 $ 9.24 $ 13.64 $ 10.80 $ 11.58
========================================================================================================================
Total Return 19.82% 10.17% 28.62% (4.27%) 7.79%
========================================================================================================================
Ratios and Supplemental Data:
Net assets, end of year (000's omitted) $16,614 $10,486 $ 3,671 $ 10,394 $ 7,848
========================================================================================================================
Ratio of expenses to average net
assets 1.01% 1.14% 1.00% 1.08% 1.25%
========================================================================================================================
Decrease reflected in above expense
ratios due to expense
reimbursements -- -- -- -- 0.19%
========================================================================================================================
Ratio of net investment income to
average net assets 2.14% 2.06% 2.49% 2.30% 2.05%
========================================================================================================================
Portfolio Turnover Rate 105.01% 68.66% 113.02% 78.80% 85.46%
========================================================================================================================
Average Commission Rate Paid $ .0712 $ .0712
====================================================================================
(i) Amount was computed based on average shares outstanding during the year.
</TABLE>
See Notes to Financial Statements.
F-13
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1997
- -------------------------------------------------------------------------------
SHARES COMMON STOCKS--92.5% VALUE
------ -----
AEROSPACE--1.1%
166,000 Gulfstream Aerospace Corp.* ...... $ 4,855,500
-----------
APPAREL--.5%
90,100 NAUTICA ENTERPRISES INC.* ........ 2,094,825
-----------
APPLIANCES & TOOLS--3.2%
336,000 Sunbeam Corp. .................... 14,154,000
-----------
BIO-TECHNOLOGY--1.3%
278,200 BioChem Pharma Inc.*+ ............ 5,807,425
-----------
BUILDING & CONSTRUCTION--2.0%
175,900 Masco Corp. ...................... 8,948,913
-----------
BUSINESS SERVICES--4.8%
304,100 Cognizant Corp. .................. 13,551,608
22,600 Consolidation Capital Corp.* ..... 459,074
142,300 Paychex, Inc. .................... 7,203,938
-----------
21,214,620
-----------
COMMUNICATIONS--1.2%
61,400 America Online Inc.* ............. 5,476,143
-----------
COMMUNICATION EQUIPMENT--5.7%
109,000 Advanced Fibre Communications Inc.*. 3,174,625
156,700 Bay Networks Inc.* ................. 4,005,722
120,300 CIENA Corporation* ................. 7,353,338
98,700 Cisco Systems, Inc.* ............... 5,502,525
96,400 Tellabs, Inc.* ..................... 5,097,150
-----------
25,133,360
-----------
COMPUTER SERVICES--.6%
72,500 Sterling Commerce, Inc.* ........... 2,786,755
-----------
COMPUTER SOFTWARE--3.8%
36,500 Citrix Systems, Inc.* .............. 2,774,000
297,700 HBO & Company ...................... 14,289,600
-----------
17,063,600
-----------
COMPUTER TECHNOLOGY
171 Dataware Technologies Inc.* ........ 449
-----------
CONGLOMERATE--1.8%
181,574 Tyco International Ltd. ............ 8,182,269
-----------
CONSUMER PRODUCTS--3.2%
338,750 Cendant Corp.* ..................... 11,644,531
75,000 Fortune Brands Inc. ................ 2,779,725
-----------
14,424,256
-----------
DRUG DISTRIBUTION--8.9%
135,000 AmeriSource Health Corp. Cl. A* .... 7,863,750
198,300 Bergen Brunswig Corp. Cl. A ........ 8,353,388
140,600 Cardinal Health, lnc. .............. 10,562,575
73,700 McKesson Corp. ..................... 7,973,456
170,700 Omnicare, Inc. ..................... 5,291,700
-----------
40,044,869
-----------
ENERGY & ENERGY SERVICES--2.2%
69,900 Diamond Offshore Drilling Inc. ..... 3,363,938
90,000 Global Industries Ltd.* ............ 1,530,000
88,800 Halliburton Co. .................... 4,612,094
-----------
9,506,032
-----------
FINANCIAL SERVICES--9.2%
83,500 Dime Community Bancorp, Inc. ....... 2,525,875
173,000 INMC Mortgage Holdings Inc. ........ 4,054,774
434,900 Money Store Inc. (The)+ ............ 9,132,900
178,050 Paine Webber Group Inc. ............ 6,153,942
150,000 Sovereign Bancorp Inc. ............. 3,112,500
54,700 Star Banc Corp. .................... 3,138,413
134,300 State Street Corp. ................. 7,814,648
117,100 SunAmerica Inc. .................... 5,006,025
-----------
40,939,077
-----------
FOODS & BEVERAGES--.6%
89,500 International Home Foods Inc.* ..... 2,506,000
-----------
INSURANCE--2.9%
197,000 MGIC Investment Corp. .............. 13,100,500
-----------
LEISURE & ENTERTAINMENT--6.2%
168,500 Carnival Corporation Cl. A ......... 9,330,688
9,700 Family Golf Centers Inc.* .......... 304,337
555,900 International Game Technology ...... 14,036,475
174,600 Mirage Resorts, Incorporated* ...... 3,972,150
-----------
27,643,650
-----------
MANUFACTURING--1.4%
152,200 Leggett & Platt Inc. ............... 6,373,375
-----------
MEDICAL DEVICES--5.5%
23,300 Biomatrix Inc.* .................... 699,000
230,200 Biomet Inc. ........................ 5,898,875
176,100 Guidant Corp. ...................... 10,962,225
107,600 Mentor Corp. ....................... 3,927,400
53,000 Safeskin Corp.*+ ................... 3,007,750
-----------
24,495,250
-----------
MEDICAL SERVICES--1.2%
196,800 Quorum Health Group Inc.* .......... 5,141,400
-----------
PHARMACEUTICALS--1.9%
163,400 Elan Corp PLC-ADR*+ ................ 8,364,119
-----------
POLLUTION CONTROL--3.5%
130,100 Allied Waste Industries Inc.* ...... 3,033,020
321,120 USA Waste Services, Inc.* .......... 12,603,960
-----------
15,636,980
-----------
REAL ESTATE INVESTMENT TRUST--1.1%
56,400 Boston Properties, Inc.* ........... 1,864,753
90,571 Equity Office Properties Trust ..... 2,858,692
-----------
4,723,445
-----------
F-14
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1997 (CONT'D)
- -------------------------------------------------------------------------------
SHARES COMMON STOCK (CONTINUED) VALUE
------ -----
RETAILING--10.2%
59,400 BJ's Wholesale Club Inc.* .......... $ 1,863,675
236,400 Borders Group Inc.* ................ 7,402,393
90,500 CVS Corp. .......................... 5,797,701
293,200 CompUSA Inc.* ...................... 9,089,200
344,900 General Nutrition Companies, Inc* .. 11,726,600
86,600 Rite Aid Corp. ..................... 5,082,381
158,000 Staples Inc.* ...................... 4,384,500
-----------
45,346,450
-----------
SEMICONDUCTORS--2.4%
115,000 Altera Corporation* ................ 3,809,375
121,700 Linear Technology Corporation ...... 7,012,963
-----------
10,822,338
-----------
TOYS--1.9%
224,000 Mattel Inc. ........................ 8,344,000
-----------
TRANSPORTATION--4.2%
67,600 AMR Corp.* ......................... 8,686,600
58,000 Alaska Air Group Inc.* ............. 2,247,500
76,000 Coach USA Inc.* .................... 2,546,000
102,900 Continental Airlines Inc. Cl. B*+ .. 4,952,063
-----------
18,432,163
-----------
TOTAL COMMON STOCKS
(COST $341,957,585) .............. 411,561,763
-----------
PRINCIPAL
AMOUNT SHORT-TERM INVESTMENTS--8.6%
--------
SHORT-TERM CORPORATE NOTES--7.3%
$10,500,000 Elf Aquitaine Finance (S.A.),
6.15%, 1/7/98 .................... 10,489,237
12,000,000 Merrill Lynch & Co. Inc.,
6.05%, 1/9/98 .................... 11,983,867
10,000,000 PHH Corp.,
5.85%, 1/6/98 .................... 9,991,875
-----------
TOTAL SHORT-TERM CORPORATE NOTES
(COST $32,464,979) ............... 32,464,979
-----------
SECURITIES HELD UNDER
REPURCHASE AGREEMENTS--1.3%
Securities Held Under Repurchase
Agreements, 6.25%, 1/2/98, with
Bear, Stearns & Co. Inc., dtd
12/31/97, repurchase price
$5,797,631; collateralized by U.S.
Treasury Strips (par value
$12,364,000 due 8/15/02-8/15/15).. 5,795,619
-----------
TOTAL SHORT-TERM INVESTMENTS
(COST $38,260,598) .............. 38,260,598
-----------
TOTAL INVESTMENTS
(COST $380,218,183)(A) .............. 101.1% 449,822,361
Liabilities in Excess of Other Assets.. (1.1) (4,855,661)
----- ------------
NET ASSETS ............................ 100.0% $444,966,700
===== ============
- --------------------------------------------------------------------------------
* Non-income producing security.
+ Security partially or fully on loan.
(a) At December 31, 1997, the net unrealized appreciation on investments, based
on cost for federal income tax purposes of $380,218,183 amounted to $69,604,178
which consisted of aggregate gross unrealized appreciation of $74,019,327 and
gross unrealized depreciation of $4,415,149.
See Notes to Financial Statements.
F-15
<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)
1997 1996 1995 1994 TO DECEMBER 31, 1993(I)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 21.35 $ 19.44 $ 13.46 $ 13.72 $ 10.00
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (0.04) 0.03 (0.03) 0.00(ii) (0.02)
Net realized and unrealized gain (loss)
on investments 3.20 2.29 6.01 (0.21) 3.88
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 3.16 2.32 5.98 (0.21) 3.86
- ------------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (0.01) -- -- -- --
Distributions from net realized gains (0.32) (0.41) -- (0.05) (0.14)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.33) (0.41) -- (0.05) (0.14)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 24.18 $ 21.35 $ 19.44 $ 13.46 $ 13.72
====================================================================================================================================
Total Return 15.01% 11.90% 44.45% (1.54%) 38.67%
====================================================================================================================================
Ratios and Supplemental Data:
Net assets, end of period (000's omitted) $444,967 $394,847 $185,349 $ 62,178 $21,301
====================================================================================================================================
Ratio of expenses to average net assets 0.84% 0.84% 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 (0.15%) 0.08% (0.25%) 0.03% (0.58%)
====================================================================================================================================
Portfolio Turnover Rate 151.98% 90.97% 104.74% 83.96% 67.22%
====================================================================================================================================
Average Commission Rate Paid $ .0676 $ .0663
====================================================================================
</TABLE>
(i) Ratios have been annualized; total return has not been annualized.
(ii) Amount was computed based on average shares outstanding during the period.
F-16
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1997
===============================================================================
SHARES COMMON STOCKS--95.5% VALUE
------ -----
APPLIANCES & TOOLS--1.0%
12,000 Sunbeam Corp. ..................... $ 505,500
-----------
AUTOMOTIVE EQUIPMENT & SERVICES--1.1%
19,000 Avis Rent A Car Inc.* ............. 606,821
-----------
BIO-TECHNOLOGY--1.3%
15,500 INCYTE Pharmaceuticals, Inc.* ..... 697,500
-----------
BROADCASTING--2.2%
40,100 CBS Corp .......................... 1,180,464
-----------
BUSINESS SERVICES--1.1%
12,700 Cognizant Corp. ................... 565,950
-----------
COMMUNICATIONS--4.5%
4,500 AT&T Corp. ........................ 275,625
19,500 America Online Inc.* .............. 1,739,165
13,700 WorldCom Inc.* .................... 414,425
-----------
2,429,215
-----------
COMMUNICATION EQUIPMENT--6.1%
23,000 Advanced Fibre Communications Inc.*.. 669,875
34,600 Bay Networks Inc.* .................. 884,480
19,300 CIENA Corporation.* ................. 1,179,713
10,300 Tellabs, Inc.* ...................... 544,613
-----------
3,278,681
-----------
COMPUTER SERVICES--1.2%
10,300 Sterling Commerce, Inc.* ............ 395,911
15,500 Transaction Network Services Inc.*+.. 267,375
-----------
663,286
-----------
COMPUTER SOFTWARE--4.3%
17,500 HBO & Company ...................... 840,000
11,500 Microsoft Corporation* ............. 1,486,375
-----------
2,326,375
-----------
CONGLOMERATE--3.5%
41,730 Tyco International Ltd. ............ 1,880,479
-----------
DRUG DISTRIBUTION--3.3%
9,000 AmeriSource Health Corp Cl. A* ..... 524,250
11,200 McKesson Corp. ..................... 1,211,706
-----------
1,735,956
-----------
ENERGY & ENERGY SERVICES--2.9%
8,400 Diamond Offshore Drilling Inc.+ .... 404,250
10,800 Halliburton Co. .................... 560,930
7,000 Schlumberger Ltd. .................. 563,500
-----------
1,528,680
-----------
FINANCIAL SERVICES--14.5%
18,300 BankAmerica Corp. .................. 1,335,900
22,300 Bank of New York Inc. .............. 1,289,230
14,100 Federal Home Loan Mortgage
Corporation ...................... 591,326
10,900 First Union Corp. .................. 558,625
7,400 Household International Inc. ....... 943,966
30,000 INMC Mortgage Holdings Inc. ........ 703,140
14,600 Money Store Inc. (The) ............. 306,600
19,470 Morgan Stanley, Dean Witter,
Discover & Co. ................... 1,151,164
21,300 Schwab (Charles) Corporation (The).. 893,279
-----------
7,773,230
-----------
FOOD CHAINS--1.3%
10,600 Safeway Inc.* ..................... 670,450
-----------
INSURANCE--6.3%
8,900 American International Group Inc. . 967,875
18,800 MGIC Investment Corp. ............. 1,250,200
21,100 Travelers Group Inc. .............. 1,136,763
-----------
3,354,838
-----------
LEISURE & ENTERTAINMENT--2.7%
11,000 Carnival Corporation Cl. A ........ 609,125
33,000 International Game Technology ..... 833,250
-----------
1,442,375
-----------
MEDICAL DEVICES--4.7%
14,700 ESC Medical Systems Ltd.* ......... 569,625
31,600 Guidant Corp. ..................... 1,967,100
-----------
2,536,725
-----------
OIL & GAS--.9%
10,000 EVI Inc.* ......................... 517,500
-----------
PHARMACEUTICALS--14.2%
14,000 Bristol Myers Squibb Co. .......... 1,324,750
20,100 Elan Corp PLC-ADR* ................ 1,028,879
14,600 Eli Lilly & Company ............... 1,016,525
15,300 Pfizer Inc. ....................... 1,140,814
25,600 Schering-Plough Corporation ....... 1,590,400
11,800 Warner-Lambert Co. ................ 1,463,200
-----------
7,564,568
-----------
POLLUTION CONTROL--2.1%
28,540 USA Waste Services, Inc.* ......... 1,120,195
-----------
REAL ESTATE INVESTMENT TRUST--1.6%
9,140 Equity Office Properties Trust .... 288,486
10,000 Starwood Lodging Trust ............ 578,750
-----------
867,236
-----------
RETAILING--11.8%
12,000 CVS Corp. ......................... 768,756
31,950 Home Depot, Inc. .................. 1,881,056
23,000 Rite Aid Corp. .................... 1,349,824
34,300 Staples Inc.* ..................... 951,825
34,200 Wal-Mart Stores Inc. .............. 1,348,780
-----------
6,300,241
-----------
SEMICONDUCTORS--2.9%
17,400 Altera Corporation* ............... 576,375
17,000 Linear Technology Corporation ..... 979,625
-----------
1,556,000
-----------
TOTAL COMMON STOCKS
(COST $44,411,723) .............. 51,102,265
-----------
F-17
<PAGE>
HE ALGER AMERICAN FUND
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1997 (CONT'D)
===============================================================================
PRINCIPAL
AMOUNT SHORT-TERM INVESTMENTS--4.6% VALUE
-------- -----
SHORT-TERM CORPORATE NOTES--3.8%
$1,000,000 Four Winds Funding Co.,
6.06%, 1/5/98 (a) ................ $ 999,326
1,000,000 Merrill Lynch & Co. Inc.,
6.05%, 1/9/98 .................... 998,656
-----------
TOTAL SHORT-TERM CORPORATE NOTES
(COST $1,997,982) ................ 1,997,982
-----------
SECURITIES HELD UNDER
REPURCHASE AGREEMENTS--.8%
Securities Held Under Repurchase
Agreements, 6.25%,1/2/98, with
Bear, Stearns & Co. Inc., dtd
12/31/97, repurchase price
$421,447; collateralized by
U.S. Treasury Strips (par value
$1,515,000 due 11/15/18) ........ 421,301
-----------
TOTAL SHORT-TERM INVESTMENTS
(COST $2,419,283) ............... 2,419,283
-----------
TOTAL INVESTMENTS
(COST $46,831,006) (b) ............ 100.1% 53,521,548
Liabilities in Excess Of Other Assets (.1) (33,550)
------ -----------
NET ASSETS 100.0% $53,487,998
====== ===========
- --------------------------------------------------------------------------------
* Non-income producing security.
+ Security 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, 1997, the net unrealized appreciation on investments, based
on cost for federal income tax purposes of $46,831,006 amounted to
$6,690,542 which consisted of aggregate gross unrealized appreciation of
$7,440,171 and gross unrealized depreciation of $749,629.
See Notes to Financial Statements.
F-18
<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
YEAR ENDED DECEMBER 31, (COMMENCEMENT OF
-------------------------------- OPERATIONS)
1997 1996 TO DECEMBER 31, 1995(I)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 19.36 $ 17.43 $ 10.00
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment loss (0.03) (0.03)(ii) (0.03)
Net realized and unrealized gain on investments 3.84 2.14 7.46
---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 3.81 2.11 7.43
Distribution from net realized gains -- (0.18) --
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 23.17 $ 19.36 $ 17.43
===================================================================================================================================
Total Return 19.68% 12.04% 74.30%
===================================================================================================================================
Ratios and Supplemental Data:
Net assets, end of period (000's omitted) $ 53,488 $ 34,925 $ 5,497
===================================================================================================================================
Ratio of expenses excluding interest to average net assets 0.96% 1.06% 1.50%
===================================================================================================================================
Ratio of expenses including interest to average net assets 1.00% 1.09% 1.56%
===================================================================================================================================
Decrease reflected in above expense ratios
due to expense reimbursements -- -- 2.36%
===================================================================================================================================
Ratio of net investment loss to average net assets (0.17%) (0.15%) (0.71%)
===================================================================================================================================
Portfolio Turnover Rate 164.27% 102.10% 178.23%
===================================================================================================================================
Amount of debt outstanding at end of period -- -- --
===================================================================================================================================
Average amount of debt outstanding during the period $ 201,644 $ 76,079 $ 8,122
===================================================================================================================================
Average daily number of shares outstanding during the period 2,135,458 1,107,187 75,460
===================================================================================================================================
Average amount of debt per share during the period $ 0.09 $ 0.07 $ 0.11
===================================================================================================================================
Average Commission Rate Paid $ .0703 $ .0682
============================================================================================================
(i)Ratios have been annualized; total return has not been annualized.
(ii)Amount was computed based on average shares outstanding during the period.
</TABLE>
See Notes to Financial Statements.
F-19
<PAGE>
THE ALGER AMERICAN FUND
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
================================================================================
<TABLE>
<CAPTION>
AMERICAN AMERICAN
SMALL INCOME AMERICAN AMERICAN
AMERICAN CAPITALIZA- AND AMERICAN MIDCAP LEVERAGED
GROWTH TION GROWTH BALANCED GROWTH ALLCAP
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments in securities, at value
(identified cost*)--see accompany-
ing schedules of investments $1,041,875,018 $1,005,657,872 $47,485,499 $16,516,340 $449,822,361 $53,521,548
Receivable for investment securities
sold 38,186,519 14,720,290 -- 98,170 8,118,658 --
Receivable for shares of beneficial
interest sold 1,609,688 571,994 10,887 288,046 2,080,335 27,350
Interest and dividends receivable 628,356 213,181 30,739 91,708 180,033 29,227
Other assets 54,076 72,082 1,635 588 19,637 2,098
- -----------------------------------------------------------------------------------------------------------------------------------
Total Assets 1,082,353,657 1,021,235,419 47,528,760 16,994,852 460,221,024 53,580,223
- -----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for investment securities
purchased 8,632,784 -- 72,596 359,191 14,824,145 --
Payable for shares of beneficial
interest redeemed 384,274 22,836,324 16,236 1,564 71,782 32,031
Accrued investment management fees 720,450 737,069 25,803 10,796 317,494 41,299
Accrued expenses 87,257 76,118 15,233 9,551 40,903 18,895
- -----------------------------------------------------------------------------------------------------------------------------------
Total Liabilities 9,824,765 23,649,511 129,868 381,102 15,254,324 92,225
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $1,072,528,892 $ 997,585,908 $47,398,892 $16,613,750 $444,966,700 $53,487,998
===================================================================================================================================
NET ASSETS CONSIST OF:
Paid-in capital $ 692,612,447 $ 649,850,434 $34,571,756 $13,416,427 $337,701,891 $44,079,890
Undistributed net investment
income (accumulated loss) 3,262,091 (7,380,753) 205,238 287,336 (967,068) (119,678)
Undistributed net realized gain 198,354,499 131,575,233 5,364,574 1,317,449 38,627,699 2,837,244
Net unrealized appreciation 178,299,855 223,540,994 7,257,324 1,592,538 69,604,178 6,690,542
- -----------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $1,072,528,892 $ 997,585,908 $47,398,892 $16,613,750 $444,966,700 $53,487,998
===================================================================================================================================
Shares of beneficial interest
outstanding--Note 6 25,081,266 22,801,879 4,314,475 1,544,192 18,403,196 2,308,122
===================================================================================================================================
NET ASSET VALUE PER SHARE $ 42.76 $ 43.75 $ 10.99 $ 10.76 $ 24.18 $ 23.17
===================================================================================================================================
*Identified cost $ 863,575,163 $ 782,116,878 $40,228,175 $14,923,802 $380,218,183 $46,831,006
===================================================================================================================================
</TABLE>
See Notes to Financial Statements.
F-20
<PAGE>
THE ALGER AMERICAN FUND
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
================================================================================
<TABLE>
<CAPTION>
AMERICAN AMERICAN
SMALL INCOME AMERICAN AMERICAN
AMERICAN CAPITALIZA- AND AMERICAN MIDCAP LEVERAGED
GROWTH TION GROWTH BALANCED GROWTH ALLCAP
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Income:
Interest $ 4,376,996 $ 6,637,890 $ 99,300 $ 372,967 $ 1,412,147 $ 93,307
Dividends 8,330,272 4,707,309 355,467 60,306 1,651,649 296,772
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income 12,707,268 11,345,199 454,767 433,273 3,063,796 390,079
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses:
Management fees-- Note 3(a) 8,988,054 12,582,027 217,844 103,223 3,536,454 399,269
Interest on line of credit utilized -- -- -- -- -- 17,347
Custodian fees 271,226 371,365 20,370 20,876 106,100 27,525
Transfer agent fees 2,500 2,500 2,500 2,500 2,500 2,500
Professional fees 56,068 54,582 6,099 4,868 25,570 7,082
Trustees' fees 4,000 4,000 4,000 4,000 4,000 4,000
Miscellaneous 108,224 150,850 8,078 3,151 42,762 11,667
- ------------------------------------------------------------------------------------------------------------------------------------
Total Expenses 9,430,072 13,165,324 258,891 138,618 3,717,386 469,390
- ------------------------------------------------------------------------------------------------------------------------------------
Net Investment Income
(Loss) 3,277,196 (1,820,125) 195,876 294,655 (653,590) (79,311)
- ------------------------------------------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS
Net realized gain on investments 199,900,299 139,147,522 5,378,374 1,319,306 38,971,626 3,587,761
Net change in unrealized appreciation
on investments 49,343,495 22,504,405 4,254,496 756,566 20,863,695 4,257,904
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
on investments 249,243,794 161,651,927 9,632,870 2,075,872 59,835,321 7,845,665
- ------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE IN NET
ASSETS RESULTING FROM
OPERATIONS $252,520,990 $159,831,802 $9,828,746 $2,370,527 $59,181,731 $7,766,354
====================================================================================================================================
</TABLE>
See Notes to Financial Statements.
F-21
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1997
================================================================================
<TABLE>
<CAPTION>
<S> <C>
INCREASE (DECREASE) IN CASH Cash
flows from operating activities:
Interest received $ 88,938
Dividends received 281,113
Interest paid (22,317)
Operating expenses paid (430,943)
Disposition (purchase) of short-term securities, net (1,021,152)
Purchase of portfolio securities (83,144,052)
Proceeds from disposition of portfolio securities 74,017,676
Other (1,640)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash used in operating activities (10,232,377)
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Proceeds from shares sold 30,458,986
Payments on shares redeemed (19,312,173)
Decrease in cash collateral received on securities loaned (914,436)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 10,232,377
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in cash --
Cash--beginning of year --
- ------------------------------------------------------------------------------------------------------------------------------------
Cash--end of year $ --
====================================================================================================================================
RECONCILIATION OF NET INCREASE IN NET ASSETS TO NET CASH PROVIDED BY (USED
IN) OPERATING ACTIVITIES:
Net increase in net assets resulting from operations $ 7,766,354
Increase in investments (10,265,895)
Decrease in receivable for investments sold 118,367
Increase in interest and dividends receivable (20,028)
Net realized gain (3,587,761)
Net increase in unrealized appreciation (4,257,904)
Increase in accrued expenses 16,130
Net increase in other assets (1,640)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash used in operating activities $(10,232,377)
====================================================================================================================================
</TABLE>
See Notes to Financial Statements.
F-22
<PAGE>
THE ALGER AMERICAN FUND
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996
===============================================================================
<TABLE>
<CAPTION>
AMERICAN
AMERICAN INCOME AMERICAN AMERICAN
AMERICAN SMALL AND AMERICAN MIDCAP LEVERAGED
GROWTH CAPITALIZATION GROWTH BALANCED GROWTH ALLCAP
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net investment income (loss) $ 3,277,196 $ (1,820,125) $ 195,876 $ 294,655 $ (653,590) $ (79,311)
Net realized gain on investments 199,900,299 139,147,522 5,378,374 1,319,306 38,971,626 3,587,761
Net change in unrealized appreciation
on investments 49,343,495 22,504,405 4,254,496 756,566 20,863,695 4,257,904
- -----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting
from operations 252,520,990 159,831,802 9,828,746 2,370,527 59,181,731 7,766,354
Dividends to shareholders:
Net investment income (3,760,721) -- (141,500) (155,278) (250,596) --
Net realized gains (6,810,754) (54,749,439) (1,170,590) (210,546) (6,110,692) --
Net increase (decrease) from
Shares of beneficial interest
transactions --Note 6 (160,448,991) (577,014,924) 17,971,996 4,123,363 (2,700,477) 10,796,374
- -----------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) 81,500,524 (471,932,561) 26,488,652 6,128,066 50,119,966 18,562,728
Net Assets
Beginning of year 991,028,368 1,469,518,469 20,910,240 10,485,684 394,846,734 34,925,270
- -----------------------------------------------------------------------------------------------------------------------------------
End of year $1,072,528,892 $ 997,585,908 $47,398,892 $16,613,750 $444,966,700 $53,487,998
===================================================================================================================================
Undistributed net investment income
(accumulated loss) $ 3,262,091 $ (7,380,753) $ 205,238 $ 287,336 $ (967,068) $ (119,678)
===================================================================================================================================
</TABLE>
THE ALGER AMERICAN FUND
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997
================================================================================
<TABLE>
<CAPTION>
AMERICAN
AMERICAN INCOME AMERICAN AMERICAN
AMERICAN SMALL AND AMERICAN MIDCAP LEVERAGED
GROWTH CAPITALIZATION GROWTH BALANCED GROWTH ALLCAP
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net investment income (loss) $ 3,757,275 $ (1,171,148) $ 139,955 $ 153,453 $ 241,899 $ (32,302)
Net realized gain (loss) on investments 10,026,741 74,215,000 1,169,219 215,191 9,953,972 (496,035)
Net change in unrealized appreciation
(depreciation) on investments 75,821,385 (40,231,403) 1,638,507 327,089 17,131,537 2,028,927
- ----------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting
from operations 89,605,401 32,812,449 2,947,681 695,733 27,327,408 1,500,590
Dividends to shareholders:
Net investment income (460,331) -- (229,100) (324,679) -- --
Net realized gains (19,459,452) (4,872,722) (7,658,484) (2,173,260) (5,502,860) (145,132)
Additional paid-in capital -- 1,653,352 -- -- -- --
Net increase from
shares of beneficial
interest transactions-- Note 6 418,369,211 455,713,242 17,210,684 8,616,721 187,673,423 28,072,726
- ----------------------------------------------------------------------------------------------------------------------------------
Total increase 488,054,829 485,306,321 12,270,781 6,814,515 209,497,971 29,428,184
Net Assets
Beginning of year 502,973,539 984,212,148 8,639,459 3,671,169 185,348,763 5,497,086
- ----------------------------------------------------------------------------------------------------------------------------------
End of year $ 991,028,368 $1,469,518,469 $ 20,910,240 $10,485,684 $394,846,734 $34,925,270
==================================================================================================================================
Undistributed net investment income
(accumulated loss) $ 3,745,616 $ (5,560,628) $ 150,862 $ 147,959 $ (62,882) $ (40,367)
==================================================================================================================================
</TABLE>
F-23
<PAGE>
THE ALGER AMERICAN FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
===============================================================================
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 series 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"). The
American Growth Portfolio, American Small Capitalization Portfolio, American
MidCap Growth Portfolio and American Leveraged AllCap Portfolio invest primarily
in equity securities and each has an investment objective of long-term capital
appreciation. The American Income and Growth Portfolio's primary investment
objective is to provide a high level of dividend income by investing primarily
in dividend-paying equity securities; capital appreciation is a second
objective. The American Balanced Portfolio's investment objectives are current
income and long-term capital appreciation which it seeks to achieve through
investing in equity and fixed income securities. 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 on each day
the New York Stock Exchange ("NYSE") is open as of the close of the NYSE
(normally 4:00 p.m. Eastern time). 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. The
repurchase agreements are collateralized by U.S. Government securities which are
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, as defined. The Portfolios earn fees on the
securities loaned which are included in interest income in the accompanying
Statements of Operations. 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, 1997, the value of securities loaned and
collateral received thereon were as follows:
VALUE OF
SECURITIES VALUE OF
LOANED COLLATERAL
--------- ---------
American Growth Portfolio...... $ 6,670,125 $ 6,803,795
American Small Capitalization
Portfolio.................... 112,827,261 115,084,103
American Income and Growth
Portfolio.................... -- --
American Balanced Portfolio.... 105,710 107,725
American MidCap Growth
Portfolio.................... 26,666,918 27,200,993
American Leveraged AllCap
Portfolio.................... 306,725 313,443
(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.
F-24
<PAGE>
THE ALGER AMERICAN FUND
NOTES TO FINANCIAL STATEMENTS (CONT'D)
DECEMBER 31, 1997
===============================================================================
Dividends from net realized gains, offset by any loss carryforward, are declared
and paid annually after the end of the fiscal year in which earned.
(f) FEDERAL INCOME TAXES: It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of the taxable income, including net realized
capital gains, 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: These financial statements have been prepared using estimates and
assumptions that affect the reported amounts therein. Actual results may differ
from those estimates.
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.
(b) BROKERAGE COMMISSIONS: During the year ended December 31, 1997, 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.") $3,071,710, $3,122,828, $127,386, $23,971,
$1,220,558 and $146,246, 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.
NOTE 4--SECURITIES TRANSACTIONS:
Purchases and sales of securities, other than short-term securities, for the
year ended December 31, 1997, were as follows:
PURCHASES SALES
--------- -----
American Growth Portfolio...... $1,421,429,296 $1,628,944,088
American Small Capitalization
Portfolio.................... 1,386,863,484 2,010,688,167
American Income and Growth
Portfolio.................... 63,711,933 49,269,370
American Balanced Portfolio.... 15,401,391 11,963,812
American MidCap Growth
Portfolio.................... 625,451,561 649,655,141
American Leveraged AllCap
Portfolio.................... 83,144,052 73,899,224
NOTE 5--LINE OF CREDIT:
The American Leveraged AllCap Portfolio has a line of credit with
its custodian bank whereby it may borrow up to one-third of the value 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. During the year ended December
31, 1997, the American Leveraged AllCap Portfolio had borrowings which averaged
$201,644 at a weighted average interest rate of 8.48%.
NOTE 6--SHARE CAPITAL:
The Fund has an unlimited number of authorized shares of beneficial interest of
$.001 par value.
F-25
<PAGE>
THE ALGER AMERICAN FUND
NOTES TO FINANCIAL STATEMENTS (CONT'D)
DECEMBER 31, 1997
===============================================================================
During the year ended December 31, 1997, transactions of shares of beneficial
interest were as follows:
SHARES AMOUNT
------ -------
American Growth
Portfolio:
Shares sold................ 16,488,837 $ 655,951,502
Dividends reinvested....... 283,342 10,571,475
--------- ------------
16,772,179 666,522,977
Shares redeemed............ (20,559,387) (826,971,968)
--------- ------------
Net decrease............. (3,787,208) $ (160,448,991)
========= ============
SHARES AMOUNT
------ -------
American Small Capitalization
Portfolio:
Shares sold................ 24,762,826 $1,038,991,957
Dividends reinvested....... 1,463,106 54,749,439
--------- ------------
26,225,932 1,093,741,396
Shares redeemed............ (39,348,743) (1,670,756,320)
--------- ------------
Net decrease............. (13,122,811) $ (577,014,924)
========= ============
SHARES AMOUNT
------ -------
American Income and Growth
Portfolio:
Shares sold................ 2,857,584 $ 27,984,376
Dividends reinvested....... 142,001 1,312,090
--------- ------------
2,999,585 29,296,466
Shares redeemed............ (1,167,593) (11,324,470)
--------- ------------
Net increase............. 1,831,992 $ 17,971,996
========= ============
SHARES AMOUNT
------ -------
American Balanced
Portfolio:
Shares sold................ 592,297 $ 6,003,090
Dividends reinvested....... 38,027 365,824
--------- ------------
630,324 6,368,914
Shares redeemed............ (220,624) (2,245,551)
--------- ------------
Net increase............. 409,700 $ 4,123,363
========= ============
SHARES AMOUNT
------ -------
American MidCap Growth
Portfolio:
Shares sold................ 14,279,060 $328,791,802
Dividends reinvested....... 297,953 6,361,288
--------- ------------
14,577,013 335,153,090
Shares redeemed............ (14,668,073) (337,853,567)
--------- ------------
Net decrease............. (91,060) $ (2,700,477)
========= ============
SHARES AMOUNT
------ -------
American Leveraged AllCap
Portfolio:
Shares sold................ 1,381,000 $ 30,139,481
Shares redeemed............ (876,756) (19,343,107)
--------- ------------
Net increase............. 504,244 $ 10,796,374
========= ============
During the year ended December 31, 1996, transactions of shares of beneficial
interest were as follows:
SHARES AMOUNT
------ -------
American Growth
Portfolio:
Shares sold................ 19,647,051 $642,965,537
Dividends reinvested....... 603,264 19,919,783
--------- -----------
20,250,315 662,885,320
Shares redeemed............ (7,525,422) (244,516,109)
--------- -----------
Net increase............. 12,724,893 $418,369,211
========= ===========
SHARES AMOUNT
------ -------
American Small Capitalization
Portfolio:
Shares sold................ 23,962,644 $986,432,069
Dividends reinvested....... 107,827 4,872,722
--------- -----------
24,070,471 991,304,791
Shares redeemed............ (13,122,238) (535,591,549)
--------- -----------
Net increase............. 10,948,233 $455,713,242
========= ===========
SHARES AMOUNT
------ -------
American Income and Growth
Portfolio:
Shares sold................ 1,280,083 $ 12,357,144
Dividends reinvested....... 1,064,451 7,887,584
--------- -----------
2,344,534 20,244,728
Shares redeemed............ (347,790) (3,034,044)
--------- -----------
Net increase............. 1,996,744 17,210,684
========= ===========
SHARES AMOUNT
------ -------
American Balanced
Portfolio:
Shares sold................ 701,980$ $ 7,239,916
Dividends reinvested....... 278,167 2,497,939
--------- -----------
980,147 9,737,855
Shares redeemed............ (114,847) (1,121,134)
--------- -----------
Net increase............. 865,300 $ 8,616,721
========= ===========
SHARES AMOUNT
------ -------
American MidCap Growth
Portfolio:
Shares sold................ 16,365,480 $340,608,341
Dividends reinvested....... 252,773 5,502,860
--------- -----------
16,618,253 346,111,201
Shares redeemed............ (7,657,192) (158,437,778)
--------- -----------
Net increase............. 8,961,061 $187,673,423
========= ===========
SHARES AMOUNT
------ -------
American Leveraged AllCap
Portfolio:
Shares sold................ 2,109,229 $39,694,878
Dividends reinvested....... 7,221 145,132
--------- -----------
2,116,450 39,840,010
Shares redeemed............ (627,954) (11,767,284)
--------- -----------
Net increase............. 1,488,496 $ 28,072,726
========= ===========
F-26
<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,
1997, 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, 1997, 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, 1997, the results of their operations and cash flows for the year then
ended, the changes in their net assets for each of the two years in the period
then ended, and the financial highlights for each of the five years in the
period then ended, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
New York, New York
February 2, 1998
F-27
<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
A-1
<PAGE>
APPENDIX
(continued)
in the money rate. The prime feature of an AAA bond is a showing of earnings
several times or many times interest requirements, with such stability of
applicable earnings that safety is beyond reasonable question whatever changes
occur in conditions. Bonds rated AA by Fitch are judged by Fitch to be of safety
virtually beyond question and are readily salable, whose merits are not unlike
those of the AAA class, but whose margin of safety is less strikingly broad. The
issue may be the obligation of a small company, strongly secured but influenced
as to rating by the lesser financial power of the enterprise and more local type
of market.
Bonds rated Duff-1 are judged by Duff and Phelps, Inc. ("Duff") to be of the
highest credit quality with negligible risk factors; only slightly more than
U.S. Treasury debt. Bonds rated Duff-2, 3 and 4 are judged by Duff to be of high
credit quality with strong protection factors. Risk is modest but may vary
slightly from time to time because of economic conditions.
COMMERCIAL PAPER RATINGS
Moody's Commercial Paper ratings are opinions of the ability of issuers to
repay punctually promissory obligations not having an original maturity in
excess of nine months. The rating Prime-1 is the highest commercial paper rating
assigned by Moody's. Issuers rated Prime-1, or related supporting institutions,
are considered to have a superior capacity for repayment of short-term
promissory obligations. Issuers rated Prime-2, or related supporting
institutions, are considered to have a strong capacity for repayment of
short-term promissory obligations. This will normally be evidenced by many of
the characteristics of issuers rated Prime-1, but to a lesser degree. Earnings
trends and coverage ratios, while sound, will be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample liquidity is maintained.
Commercial paper ratings of S&P are current assessments of the likelihood of
timely payment of debts having original maturities of no more than 365 days.
Commercial paper rated A-1 by S&P indicates that the degree of safety regarding
timely payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted A-1+. Capacity for
timely payment on commercial paper rated A-2 is strong, but the relative degree
of safety is not as high as for issues designated A-1.
The rating Fitch-1 (Highest Grade) is the highest commercial paper rating
assigned by Fitch. Paper rated Fitch-1 is regarded as having the strongest
degree of assurance for timely payment. The rating Fitch-2 (Very Good Grade) is
the second highest commercial paper rating assigned by Fitch which reflects an
assurance of timely payment only slightly less in degree than the strongest
issues.
The rating Duff-l is the highest commercial paper rating assigned by Duff.
Paper rated Duff-l is regarded as having very high certainty of timely payment
with excellent liquidity factors which are supported by ample asset protection.
Risk factors are minor. Paper rated Duff-2 is regarded as having good certainty
of timely payment, good access to capital markets and sound liquidity factors
and company fundamentals. Risk factors are small.
A-2
<PAGE>
INVESTMENT MANAGER:
Fred Alger Management, Inc.
75 Maiden Lane
New York, New York 10038
- --------------------------------------------------------------------------------
DISTRIBUTOR:
Fred Alger & Company, Incorporated
30 Montgomery Street
Jersey City, New Jersey 07302
- -------------------------------------------------------------------------------
TRANSFER AGENT:
Alger Shareholder Services, Inc.
30 Montgomery Street
Box 2001
Jersey City, New Jersey 07302
- --------------------------------------------------------------------------------
INDEPENDENT PUBLIC ACCOUNTANTS:
Arthur Andersen LLP
1345 Avenue of the Americas
New York, New York 10105
- --------------------------------------------------------------------------------
COUNSEL:
Hollyer Brady Smith Troxell Barrett
Rockett Hines & Mone LLP
551 Fifth Avenue
New York, N.Y 10176
THE |
ALGER | MEETING THE CHALLENGE
AMERICAN | OF INVESTING
FUND |
STATEMENT |
OF ADDITIONAL | MAY 1, 1998
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, 1997 and for the
period then ended;
(b) Exhibits:
Exhibit No. Description of Exhibit
- ----------- ----------------------
l(a) Agreement and Declaration of Trust (l) [EDGAR 4/98]
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) [EDGAR 4/98]
1(e) Certificate of Designation relating to the Alger American Leveraged
AllCap Portfolio (6) [EDGAR 4/98]
2 By-laws of Registrant (l) [EDGAR 4/98]
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) [EDGAR 4/98]
4(d) Specimen certificate for shares of beneficial interest in the Alger
American MidCap Growth Portfolio (5) [EDGAR 4/98]
4(e) Specimen certificate for shares of beneficial interest in the Alger
American Leveraged AllCap Portfolio (6) [EDGAR 4/98]
5 Investment Management Agreements
5(a) Investment Management Agreement for the Alger American Balanced
Portfolio (4) [EDGAR 4/98]
5(b) Investment Management Agreement for the Alger American MidCap Growth
Portfolio (5) [EDGAR 4/98]
5(c) Investment Management Agreement for the Alger American Leveraged
AllCap Portfolio (6) [EDGAR 4/98]
5(d) Investment Management Agreement for the Alger American Money
Market Portfolio (3) [EDGAR 4/98]
5(e) Investment Management Agreement for the Alger American Income
and Growth Portfolio (3) [EDGAR 4/98]
5(f) Investment Management Agreement for the Alger American Small
Capitalization Portfolio (3) [EDGAR 4/98]
5(g) Investment Management Agreement for the Alger American Growth
Portfolio (3) [EDGAR 4/98]
6 Distribution Agreement (3) [EDGAR 4/98]
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)
8(c) Amendment 1 to Custody Agreement
9 Transfer Agency Agreement
10 Opinion of Counsel
l0(a) Opinions of Sullivan & Worcester (6)
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) [EDGAR 4/98]
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) [EDGAR 4/98]
13(d) Purchase Agreement relative to the shares of the Alger American
Leveraged AllCap Portfolio (6) [EDGAR 4/98]
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 3, 1998.
Title or Class Number of Record Holders
-------------- ------------------------
Alger American Income and Growth Portfolio 9
Alger American Small Capitalization Portfolio 53
Alger American Growth Portfolio 50
Alger American Balanced Portfolio 5
Alger American MidCap Growth Portfolio 34
Alger American Leveraged AllCap Portfolio 19
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 one closed-end investment company and to three other open-end
investment companies. The list required by this Item 28 regarding any other
business, profession, vocation or employment of a substantial nature engaged in
by officers and directors of Alger Management during the past two years is
incorporated by reference to 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, The Alger
Retirement Fund, Spectra Fund and The Alger Fund and has acted as subscription
agent for Castle Convertible Fund, Inc.
(b) The information required by this Item 29 with respect to each director,
officer or partner of Alger Inc. is incorporated by reference to Schedule A of
Form BD filed by Alger Inc. pursuant to the Securities Exchange Act of 1934 (SEC
File No. 8-6423).
(c) Not applicable.
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 certifies 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 9th day of
April, 1998.
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 April 9, 1998
- -------------------------------
Fred M. Alger III
/s/ David D. Alger President and Trustee April 9, 1998
- -------------------------------- (Chief Executive Officer)
David D. Alger
/s/ Gregory S. Duch Treasurer April 9, 1998
- -------------------------------- (Chief Financial and
Gregory S. Duch Accounting Officer)
/s/ Nathan E. Saint-Amand* Trustee April 9, 1998
- --------------------------------
Nathan E. Saint-Amand
/s/ Stephen E. O'Neil* Trustee April 9, 1998
- --------------------------------
Stephen E. O'Neil
/s/ Arthur M. Dubow* Trustee April 9, 1998
- --------------------------------
Arthur M. Dubow
/s/ John T. Sargent* Trustee April 9, 1998
- --------------------------------
John T. Sargent
*/s/ Gregory S. Duch
- --------------------------------
*By: Gregory S. Duch
Attorney-In-Fact
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. 15 X
---
and/or
---
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 ---
---
Amendment No. 17 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
<TABLE>
<CAPTION>
Exhibit Page Number in Sequential
No. Number System
- ------ -------------------------
<S> <C> <C>
l(a) Agreement and Declaration of Trust .........................................
l(d) Certificate of Designation relating to the Alger American MidCap
Growth Portfolio ...........................................................
1(e) Certificate of Designation relating to the Alger American Leveraged
AllCap Portfolio ...........................................................
2 By-laws of Registrant ......................................................
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 ....................................
4(c) Specimen certificate for shares of beneficial interest in the Alger
American Balanced Portfolio ................................................
4(d) Specimen certificate for shares of beneficial interest in the Alger
American MidCap Growth Portfolio ...........................................
4(e) Specimen certificate for shares of beneficial interest in the Alger
American Leveraged AllCap Portfolio ........................................
5(a) Investment Management Agreement for the Alger American Balanced
Portfolio ..................................................................
5(b) Investment Management Agreement for the Alger American MidCap Growth
Portfolio ..................................................................
5(c) Investment Management Agreement for the Alger American Leveraged
AllCap Portfolio ...........................................................
5(d) Investment Management Agreement for the Alger American Money
Market Portfolio ...........................................................
5(e) Investment Management Agreement for the Alger American Income
and Growth Portfolio .......................................................
5(f) Investment Management Agreement for the Alger American Small
Capitalization Portfolio ...................................................
5(g) Investment Management Agreement for the Alger American Growth
Portfolio ..................................................................
6 Distribution Agreement .....................................................
8(a) Form of Custody Agreement ..................................................
8(c) Amendment 1 to Custody Agreement............................................
9 Transfer Agency Agreement ..................................................
l0(a) Opinions of Sullivan & Worcester ...........................................
11 Consent of Arthur Andersen LLP .............................................
13(a) Purchase Agreement relative to the shares of the Alger American
Money Market, Income and Growth, Small Capitalization and Growth
Portfolios .................................................................
13(c) Purchase Agreement relative to the shares of the Alger American
MidCap Growth Portfolio ....................................................
13(d) Purchase Agreement relative to the shares of the Alger American
Leveraged AllCap Portfolio .................................................
</TABLE>
EXHIBIT 1(a)
THE ALGER VARIABLE INSURANCE PRODUCTS FUND
----------------------------------
AGREEMENT AND DECLARATION OF TRUST
----------------------------------
Dated: April 6, 1988
<PAGE>
THE ALGER VARIABLE INSURANCE PRODUCTS FUND
AGREEMENT AND DECLARATION OF TRUST
Table of Contents
Page
----
RECITALS ................................................................ 1
ARTICLE 1 THE TRUST..................................................... 2
Section 1.1 Name......................................................... 2
Section 1.2 Location..................................................... 2
Section 1.3 Nature of Trust.............................................. 2
Section 1.4 Definitions.................................................. 3
Section 1.5 Real Property to be Converted into Personal Property......... 7
ARTICLE 2 PURPOSE OF THE TRUST.......................................... 7
ARTICLE 3 POWERS OF THE TRUSTEES........................................ 7
Section 3.1 Powers in General............................................ 7
(a) Investments.............................................. 9
(b) Disposition of Assets.................................... 9
(c) Ownership Powers......................................... 9
(d) Form of Holding.......................................... 9
(e) Reorganization, etc...................................... 9
(f) Voting Trusts, etc....................................... 10
(g) Contracts, etc........................................... 10
(h) Guarantees, etc.......................................... 10
(i) Partnerships, etc........................................ 10
(j) Insurance................................................ 10
(k) Pensions, etc............................................ 11
(l) Power of Collection and Litigation....................... 11
(m) Issuance and Repurchase of Shares........................ 11
(n) Offices.................................................. 11
(o) Expenses................................................. 11
(p) Agents, etc.............................................. 11
(q) Accounts................................................. 12
(r) Valuation................................................ 12
(s) Indemnification.......................................... 12
(t) General.................................................. 12
<PAGE>
-2-
Section 3.2 Borrowings; Financings; Issuance of Securities.............. 12
Section 3.3 Deposits.................................................... 13
Section 3.4 Allocations................................................. 13
Section 3.5 Further Powers; Limitations................................. 13
ARTICLE 4 TRUSTEES AND OFFICERS......................................... 14
Section 4.1 Number, Designation, Election, Term, etc.................... 14
(a) Initial Trustee.......................................... 14
(b) Number................................................... 14
(c) Election and Term........................................ 14
(d) Resignation and Retirement............................... 9
(e) Removal.................................................. 15
(f) Vacancies................................................ 15
(g) Acceptance of Trusts..................................... 15
(h) Effect of Death, Resignation, etc........................ 15
(i) Conveyance............................................... 16
(j) No Accounting............................................ 16
(k) Filings.................................................. 16
Section 4.2 Trustees' Meetings; Participation by Telephone, etc......... 16
Section 4.3 Committees; Delegation...................................... 17
Section 4.4 Officers ................................................... 17
Section 4.5 Compensation of Trustees and Officers....................... 17
Section 4.6 Ownership of Shares and Securities of the Trust............. 18
Section 4.7 Right of Trustees and Officers to Own Property
or to Engage in Business; Authority of Trustees
to Permit Others to Do Likewise........................... 18
Section 4.8 Reliance on Experts......................................... 18
Section 4.9 Surety Bonds................................................ 19
Section 4.10 Apparent Authority of Trustees and Officers................. 19
Section 4.11 Other Relationships Not Prohibited.......................... 19
Section 4.12 Payment of Trust Expenses................................... 20
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Section 4.13 Ownership of the Trust Property............................. 20
ARTICLE 5 DELEGATION OF MANAGERIAL RESPONSIBILITIES..................... 21
Section 5.1 Appointment; Action by Less than All Trustees................ 21
Section 5.2 Certain Contracts............................................ 21
(a) Advisory................................................. 21
(b) Administration........................................... 22
(c) Distribution............................................. 22
(d) Custodian................................................ 22
(e) Transfer and Dividend Disbursing Agency.................. 23
(f) Shareholder Servicing.................................... 23
(g) Accounting............................................... 23
ARTICLE 6 PORTFOLIOS AND SHARES......................................... 23
Section 6.1 Description of Portfolios and Shares......................... 23
(a) Shares; Portfolios; Series of Shares..................... 23
(b) Establishment, etc. of Portfolios;
Authorization of Shares................................ 24
(c) Character of Separate Portfolios and Shares Thereof...... 24
(d) Consideration for Shares................................. 25
Section 6.2 Establishment and Designation of Certain Portfolios;
General Provisions for All Portfolios...................... 25
(a) Assets Belonging to Portfolios........................... 25
(b) Liabilities of Portfolios................................ 26
(c) Dividends................................................ 26
(d) Liquidation.............................................. 27
(e) Voting................................................... 27
(f) Redemption by Shareholder................................ 27
(g) Redemption at the Option of the Trust.................... 28
(h) Net Asset Value.......................................... 28
(i) Transfer................................................. 29
(j) Equality................................................. 29
(k) Rights of Fractional Shares.............................. 29
(l) Conversion Rights........................................ 29
Section 6.3 Ownership of Shares.......................................... 29
Section 6.4 Investments in the Trust..................................... 30
Section 6.5 No Pre-emptive Rights........................................ 30
Section 6.6 Status of Shares............................................. 30
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ARTICLE 7 SHAREHOLDERS' VOTING POWERS AND MEETINGS....................... 30
Section 7.1 Voting Powers................................................ 30
Section 7.2 Number of Votes and Manner of Voting; Proxies................ 31
Section 7.3 Meetings..................................................... 31
Section 7.4 Record Dates................................................. 32
Section 7.5 Quorum and Required Vote..................................... 32
Section 7.6 Action by Written Consent.................................... 32
Section 7.7 Inspection of Records........................................ 33
Section 7.8 Additional Provisions........................................ 33
ARTICLE 8 LIMITATION OF LIABILITY; INDEMNIFICATION...................... 33
Section 8.1 Trustees, Shareholders, etc. Not Personally Liable; Notice... 33
Section 8.2 Trustees' Good Faith Action; Expert Advice;
No Bond or Surety.......................................... 34
Section 8.3 Indemnification of Shareholders.............................. 34
Section 8.4 Indemnification of Trustees, Officers, etc................... 35
Section 8.5 Compromise Payment........................................... 36
Section 8.6 Indemnification Not Exclusive, etc........................... 36
Section 8.7 Liability of Third Persons Dealing with Trustees............. 36
ARTICLE 9 DURATION; REORGANIZATION; AMENDMENTS.......................... 37
Section 9.1 Duration and Termination of Trust............................ 37
Section 9.2 Reorganization............................................... 37
Section 9.3 Amendments; etc.............................................. 38
Section 9.4 Filing of Copies of Declaration and Amendments............... 38
ARTICLE 10 MISCELLANEOUS................................................ 39
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Section 10.1 Governing Law............................................... 39
Section 10.2 Counterparts................................................ 39
Section 10.3 Reliance by Third Parties................................... 39
Section 10.4 References; Headings........................................ 39
Section 10.5 Use of the Name "Alger"..................................... 39
Signatures............................................................... 40
Acknowledgments.......................................................... 41
<PAGE>
AGREEMENT AND DECLARATION OF TRUST
OF
THE ALGER VARIABLE INSURANCE PRODUCTS FUND
This AGREEMENT AND DECLARATION OF TRUST, made at Boston, Massachusetts
this sixth day of April, 1988, by and between the Settlor and the Trustee whose
signature is set forth below (the "Initial Trustee"),
WITNESSETH THAT:
WHEREAS, Bryan G. Tyson, an individual residing in Natick, Massachusetts
(the "Settlor"), proposes to deliver to the Initial Trustee the sum of one
hundred dollars ($100.00) lawful money of the United States of America in trust
hereunder and to authorize the Initial Trustee and all other Persons acting as
Trustees hereunder to employ such funds, and any other funds coming into their
hands or the hands of their successor or successors as such Trustees, to carry
on the business of an investment company, and as such of buying, selling,
investing in or otherwise dealing in and with stocks, bonds, debentures,
warrants, options, futures contracts and other securities and interests therein,
or calls or puts with respect to any of the same, or such other and further
investment media and other property as the Trustees may deem advisable, which
are not prohibited by law or the terms of this Declaration; and
WHEREAS, the Initial Trustee is willing to accept such sum, together with
any and all additions thereto and the income or increments thereof, upon the
terms, conditions and trusts hereinafter set forth; and
WHEREAS, it is proposed that the assets held by the Trustees be divided
into separate portfolios, each with its own separate investment assets,
investment objectives, policies and purposes, and that the beneficial interest
in each such fund shall be divided into transferable Shares of Beneficial
Interest, a separate Series of Shares for each fund, all in accordance with the
provisions hereinafter set forth; and
WHEREAS, it is desired that the trust established hereby (the "Trust") be
managed and operated as a trust with transferable shares under the laws of
Massachusetts, of the type commonly known as and referred to as a Massachusetts
business trust, in accordance with the provisions hereinafter set forth,
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NOW, THEREFORE, the Initial Trustee, for himself and his successors as
Trustees, hereby declares, and agrees with the Settlor, for himself and for all
Persons who shall hereafter become holders of Shares of Beneficial Interest of
the Trust, of any Series, that the Trustees will hold the sum delivered to them
upon the execution hereof, and all other and further cash, securities and other
property of every type and description which they may in any way acquire in
their capacity as such Trustees, together with the income therefrom and the
proceeds thereof, IN TRUST NEVERTHELESS, to manage and dispose of the same for
the benefit of the holders from time to time of the Shares of Beneficial
Interest of the several Series being issued and to be issued hereunder and in
the manner and subject to the provisions hereof, to wit:
ARTICLE 1
THE TRUST
SECTION 1.1. Name. The name of the Trust shall be
"The Alger Variable Insurance Products Fund",
and so far as may be practicable the Trustees shall conduct the Trust's
activities, execute all documents and sue or be sued under that name, which name
(and the word "Trust" wherever used in this Agreement and Declaration of Trust,
except where the context otherwise requires) shall refer to the Trustees in
their capacity as Trustees, and not individually or personally, and shall not
refer to the officers, agents or employees of the Trust or of such Trustees, or
to the holders of the Shares of Beneficial Interest of the Trust, of any Series.
If the Trustees determine that the use of such name is not practicable, legal or
convenient at any time or in any jurisdiction, or if the Trust is required to
discontinue the use of such name pursuant to Section 10.5 hereof, then subject
to that Section, the Trustees may use such other designation, or they may adopt
such other name for the Trust as they deem proper, and the Trust may hold
property and conduct its activities under such designation or name.
SECTION 1.2. Location. The Trust shall have an office in Boston,
Massachusetts, unless changed by the Trustees to another location in
Massachusetts or elsewhere, but such office need not be the sole or principal
office of the Trust. The Trust may have such other offices or places of business
as the Trustees may from time to time determine to be necessary or expedient.
SECTION 1.3. Nature of Trust. The Trust shall be a trust with transferable
shares under the laws of The Commonwealth of Massachusetts, of the type referred
to in Section 1 of Chapter 182 of the Massachusetts General Laws and commonly
termed a Massachusetts business trust. The Trust is not intended to be, shall
not be deemed to be, and shall not be treated as, a general partnership, limited
partnership, joint venture, corporation or
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joint stock company. The Shareholders shall be beneficiaries and their
relationship to the Trustees shall be solely in that capacity in accordance with
the rights conferred upon them hereunder.
SECTION 1.4. Definitions. As used in this Agreement and Declaration of
Trust, the following terms shall have the meanings set forth below unless the
context thereof otherwise requires:
"Accounting Agent" shall have the meaning designated in Section 5.2(g)
hereof.
"Administrator" shall have the meaning designated in Section 5.2(b)
hereof.
"Affiliated Person" shall have the meaning assigned to it in the 1940 Act.
"By-Laws" shall mean the By-Laws of the Trust, as amended from time to
time.
"Certificate of Designation" shall have the meaning designated in Section
6.1 hereof.
"Certificate of Termination" shall have the meaning designated in Section
6.1 hereof.
"Commission" shall have the same meaning as in the 1940 Act.
"Contracting Party" shall have the meaning designated in the preamble to
Section 5.2 hereof.
"Covered Person" shall have the meaning designated in Section 8.4 hereof.
"Custodian" shall have the meaning designated in Section 5.2(d) hereof.
"Declaration" and "Declaration of Trust" shall mean this Agreement and
Declaration of Trust and all amendments or modifications thereof as from time to
time in effect. References in this Agreement and Declaration of Trust to
"hereof", "herein" and "hereunder" shall be deemed to refer to the Declaration
of Trust generally, and shall not be limited to the particular text, Article or
Section in which such words appear.
"Disabling Conduct" shall have the meaning designated in Section 8.4
hereof.
"Distributor" shall have the meaning designated in Section 5.2(c) hereof.
"Dividend Disbursing Agent" shall have the meaning designated in Section
5.2(e) hereof.
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"Portfolio" or "Portfolios" shall mean one or more of the separate
components of the assets of the Trust which are now or hereafter established and
designated under or in accordance with the provisions of Article 6 hereof.
"Portfolio Assets" shall have the meaning defined in Section 6.2(a)
hereof.
"General Items" shall have the meaning defined in Section 6.2(a) hereof.
"Initial Trustee" shall have the meaning defined in the preamble hereto.
"Investment Adviser" shall have the meaning stated in Section 5.2(a)
hereof.
"Majority of the Trustees" shall mean a majority of the Trustees in office
at the time in question. At any time at which there shall be only one (1)
Trustee in office, such term shall mean such Trustee.
"Majority Shareholder Vote," as used with respect to the election of any
Trustee at a meeting of Shareholders, shall mean the vote for the election of
such Trustee of a plurality of all outstanding Shares of the Trust, without
regard to Series, represented in person or by proxy and entitled to vote
thereon, provided that a quorum (as determined in accordance with the By-Laws)
is present, and as used with respect to any other action required or permitted
to be taken by Shareholders, shall mean the vote for such action of the holders
of that majority of all outstanding Shares (or, where a separate vote of Shares
of any particular Series is to be taken, the affirmative vote of that majority
of the outstanding Shares of that Series) of the Trust which consists of: (i) a
majority of all Shares (or of Shares of the particular Series) represented in
person or by proxy and entitled to vote on such action at the meeting of
Shareholders at which such action is to be taken, provided that a quorum (as
determined in accordance with the By-Laws) is present; or (ii) if such action is
to be taken by written consent of Shareholders, a majority of all Shares (or of
Shares of the particular Series) issued and outstanding and entitled to vote on
such action; provided, that (iii) as used with respect to any action requiring
the affirmative vote of "a majority of the outstanding voting securities", as
the quoted phrase is defined in the 1940 Act, of the Trust or of any Portfolio,
"Majority Shareholder Vote" means the vote for such action at a meeting of
Shareholders of the smallest majority of all outstanding Shares of the Trust (or
of Shares of the particular Portfolio) entitled to vote on such action which
satisfies such 1940 Act voting requirement.
"1940 Act" shall mean the provisions of the Investment Company Act of 1940
and the rules and regulations thereunder, both
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as amended from time to time, and any order or orders thereunder which may from
time to time be applicable to the Trust.
"Person" shall mean and include individuals, as well as corporations,
limited partnerships, general partnerships, joint stock companies, joint
ventures, associations, banks, trust companies, land trusts, business trusts or
other organizations established under the laws of any jurisdiction, whether or
not considered to be legal entities, and governments and agencies and political
subdivisions thereof.
"Principal Underwriter" shall have the meaning designated in Section
5.2(c) hereof.
"Prospectus," as used with respect to any Portfolio or Series of Shares,
shall mean the prospectus relating to such Portfolio or Series which constitutes
part of the currently effective Registration Statement of the Trust under the
Securities Act of 1933, as such prospectus may be amended or supplemented from
time to time.
"Securities" shall mean any and all bills, notes, bonds, debentures or
other obligations or evidences of indebtedness, certificates of deposit,
bankers' acceptances, commercial paper, repurchase agreements or other money
market instruments; stocks, shares or other equity ownership interests; and
warrants, options or other instruments representing rights to subscribe for,
purchase, receive or otherwise acquire or to sell, transfer, assign or otherwise
dispose of, and scrip, certificates, receipts or other instruments evidencing
any ownership rights or interests in, any of the foregoing and "when issued" and
"delayed delivery" contracts for securities, issued, guaranteed or sponsored by
any governments, political subdivisions or governmental authorities, agencies or
instrumentalities, by any individuals, firms, companies, corporations,
syndicates, associations or trusts, or by any other organizations or entities
whatsoever, irrespective of their forms or the names by which they may be
described, whether or not they be organized and operated for profit, and whether
they be domestic or foreign with respect to The Commonwealth of Massachusetts or
the United States of America.
"Securities of the Trust" shall mean any Securities issued by the Trust.
"Series" shall mean one or more of the series of Shares authorized by the
Trustees to represent the beneficial interest in one or more of the Portfolios.
"Settlor" shall have the meaning stated in the first "Whereas" clause set
forth above.
"Shareholder" shall mean as of any particular time any Person shown of
record at such time on the books of the Trust as a holder of outstanding Shares
of any Series, and shall include a pledgee into whose name any such Shares are
transferred in pledge.
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"Shareholder Servicing Agent" shall have the meaning designated in Section
5.2(f) hereof.
"Shares" shall mean the transferable units into which the beneficial
interest in the Trust and each Portfolio of the Trust (as the context may
require) shall be divided from time to time, and includes fractions of Shares as
well as whole Shares. All references herein to "Shares" which are not
accompanied by a reference to any particular Series or Portfolio shall be deemed
to apply to outstanding Shares without regard to Series.
"Single Class Voting," as used with respect to any matter to be acted upon
at a meeting or by written consent of Shareholders, shall mean a style of voting
in which each holder of one or more Shares shall be entitled to one vote on the
matter in question for each Share standing in his name on the records of the
Trust, irrespective of Series, and all outstanding Shares of all Series vote as
a single class.
"Statement of Additional Information," as used with respect to any
Portfolio or Series of Shares, shall mean the statement of additional
information relating to such Portfolio or Series, which constitutes part of the
currently effective Registration Statement of the Trust under the Securities Act
of 1933, as such statement of additional information may be amended or
supplemented from time to time.
"Transfer Agent" shall have the meaning defined in Section 5.2(e) hereof.
"Trust" shall have the meaning stated in the fourth "Whereas" clause set
forth above.
"Trust Property" shall mean, as of any particular time, any and all
property which shall have been transferred, conveyed or paid to the Trust or the
Trustees, and all interest, dividends, income, earnings, profits and gains
therefrom, and proceeds thereof, including any proceeds derived from the sale,
exchange or liquidation thereof, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, and which at
such time is owned or held by, or for the account of, the Trust or the Trustees,
without regard to the Portfolio to which such property is allocated.
"Trustees" shall mean, collectively, the Initial Trustee, so long as he
shall continue in office, and all other individuals who at the time in question
have been duly elected or appointed as Trustees of the Trust in accordance with
the provisions hereof and who have qualified and are then in office. At any time
at which there shall be only one (l) Trustee in office, such term shall mean
such single Trustee.
<PAGE>
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SECTION 1.5. Real Property to be Converted into Personal Property.
Notwithstanding any other provision hereof, any real property at any time
forming part of the Trust Property shall be held in trust for sale and
conversion into personal property at such time or times and in such manner and
upon such terms as the Trustees shall approve, but the Trustees shall have power
until the termination of this Trust to postpone such conversion as long as they
in their uncontrolled discretion shall think fit, and for the purpose of
determining the nature of the interest of the Shareholders therein, all such
real property shall at all times be considered as personal property.
ARTICLE 2
PURPOSE OF THE TRUST
The purpose of the Trust shall be to engage in the business of being an
investment company, and as such of subscribing for, purchasing or otherwise
acquiring, holding for investment or trading in, borrowing, lending and selling
short, selling, assigning, negotiating or exchanging and otherwise disposing of,
and turning to account, realizing upon and generally dealing in and with, in any
manner, (a) Securities of all kinds, (b) precious metals and other minerals,
contracts to purchase and sell, and other interests of every nature and kind in,
such metals or minerals, and (c) rare coins and other numismatic items, and all
as the Trustees in their discretion shall determine to be necessary, desirable
or appropriate, and to exercise and perform any and every act, thing or power
necessary, suitable or desirable for the accomplishment of such purpose, the
attainment of any of the objects or the furtherance of any of the powers given
hereby which are lawful purposes, objects or powers of a trust with transferable
shares of the type commonly termed a Massachusetts business trust; and to do
every other act or acts or thing or things incidental or appurtenant to or
growing out of or in connection with the aforesaid objects, purposes or powers,
or any of them, which a trust of the type commonly termed a Massachusetts
business trust is not now or hereafter prohibited from doing, exercising or
performing.
ARTICLE 3
POWERS OF THE TRUSTEES
SECTION 3.1. Powers in General. The Trustees shall have, without other or
further authorization, full, entire, exclusive and absolute power, control and
authority over, and management of, the business of the Trust and over the Trust
Property, to the same extent as if the Trustees were the sole owners of the
business and property of the Trust in their own right, and with such powers of
delegation as may be permitted by this Declaration, subject only to such
limitations as may be expressly imposed by this Declara-
<PAGE>
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tion of Trust or by applicable law. The enumeration of any specific power or
authority herein shall not be construed as limiting the aforesaid power or
authority or any specific power or authority. Without limiting the foregoing,
the Trustees may adopt By-Laws not inconsistent with this Declaration of Trust
providing for the conduct of the business and affairs of the Trust and may amend
and repeal them to the extent that such By-Laws do not reserve that right to the
Shareholders; they may select, and from time to time change, the fiscal year of
the Trust; they may adopt and use a seal for the Trust, provided, that unless
otherwise required by the Trustees, it shall not be necessary to place the seal
upon, and its absence shall not impair the validity of, any document, instrument
or other paper executed and delivered by or on behalf of the Trust; they may
from time to time in accordance with the provisions of Section 6.1 hereof
establish one or more Portfolios to which they may allocate such of the Trust
Property, subject to such liabilities, as they shall deem appropriate, each such
Portfolio to be operated by the Trustees as a separate and distinct investment
medium and with separately defined investment objectives and policies and
distinct investment purposes, all as established by the Trustees, or from time
to time changed by them; they may as they consider appropriate elect and remove
officers and appoint and terminate agents and consultants and hire and terminate
employees, any one or more of the foregoing of whom may be a Trustee; they may
appoint from their own number, and terminate, any one or more committees
consisting of one or more Trustees, including without implied limitation an
Executive Committee, which may, when the Trustees are not in session and subject
to the 1940 Act, exercise some or all of the power and authority of the Trustees
as the Trustees may determine; in accordance with Section 5.2 they may employ
one or more Investment Advisers, Administrators and Custodians and may authorize
any Custodian to employ subcustodians or agents and to deposit all or any part
of such assets in a system or systems for the central handling of Securities,
retain Transfer, Dividend Disbursing, Accounting or Shareholder Servicing Agents
or any of the foregoing, provide for the distribution of Shares by the Trust
through one or more Distributors, Principal Underwriters or otherwise, set
record dates or times for the determination of Shareholders entitled to
participate in, benefit from or act with respect to various matters; and in
general they may delegate to any officer of the Trust, to any Committee of the
Trustees and to any employee, Investment Adviser, Administrator, Distributor,
Custodian, Transfer Agent, Dividend Disbursing Agent, or any other agent or
consultant of the Trust, such authority, powers, functions and duties as they
consider desirable or appropriate for the conduct of the business and affairs of
the Trust, including without implied limitation the power and authority to act
in the name of the Trust and of the Trustees, to sign documents and to act as
attorney-in-fact for the Trustees. Without limiting the foregoing and to the
extent not inconsistent with the 1940 Act or other applicable law, the Trustees
shall have power and authority:
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(a) Investments. To invest and reinvest cash and other property; to
buy, for cash or on margin, and otherwise acquire and hold, Securities
created or issued by any Persons, including Securities maturing after the
possible termination of the Trust; to make payment therefor in any lawful
manner in exchange for any of the Trust Property; and to hold cash or
other property uninvested without in any event being bound or limited by
any present or future law or custom in regard to investments by trustees;
(b) Disposition of Assets. Upon such terms and conditions as they
deem best, to lend, sell, exchange, mortgage, pledge, hypothecate, grant
security interests in, encumber, negotiate, convey, transfer or otherwise
dispose of, and to trade in, any and all of the Trust Property, free and
clear of all trusts, for cash or on terms, with or without advertisement,
and on such terms as to payment, security or otherwise, all as they shall
deem necessary or expedient;
(c) Ownership Powers. To vote or give assent, or exercise any and
all other rights, powers and privileges of ownership with respect to, and
to perform any and all duties and obligations as owners of, any Securities
or other property forming part of the Trust Property, the same as any
individual might do; to exercise powers and rights of subscription or
otherwise which in any manner arise out of ownership of Securities, and to
receive powers of attorney from, and to execute and deliver proxies or
powers of attorney to, such Person or Persons as the Trustees shall deem
proper, receiving from or granting to such Person or Persons such power
and discretion with relation to Securities or other property of the Trust,
all as the Trustees shall deem proper;
(d) Form of Holding. To hold any Security or other property in a
form not indicating any trust, whether in bearer, unregistered or other
negotiable form, or in the name of the Trustees or of the Trust, or of the
Portfolio to which such Securities or property belong, or in the name of a
Custodian, subcustodian or other nominee or nominees, or otherwise, upon
such terms, in such manner or with such powers, as the Trustees may
determine, and with or without indicating any trust or the interest of the
Trustees therein;
(e) Reorganization, etc. To consent to or participate in any plan
for the reorganization, consolidation or merger of any corporation or
issuer, any Security of which is or was held in the Trust or any
Portfolio; to consent to any contract, lease, mortgage, purchase or sale
of property by such corporation or issuer, and to pay calls or
subscriptions with respect to any Security forming part of the Trust
Property;
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(f) Voting Trusts, etc. To join with other holders of any Securities
in acting through a committee, depository, voting trustee or otherwise,
and in that connection to deposit any Security with, or transfer any
Security to, any such committee, depository or trustee, and to delegate to
them such power and authority with relation to any Security (whether or
not so deposited or transferred) as the Trustees shall deem proper, and to
agree to pay, and to pay, such portion of the expenses and compensation of
such committee, depository or trustee as the Trustees shall deem proper;
(g) Contracts, etc. To enter into, make and perform all such
obligations, contracts, agreements and undertakings of every kind and
description, with any Person or Persons, as the Trustees shall in their
discretion deem expedient in the conduct of the business of the Trust, for
such terms as they shall see fit, whether or not extending beyond the term
of office of the Trustees, or beyond the possible expiration of the Trust;
to amend, extend, release or cancel any such obligations, contracts,
agreements or understandings; and to execute, acknowledge, deliver and
record all written instruments which they may deem necessary or expedient
in the exercise of their powers;
(h) Guarantees, etc. To endorse or guarantee the payment of any
notes or other obligations of any Person; to make contracts of guaranty or
suretyship, or otherwise assume liability for payment thereof; and to
mortgage and pledge the Trust Property or any part thereof to secure any
of or all such obligations;
(i) Partnerships, etc. To enter into joint ventures, general or
limited partnerships and any other combinations or associations;
(j) Insurance. To purchase and pay for entirely out of Trust
Property such insurance as they may deem necessary or appropriate for the
conduct of the business, including, without limitation, insurance policies
insuring the assets of the Trust and payment of distributions and
principal on its portfolio investments, and insurance policies insuring
the Shareholders, Trustees, officers, employees, agents, consultants,
Investment Advisers, managers, Administrators, Distributors, Principal
Underwriters, or other independent contractors, or any thereof (or any
Person connected therewith), of the Trust, individually, against all
claims and liabilities of every nature arising by reason of holding, being
or having held any such office or position, or by reason of any action
alleged to have been taken or omitted by any such Person in any such
capacity, including any action taken or omitted that may be determined to
constitute negligence, whether or not the Trust would have the power to
indemnify such Person against such liability;
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(k) Pensions, etc. To pay pensions for faithful service, as deemed
appropriate by the Trustees, and to adopt, establish and carry out
pension, profit-sharing, share bonus, share purchase, savings, thrift and
other retirement, incentive and benefit plans, trusts and provisions,
including the purchasing of life insurance and annuity contracts as a
means of providing such retirement and other benefits, for any or all of
the Trustees, officers, employees and agents of the Trust;
(l) Power of Collection and Litigation. To collect, sue for and
receive all sums of money coming due to the Trust, to employ counsel, and
to commence, engage in, prosecute, intervene in, join, defend, compound,
compromise, adjust or abandon, in the name of the Trust, any and all
actions, suits, proceedings, disputes, claims, controversies, demands or
other litigation or legal proceedings relating to the Trust, the business
of the Trust, the Trust Property, or the Trustees, officers, employees,
agents and other independent contractors of the Trust, in their capacity
as such, at law or in equity, or before any other bodies or tribunals, and
to compromise, arbitrate or otherwise adjust any dispute to which the
Trust may be a party, whether or not any suit is commenced or any claim
shall have been made or asserted;
(m) Issuance and Repurchase of Shares. To issue, sell, repurchase,
redeem, retire, cancel, acquire, hold, resell, reissue, dispose of,
transfer, and otherwise deal in Shares of any Series, and, subject to
Article 6 hereof, to apply to any such repurchase, redemption, retirement,
cancellation or acquisition of Shares of any Series, any of the Portfolio
Assets belonging to the Portfolio to which such Series relates, whether
constituting capital or surplus or otherwise, to the full extent now or
hereafter permitted by applicable law; provided, that any Shares belonging
to the Trust shall not be voted, directly or indirectly;
(n) Offices. To have one or more offices, and to carry on all or any
of the operations and business of the Trust, in any of the States,
Districts or Territories of the United States, and in any and all foreign
countries, subject to the laws of such State, District, Territory or
country;
(o) Expenses. To incur and pay any and all such expenses and charges
as they may deem advisable (including without limitation appropriate fees
to themselves as Trustees), and to pay all such sums of money for which
they may be held liable by way of damages, penalty, fine or otherwise;
(p) Agents, etc. To retain and employ any and all such servants,
agents, employees, attorneys, brokers, investment advisers, accountants,
architects, engineers, builders, escrow agents, depositories, consultants,
ancillary trustees,
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custodians, agents for collection, insurers, banks and officers, as they
think best for the business of the Trust or any Portfolio, to supervise
and direct the acts of any of the same, and to fix and pay their
compensation and define their duties;
(q) Accounts. To determine, and from time to time change, the method
or form in which the accounts of the Trust shall be kept;
(r) Valuation. Subject to the requirements of the 1940 Act, to
determine from time to time the value of all or any part of the Trust
Property and of any services, Securities, property or other consideration
to be furnished to or acquired by the Trust, and from time to time to
revalue all or any part of the Trust Property in accordance with such
appraisals or other information as is, in the Trustees' sole judgment,
necessary and satisfactory;
(s) Indemnification. In addition to the mandatory indemnification
provided for in Article 8 hereof and to the extent permitted by law, to
indemnify or enter into agreements with respect to indemnification with
any Person with whom this Trust has dealings, including, without
limitation, any independent contractor, to such extent as the Trustees
shall determine; and
(t) General. To do all such other acts and things and to conduct,
operate, carry on and engage in such other lawful businesses or business
activities as they shall in their sole and absolute discretion consider to
be incidental to the business of the Trust or any Portfolio as an
investment company, and to exercise all powers which they shall in their
discretion consider necessary, useful or appropriate to carry on the
business of the Trust or any Portfolio, to promote any of the purposes for
which the Trust is formed, whether or not such things are specifically
mentioned herein, in order to protect or promote the interests of the
Trust or any Portfolio, or otherwise to carry out the provisions of this
Declaration.
SECTION 3.2. Borrowings; Financings; Issuance of Securities. The Trustees
have power to borrow or in any other manner raise such sum or sums of money, and
to incur such other indebtedness for goods or services, or for or in connection
with the purchase or other acquisition of property, as they shall deem advisable
for the purposes of the Trust, in any manner and on any terms, and to evidence
the same by negotiable or non-negotiable Securities which may mature at any time
or times, even beyond the possible date of termination of the Trust; to issue
Securities of any type for such cash, property, services or other
considerations, and at such time or times and upon such terms, as they may deem
advisable; and to reacquire any such Securities. Any such Securities of the
Trust may, at the discretion of the Trustees, be made convertible into
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Shares of any Series, or may evidence the right to purchase, subscribe for or
otherwise acquire Shares of any Series, at such times and on such terms as the
Trustees may prescribe.
SECTION 3.3. Deposits. Subject to the requirements of the 1940 Act, the
Trustees shall have power to deposit any moneys or Securities included in the
Trust Property with any one or more banks, trust companies or other banking
institutions, whether or not such deposits will draw interest. Such deposits are
to be subject to withdrawal in such manner as the Trustees may determine, and
the Trustees shall have no responsibility for any loss which may occur by reason
of the failure of the bank, trust company or other banking institution with
which any such moneys or Securities have been deposited, other than liability
based on their gross negligence or willful fault.
SECTION 3.4. Allocations. The Trustees shall have power to determine
whether moneys or other assets received by the Trust shall be charged or
credited to income or capital, or allocated between income and capital,
including the power to amortize or fail to amortize any part or all of any
premium or discount, to treat any part or all of the profit resulting from the
maturity or sale of any asset, whether purchased at a premium or at a discount,
as income or capital, or to apportion the same between income and capital, to
apportion the sale price of any asset between income and capital, and to
determine in what manner any expenses or disbursements are to be borne as
between income and capital, whether or not in the absence of the power and
authority conferred by this Section 3.4 such assets would be regarded as income
or as capital or such expense or disbursement would be charged to income or to
capital; to treat any dividend or other distribution on any investment as income
or capital, or to apportion the same between income and capital; to provide or
fail to provide reserves, including reserves for depreciation, amortization or
obsolescence in respect of any Trust Property in such amounts and by such
methods as they shall determine; to allocate less than all of the consideration
paid for Shares of any Series to the shares of beneficial interest account of
the Portfolio to which such Shares relate and to allocate the balance thereof to
paid-in capital of that Portfolio, and to reallocate such amounts from time to
time; all as the Trustees may reasonably deem proper.
SECTION 3.5. Further Powers; Limitations. The Trustees shall have power to
do all such other matters and things, and to execute all such instruments, as
they deem necessary, proper or desirable in order to carry out, promote or
advance the interests of the Trust, although such matters or things are not
herein specifically mentioned. Any determination as to what is in the interests
of the Trust made by the Trustees in good faith shall be conclusive. In
construing the provisions of this Declaration of Trust, the presumption shall be
in favor of a grant of power to the Trustees. The Trustees shall not be required
to obtain any court order to deal with the Trust Property. The Trustees may
limit their right to exercise any of their powers through express
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restrictive provisions in the instruments evidencing or providing the terms for
any Securities of the Trust or in other contractual instruments adopted on
behalf of the Trust.
ARTICLE 4
TRUSTEES AND OFFICERS
SECTION 4.1. Number, Designation, Election, Term, etc.
(a) Initial Trustee. Upon his execution of this Declaration of Trust
or a counterpart hereof or some other writing in which he accepts such
Trusteeship and agrees to the provisions hereof, the individual whose
signature is affixed hereto as Initial Trustee shall become the Initial
Trustee hereof.
(b) Number. The Trustees serving as such, whether named above or
hereafter becoming Trustees, may increase (to not more than twenty (20))
or decrease the number of Trustees to a number other than the number
theretofore determined by a written instrument signed by a Majority of the
Trustees (or by an officer of the Trust pursuant to the vote of a Majority
of the Trustees). No decrease in the number of Trustees shall have the
effect of removing any Trustee from office prior to the expiration of his
term, but the number of Trustees may be decreased in conjunction with the
removal of a Trustee pursuant to subsection (e) of this Section 4.1.
(c) Election and Term. The Trustees shall be elected by the
Shareholders of the Trust at the first meeting of Shareholders immediately
prior to the initial public offering of Shares of the Trust, and the term
of office of any Trustees in office before such election shall terminate
at the time of such election. Subject to Section 16(a) of the 1940 Act and
to the preceding sentence of this subsection (c), the Trustees shall have
the power to set and alter the terms of office of the Trustees, and at any
time to lengthen or shorten their own terms or make their terms of
unlimited duration, to elect their own successors and, pursuant to
subsection (f) of this Section 4.1, to appoint Trustees to fill vacancies;
provided, that Trustees shall be elected by a Majority Shareholder Vote at
any such time or times as the Trustees shall determine that such action is
required under Section 16(a) of the 1940 Act or, if not so required, that
such action is advisable; and further provided, that, after the initial
election of Trustees by the Shareholders, the term of office of any
incumbent Trustee shall continue until the termination of this Trust or
his earlier death, resignation, retirement, bankruptcy, adjudicated
incompetency or other incapacity or removal, or if not so terminated,
until the election of such Trustee's successor in office has become
effective in accordance with this subsection (c).
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(d) Resignation and Retirement. Any Trustee may resign his trust or
retire as a Trustee, by a written instrument signed by him and delivered
to the other Trustees or to any officer of the Trust, and such resignation
or retirement shall take effect upon such delivery or upon such later date
as is specified in such instrument.
(e) Removal. Any Trustee may be removed with or without cause at any
time: (i) by written instrument, signed by at least two-thirds (2/3) of
the number of Trustees prior to such removal, specifying the date upon
which such removal shall become effective; or (ii) by vote of Shareholders
holding not less than two-thirds (2/3) of the Shares of each Series then
outstanding, cast in person or by proxy at any meeting called for the
purpose; or (iii) by a written declaration signed by Shareholders holding
not less than two-thirds (2/3) of the Shares of each Series then
outstanding and filed with the Trust's Custodian.
(f) Vacancies. Any vacancy or anticipated vacancy resulting from any
reason, including an increase in the number of Trustees, may (but need not
unless required by the 1940 Act) be filled by a Majority of the Trustees,
subject to the provisions of Section 16(a) of the 1940 Act, through the
appointment in writing of such other individual as such remaining Trustees
in their discretion shall determine; provided, that if there shall be no
Trustees in office, such vacancy or vacancies shall be filled by vote of
the Shareholders. Any such appointment or election shall be effective upon
such individual's written acceptance of his appointment as a Trustee and
his agreement to be bound by the provisions of this Declaration of Trust,
except that any such appointment in anticipation of a vacancy to occur by
reason of retirement, resignation or increase in the number of Trustees to
be effective at a later date shall become effective only at or after the
effective date of said retirement, resignation or increase in the number
of Trustees.
(g) Acceptance of Trusts. Any individual appointed as a Trustee
under subsection (f), and any individual elected as a Trustee under
subsection (c), of this Section 4.1 who was not, immediately prior to such
election, acting as a Trustee, shall accept such appointment or election
in writing and agree in such writing to be bound by the provisions hereof,
and whenever such individual shall have executed such writing and any
conditions to such appointment or election shall have been satisfied, such
individual shall become a Trustee and the Trust Property shall vest in the
new Trustee, together with the continuing Trustees, without any further
act or conveyance.
(h) Effect of Death, Resignation, etc. No vacancy, whether resulting
from the death, resignation, retirement, removal or incapacity of any
Trustee, an increase in the
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number of Trustees or otherwise, shall operate to annul or terminate the
Trust hereunder or to revoke or terminate any existing agency or contract
created or entered into pursuant to the terms of this Declaration of
Trust. Until such vacancy is filled as provided in this Section 4.1, the
Trustees in office (if any), regardless of their number, shall have all
the powers granted to the Trustees and shall discharge all the duties
imposed upon the Trustees by this Declaration. A written instrument
certifying the existence of such vacancy signed by a Majority of the
Trustees shall be conclusive evidence of the existence of such vacancy.
(i) Conveyance. In the event of the resignation or removal of a
Trustee or his otherwise ceasing to be a Trustee, such former Trustee or
his legal representative shall, upon request of the continuing Trustees,
execute and deliver such documents as may be required for the purpose of
consummating or evidencing the conveyance to the Trust or the remaining
Trustees of any Trust Property held in such former Trustee's name, but the
execution and delivery of such documents shall not be requisite to the
vesting of title to the Trust Property in the remaining Trustees, as
provided in subsection (g) of this Section 4.1 and in Section 4.13 hereof.
(j) No Accounting. Except to the extent required by the 1940 Act or
under circumstances which would justify his removal for cause, no Person
ceasing to be a Trustee (nor the estate of any such Person) shall be
required to make an accounting to the Shareholders or remaining Trustees
upon such cessation.
(k) Filings. Whenever there shall be a change in the composition of
the Trustees, the Trust shall cause to be filed in the office of the
Secretary of The Commonwealth of Massachusetts and in each other place
where the Trust is required to file amendments to this Declaration a copy
of (i) the instrument by which (in the case of the appointment of a new
Trustee, or the election of an individual who was not theretofore a
Trustee) the new Trustee accepted his appointment or election and agreed
to be bound by the terms of this Declaration, or (in the case of a
resignation) by which the former Trustee resigned as such, together in
either case with a certificate of one of the other Trustees as to the
circumstances of such election, appointment or resignation, or (ii) in the
case of the removal or death of a Trustee, a certificate of one of the
Trustees as to the circumstances of such removal or resignation.
SECTION 4.2. Trustees' Meetings; Participation by Telephone, etc. An
annual meeting of Trustees shall be held not later than the last day of the
fourth month after the end of each fiscal year of the Trust and special
meetings may be held from time to time, in each case, upon the call of such
officers as may be thereunto
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authorized by the By-Laws or vote of the Trustees, or by any two (2) Trustees,
or pursuant to a vote of the Trustees adopted at a duly constituted meeting of
the Trustees, and upon such notice as shall be provided in the By-Laws. The
Trustees may act with or without a meeting, and a written consent to any matter,
signed by a Majority of the Trustees, shall be equivalent to action duly taken
at a meeting of the Trustees, duly called and held. Except as otherwise provided
by the 1940 Act or other applicable law, or by this Declaration of Trust or the
By-Laws, any action to be taken by the Trustees may be taken by a majority of
the Trustees present at a meeting of Trustees (a quorum, consisting of at least
a Majority of the Trustees, being present), within or without Massachusetts. If
authorized by the By-Laws, all or any one or more Trustees may participate in a
meeting of the Trustees or any Committee thereof by means of conference
telephone or similar means of communication by means of which all Persons
participating in the meeting can hear each other, and participation in a meeting
pursuant to such means of communication shall constitute presence in person at
such meeting. The minutes of any meeting thus held shall be prepared in the same
manner as a meeting at which all participants were present in person.
SECTION 4.3. Committees; Delegation. The Trustees shall have power,
consistent with their ultimate responsibility to supervise the affairs of the
Trust, to delegate from time to time to an Executive Committee, and to one or
more other Committees, or to any single Trustee, the doing of such things and
the execution of such deeds or other instruments, either in the name of the
Trust or the names of the Trustees or as their attorney or attorneys in fact, or
otherwise as the Trustees may from time to time deem expedient, and any
agreement, deed, mortgage, lease or other instrument or writing executed by the
Trustee or Trustees or other Person to whom such delegation was made shall be
valid and binding upon the Trustees and upon the Trust.
SECTION 4.4. Officers. The Trustees shall annually elect such officers or
agents, who shall have such powers, duties and responsibilities as the Trustees
may deem to be advisable, and as they shall specify by resolution or in the
By-Laws. Except as may be provided in the By-Laws, any officer elected by the
Trustees may be removed at any time with or without cause. Any two (2) or more
offices may be held by the same individual.
SECTION 4.5. Compensation of Trustees and Officers. The Trustees shall fix
the compensation of all officers and Trustees. Without limiting the generality
of any of the provisions hereof, the Trustees shall be entitled to receive
reasonable compensation for their general services as such, and to fix the
amount of such compensation, and to pay themselves or any one or more of
themselves such compensation for special services, including legal, accounting,
or other professional services, as they in good faith may deem reasonable. No
Trustee or officer resigning and (except where a right to receive compensation
for a definite future period shall be expressly provided in a written agreement
<PAGE>
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with the Trust, duly approved by the Trustees) no Trustee or officer removed
shall have any right to any compensation as such Trustee or officer for any
period following his resignation or removal, or any right to damages on account
of his removal, whether his compensation be by the month, by the year or
otherwise.
SECTION 4.6. Ownership of Shares and Securities of the Trust. Any Trustee,
and any officer, employee or agent of the Trust, and any organization in which
any such Person is interested, may acquire, own, hold and dispose of Shares of
any Series and other Securities of the Trust for his or its individual account,
and may exercise all rights of a holder of such Shares or Securities to the same
extent and in the same manner as if such Person were not such a Trustee,
officer, employee or agent of the Trust; subject, in the case of Trustees and
officers, to the same limitations as directors or officers (as the case may be)
of a Massachusetts business corporation; and the Trust may issue and sell or
cause to be issued and sold and may purchase any such Shares or other Securities
from any such Person or any such organization, subject only to the general
limitations, restrictions or other provisions applicable to the sale or purchase
of Shares of such Series or other Securities of the Trust generally.
SECTION 4.7. Right of Trustees and Officers to Own Property or to Engage
in Business; Authority of Trustees to Permit Others to Do Likewise. The
Trustees, in their capacity as Trustees, and (unless otherwise specifically
directed by vote of the Trustees) the officers of the Trust in their capacity as
such, shall not be required to devote their entire time to the business and
affairs of the Trust. Except as otherwise specifically provided by vote of the
Trustees, or by agreement in any particular case, any Trustee or officer of the
Trust may acquire, own, hold and dispose of, for his own individual account, any
property, and acquire, own, hold, carry on and dispose of, for his own
individual account, any business entity or business activity, whether similar or
dissimilar to any property or business entity or business activity invested in
or carried on by the Trust, and without first offering the same as an investment
opportunity to the Trust, and may exercise all rights in respect thereof as if
he were not a Trustee or officer of the Trust. The Trustees shall also have
power, generally or in specific cases, to permit employees or agents of the
Trust to have the same rights (or lesser rights) to acquire, hold, own and
dispose of property and businesses, to carry on businesses, and to accept
investment opportunities without offering them to the Trust, as the Trustees
have by virtue of this Section 4.7.
SECTION 4.8. Reliance on Experts. The Trustees and officers may consult
with counsel, engineers, brokers, appraisers, auctioneers, accountants,
investment bankers, securities analysts or other Persons (any of which may be a
firm in which one or more of the Trustees or officers is or are members or
otherwise interested) whose profession gives authority to a statement made
<PAGE>
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by them on the subject in question, and who are reasonably deemed by the
Trustees or officers in question to be competent, and the advice or opinion of
such Persons shall be full and complete personal protection to all of the
Trustees and officers in respect of any action taken or suffered by them in good
faith and in reliance on or in accordance with such advice or opinion. In
discharging their duties, Trustees and officers, when acting in good faith, may
rely upon financial statements of the Trust represented to them to be correct by
any officer of the Trust having charge of its books of account, or stated in a
written report by an independent certified public accountant fairly to present
the financial position of the Trust. The Trustees and officers may rely, and
shall be personally protected in acting, upon any instrument or other document
believed by them to be genuine.
SECTION 4.9. Surety Bonds. No Trustee, officer, employee or agent of the
Trust shall, as such, be obligated to give any bond or surety or other security
for the performance of any of his duties, unless required by applicable law or
regulation, or unless the Trustees shall otherwise determine in any particular
case.
SECTION 4.10. Apparent Authority of Trustees and Officers. No purchaser,
lender, transfer agent or other Person dealing with the Trustees or any officer
of the Trust shall be bound to make any inquiry concerning the validity of any
transaction purporting to be made by the Trustees or by such officer, or to make
inquiry concerning or be liable for the application of money or property paid,
loaned or delivered to or on the order of the Trustees or of such officer.
SECTION 4.11. Other Relationships Not Prohibited. The fact that:
(a) any of the Shareholders, Trustees or officers of the Trust is a
shareholder, director, officer, partner, trustee, employee, manager,
adviser, principal underwriter or distributor or agent of or for any
Contracting Party (as defined in Section 5.2 hereof), or of or for any
parent or affiliate of any Contracting Party, or that the Contracting
Party or any parent or affiliate thereof is a Shareholder or has an
interest in the Trust or any Portfolio, or that
(b) any Contracting Party may have a contract providing for the rendering
of any similar services to one or more other corporations, trusts,
associations, partnerships, limited partnerships or other organizations,
or have other business or interests,
shall not affect the validity of any contract for the performance and assumption
of services, duties and responsibilities to, for or of the Trust and/or the
Trustees or disqualify any Shareholder, Trustee or officer of the Trust from
voting upon or executing the same or create any liability or accountability to
the Trust or to
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the holders of Shares of any Series; provided, that, in the case of any
relationship or interest referred to in the preceding clause (a) on the part of
any Trustee or officer of the Trust, either (x) the material facts as to such
relationship or interest have been disclosed to or are known by the Trustees not
having any such relationship or interest and the contract involved is approved
in good faith by a majority of such Trustees not having any such relationship or
interest (even though such unrelated or disinterested Trustees are less than a
quorum of all of the Trustees), (y) the material facts as to such relationship
or interest and as to the contract have been disclosed to or are known by the
Shareholders entitled to vote thereon and the contract involved is specifically
approved in good faith by vote of the Shareholders, or (z) the specific contract
involved is fair to the Trust as of the time it is authorized, approved or
ratified by the Trustees or by the Shareholders.
SECTION 4.12. Payment of Trust Expenses. The Trustees are authorized to
pay or to cause to be paid out of the principal or income of the Trust, or
partly out of principal and partly out of income, and according to any
allocation to particular Portfolios made by them pursuant to Section 6.2(b)
hereof, all expenses, fees, charges, taxes and liabilities incurred or arising
in connection with the business and affairs of the Trust or in connection with
the management thereof, including, but not limited to, the Trustees'
compensation and such expenses and charges for the services of the Trust's
officers, employees, Investment Adviser, Administrator, Distributor, Principal
Underwriter, auditor, counsel, Custodian, Transfer Agent, Dividend Disbursing
Agent, Accounting Agent, Shareholder Servicing Agent, and such other agents,
consultants, and independent contractors and such other expenses and charges as
the Trustees may deem necessary or proper to incur.
SECTION 4.13. Ownership of the Trust Property. Legal title to all the
Trust Property shall be vested in the Trustees as joint tenants, except that the
Trustees shall have power to cause legal title to any Trust Property to be held
by or in the name of one or more of the Trustees, or in the name of the Trust,
or of any particular Portfolio, or in the name of any other Person as nominee,
on such terms as the Trustees may determine; provided, that the interest of the
Trust and of the respective Portfolio therein is appropriately protected. The
right, title and interest of the Trustees in the Trust Property shall vest
automatically in each Person who may hereafter become a Trustee. Upon the
termination of the term of office of a Trustee as provided in Section 4.1(c),
(d) or (e) hereof, such Trustee shall automatically cease to have any right,
title or interest in any of the Trust Property, and the right, title and
interest of such Trustee in the Trust Property shall vest automatically in the
remaining Trustees. Such vesting and cessation of title shall be effective
whether or not conveyancing documents have been executed and delivered pursuant
to Section 4.1(i) hereof.
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ARTICLE 5
DELEGATION OF MANAGERIAL RESPONSIBILITIES
SECTION 5.1. Appointment; Action by Less than All Trustees. The Trustees
shall be responsible for the general operating policy of the Trust and for the
general supervision of the business of the Trust conducted by officers, agents,
employees or advisers of the Trust or by independent contractors, but the
Trustees shall not be required personally to conduct all the business of the
Trust and, consistent with their ultimate responsibility as stated herein, the
Trustees may appoint, employ or contract with one or more officers, employees
and agents to conduct, manage and/or supervise the operations of the Trust, and
may grant or delegate such authority to such officers, employees and/or agents
as the Trustees may, in their sole discretion, deem to be necessary or
desirable, without regard to whether such authority is normally granted or
delegated by trustees. With respect to those matters of the operation and
business of the Trust which they shall elect to conduct themselves, except as
otherwise provided by this Declaration or the By-Laws, if any, the Trustees may
authorize any single Trustee or defined group of Trustees, or any committee
consisting of a number of Trustees less than the whole number of Trustees then
in office without specification of the particular Trustees required to be
included therein, to act for and to bind the Trust, to the same extent as the
whole number of Trustees could do, either with respect to one or more particular
matters or classes of matters, or generally.
SECTION 5.2. Certain Contracts. Subject to compliance with the provisions
of the 1940 Act, but notwithstanding any limitations of present and future law
or custom in regard to delegation of powers by trustees generally, the Trustees
may, at any time and from time to time in their discretion and without limiting
the generality of their powers and authority otherwise set forth herein, enter
into one or more contracts with any one or more corporations, trusts,
associations, partnerships, limited partnerships or other types of
organizations, or individuals ("Contracting Party"), to provide for the
performance and assumption of some or all of the following services, duties and
responsibilities to, for or on behalf of the Trust and/or any Portfolio, and/or
the Trustees, and to provide for the performance and assumption of such other
services, duties and responsibilities in addition to those set forth below, as
the Trustees may deem appropriate:
(a) Advisory. An investment advisory or management agreement whereby
the Investment Adviser shall undertake to furnish the Trust such
management, investment advisory or supervisory, administrative,
accounting, legal, statistical and research facilities and services, and
such other facilities and services, if any, as the Trustees shall from
time to time consider desirable, all upon such terms and conditions as the
Trustees may in their discretion determine to be not inconsistent with
this Declaration, the applicable
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provisions of the 1940 Act or any applicable provisions of the By-Laws.
Any such advisory or management agreement and any amendment thereto shall
be subject to approval by a Majority Shareholder Vote at a meeting of the
Shareholders of the Trust. Notwithstanding any provisions of this
Declaration, the Trustees may authorize the Investment Adviser (subject to
such general or specific instructions as the Trustees may from time to
time adopt) to effect purchases, sales, loans or exchanges of portfolio
securities of the Trust on behalf of the Trustees or may authorize any
officer or employee of the Trust or any Trustee to effect such purchases,
sales, loans or exchanges pursuant to recommendations of the Investment
Adviser (and all without further action by the Trustees). Any such
purchases, sales, loans and exchanges shall be deemed to have been
authorized by all of the Trustees. The Trustees may, in their sole
discretion, call a meeting of Shareholders in order to submit to a vote of
Shareholders at such meeting the approval of continuance of any such
investment advisory or management agreement. If the Shareholders of any
Portfolio should fail to approve any such investment advisory or
management agreement, the Investment Adviser may nonetheless serve as
Investment Adviser with respect to any other Portfolio whose Shareholders
shall have approved such contract.
(b) Administration. An agreement whereby the agent, subject to the
general supervision of the Trustees and in conformity with any policies of
the Trustees with respect to the operations of the Trust and each
Portfolio, will supervise all or any part of the operations of the Trust
and each Portfolio, and will provide all or any part of the administrative
and clerical personnel, office space and office equipment and services
appropriate for the efficient administration and operations of the Trust
and each Portfolio (any such agent being herein referred to as an
"Administrator").
(c) Distribution. An agreement providing for the sale of Shares of
any one or more Series to net the Trust not less than the net asset value
per Share (as described in Section 6.2(h) hereof) and pursuant to which
the Trust may appoint the other party to such agreement as its principal
underwriter or sales agent for the distribution of such Shares. The
agreement shall contain such terms and conditions as the Trustees may in
their discretion determine to be not inconsistent with this Declaration,
the applicable provisions of the 1940 Act and any applicable provisions of
the By-Laws (any such agent being herein referred to as a "Distributor" or
a "Principal Underwriter", as the case may be).
(d) Custodian. The appointment of a bank or trust company having an
aggregate capital, surplus and undivided profits (as shown in its last
published report) of at least
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two million dollars ($2,000,000) as custodian of the Securities and cash
of the Trust and of each Portfolio and of the accounting records in
connection therewith (any such agent being herein referred to as a
"Custodian").
(e) Transfer and Dividend Disbursing Agency. An agreement with an
agent to maintain records of the ownership of outstanding Shares, the
issuance and redemption and the transfer thereof (any such agent being
herein referred to as a "Transfer Agent"), and to disburse any dividends
declared by the Trustees and in accordance with the policies of the
Trustees and/or the instructions of any particular Shareholder to reinvest
any such dividends (any such agent being herein referred to as a "Dividend
Disbursing Agent").
(f) Shareholder Servicing. An agreement with an agent to provide
service with respect to the relationship of the Trust and its
Shareholders, records with respect to Shareholders and their Shares, and
similar matters (any such agent being herein referred to as a "Shareholder
Servicing Agent").
(g) Accounting. An agreement with an agent to handle all or any part
of the accounting responsibilities, whether with respect to the Trust's
properties, Shareholders or otherwise (any such agent being herein
referred to as an "Accounting Agent").
The same Person may be the Contracting Party for some or all of the services,
duties and responsibilities to, for and of the Trust and/or the Trustees, and
the contracts with respect thereto may contain such terms interpretive of or in
addition to the delineation of the services, duties and responsibilities
provided for, including provisions that are not inconsistent with the 1940 Act
relating to the standard of duty of and the rights to indemnification of the
Contracting Party and others, as the Trustees may determine. Nothing herein
shall preclude, prevent or limit the Trust or a Contracting Party from entering
into sub-contractual arrangements relative to any of the matters referred to in
subsections (a) through (g) of this Section 5.2.
ARTICLE 6
PORTFOLIOS AND SHARES
SECTION 6.1. Description of Portfolios and Shares.
(a) Shares; Portfolios; Series of Shares. The beneficial interest in
the Trust shall be divided into Shares having a nominal or par value of
one mill ($.001) per Share, and all of one class, of which an unlimited
number may be issued. The Trustees shall have the authority from time to
time to establish and designate one or more separate, distinct and
independent Portfolios into which the assets of
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the Trust shall be divided, and to authorize a separate Series of Shares
for each such Portfolio (each of which Series, including without
limitation each Series authorized in Section 6.2 hereof, shall represent
interests only in the Portfolio with respect to which such Series was
authorized), as they deem necessary or desirable. Except as otherwise
provided as to a particular Portfolio herein, or in the Certificate of
Designation therefor, the Trustees shall have all the rights and powers,
and be subject to all the duties and obligations, with respect to each
such Portfolio and the assets and affairs thereof as they have under this
Declaration with respect to the Trust and the Trust Property in general.
(b) Establishment, etc. of Portfolios; Authorization of Shares. The
establishment and designation of any Portfolio in addition to the
Portfolios established and designated in Section 6.2 hereof and the
authorization of the Shares thereof shall be effective upon the execution
by a Majority of the Trustees (or by an officer of the Trust pursuant to
the vote of a Majority of the Trustees) of an instrument setting forth
such establishment and designation and the relative rights and preferences
of the Shares of such Portfolio and the manner in which the same may be
amended (a "Certificate of Designation"), and may provide that the number
of Shares of such Series which may be issued is unlimited, or may limit
the number issuable. At any time that there are no Shares outstanding of
any particular Portfolio previously established and designated, including
any Portfolio established and designated in Section 6.2 hereof, the
Trustees may by an instrument executed by a Majority of the Trustees (or
by an officer of the Trust pursuant to the vote of a Majority of the
Trustees) terminate such Portfolio and the establishment and designation
thereof and the authorization of its Shares (a "Certificate of
Termination"). Each Certificate of Designation, Certificate of Termination
and any instrument amending a Certificate of Designation shall have the
status of an amendment to this Declaration of Trust, and shall be filed
and become effective as provided in Section 9.4 hereof.
(c) Character of Separate Portfolios and Shares Thereof. Each
Portfolio established hereunder shall be a separate component of the
assets of the Trust, and the holders of Shares of the Series representing
the beneficial interest in the assets of that Portfolio shall be
considered Shareholders of such Portfolio, but such Shareholders shall
also be considered Shareholders of the Trust for purposes of receiving
reports and notices and, except as otherwise provided herein or in the
Certificate of Designation of a particular Portfolio as to such Portfolio,
or as required by the 1940 Act or other applicable law, the right to vote,
all without distinction by Series. The Trustees shall have exclusive power
without the requirement of Shareholder
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approval to establish and designate such separate and distinct Portfolios,
and to fix and determine the relative rights and preferences as between
the shares of the respective Portfolios as to rights of redemption and the
price, terms and manner of redemption, special and relative rights as to
dividends and other distributions and on liquidation, sinking or purchase
fund provisions, conversion rights, and conditions under which the
Shareholders of the several Portfolios shall have separate voting rights
or no voting rights.
(d) Consideration for Shares. The Trustees may issue Shares of any
Series for such consideration (which may include property subject to, or
acquired in connection with the assumption of, liabilities) and on such
terms as they may determine (or for no consideration if pursuant to a
Share dividend or split up), all without action or approval of the
Shareholders. All Shares when so issued on the terms determined by the
Trustees shall be fully paid and non-assessable (but may be subject to
mandatory contribution back to the Trust as provided in Section 6.2(h)
hereof). The Trustees may classify or reclassify any unissued Shares, or
any Shares of any Series previously issued and reacquired by the Trust,
into Shares of one or more other Portfolios that may be established and
designated from time to time.
SECTION 6.2. Establishment and Designation of Certain Portfolios; General
Provisions for All Portfolios. Without limiting the authority of the Trustees
set forth in Section 6.1(a) hereof to establish and designate further
Portfolios, there are hereby established and designated the following six (6)
Portfolios: the Alger VIP Money Market Portfolio, the Alger VIP Fixed Income
Portfolio, the Alger VIP High Yield Portfolio, the Alger VIP Income and Growth
Portfolio, the Alger VIP Small Capitalization Portfolio and the Alger VIP Growth
Portfolio. The Shares of such Portfolios, and the Shares of any further
Portfolios that may from time to time be established and designated by the
Trustees shall (unless the Trustees otherwise determine with respect to some
further Portfolio at the time of establishing and designating the same) have the
following relative rights and preferences:
(a) Assets Belonging to Portfolios. Any portion of the Trust
Property allocated to a particular Portfolio, and all consideration
received by the Trust for the issue or sale of Shares of such Portfolio,
together with all assets in which such consideration is invested or
reinvested, all interest, dividends, income, earnings, profits and gains
therefrom, and proceeds thereof, including any proceeds derived from the
sale, exchange or liquidation of such assets, and any funds or payments
derived from any reinvestment of such proceeds in whatever form the same
may be, shall be held by the Trustees in trust for the benefit of the
holders of Shares of that Portfolio and shall irrevocably belong to that
Portfolio for all purposes, and shall be so recorded upon the books of
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account of the Trust, and the Shareholders of such Portfolio shall not
have, and shall be conclusively deemed to have waived, any claims to the
assets of any Portfolio of which they are not Shareholders. Such
consideration, assets, interest, dividends, income, earnings, profits,
gains and proceeds, together with any General Items allocated to that
Portfolio as provided in the following sentence, are herein referred to
collectively as "Portfolio Assets" of such Portfolio, and as assets
"belonging to" that Portfolio. In the event that there are any assets,
income, earnings, profits, and proceeds thereof, funds, or payments which
are not readily identifiable as belonging to any particular Portfolio
(collectively "General Items"), the Trustees shall allocate such General
Items to and among any one or more of the Portfolios established and
designated from time to time in such manner and on such basis as they, in
their sole discretion, deem fair and equitable; and any General Items so
allocated to a particular Portfolio shall belong to and be part of the
Portfolio Assets of that Portfolio. Each such allocation by the Trustees
shall be conclusive and binding upon the Shareholders of all Portfolios
for all purposes.
(b) Liabilities of Portfolios. The assets belonging to each
particular Portfolio shall be charged with the liabilities in respect of
that Portfolio and all expenses, costs, charges and reserves attributable
to that Portfolio, and any general liabilities, expenses, costs, charges
or reserves of the Trust which are not readily identifiable as pertaining
to any particular Portfolio shall be allocated and charged by the Trustees
to and among any one or more of the Portfolios established and designated
from time to time in such manner and on such basis as the Trustees in
their sole discretion deem fair and equitable. The indebtedness, expenses,
costs, charges and reserves allocated and so charged to a particular
Portfolio are herein referred to as "liabilities of" that Portfolio. Each
allocation of liabilities, expenses, costs, charges and reserves by the
Trustees shall be conclusive and binding upon the Shareholders of all
Portfolios for all purposes. Any creditor of any Portfolio may look only
to the assets of that Portfolio to satisfy such creditor's debt.
(c) Dividends. Dividends and distributions on Shares of a particular
Portfolio may be paid with such frequency as the Trustees may determine,
which may be daily or otherwise pursuant to a standing resolution or
resolutions adopted only once or with such frequency as the Trustees may
determine, to the Shareholders of that Portfolio, from such of the income,
accrued or realized, and capital gains, realized or unrealized, and out of
the assets belonging to that Portfolio, as the Trustees may determine,
after providing for actual and accrued liabilities of that Portfolio. All
dividends and distributions on Shares of a particular Portfolio shall be
distributed pro rata to the Shareholders of that Portfolio proportion to
the number of such Shares held by such holders
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at the date and time of record established for the payment of such
dividends or distributions, except that in connection with any dividend or
distribution program or procedure the Trustees may determine that no
dividend or distribution shall be payable on Shares as to which the
Shareholder's purchase order and/or payment have not been received by the
time or times established by the Trustees under such program or procedure,
or that dividends or distributions shall be payable on Shares which have
been tendered by the holder thereof for redemption or repurchase, but the
redemption or repurchase proceeds of which have not yet been paid to such
Shareholder. Such dividends and distributions may be made in cash or
Shares of that Portfolio or a combination thereof as determined by the
Trustees, or pursuant to any program that the Trustees may have in effect
at the time for the election by each Shareholder of the mode of the making
of such dividend or distribution to that Shareholder. Any such dividend or
distribution paid in Shares will be paid at the net asset value thereof as
determined in accordance with subsection (h) of this Section 6.2.
(d) Liquidation. In the event of the liquidation or dissolution of
the Trust, the Shareholders of each Portfolio of which Shares are
outstanding shall be entitled to receive, when and as declared by the
Trustees, the excess of the Portfolio Assets over the liabilities of such
Portfolio. The assets so distributable to the Shareholders of any
particular Portfolio shall be distributed among such Shareholders in
proportion to the number of Shares of that Portfolio held by them and
recorded on the books of the Trust. The liquidation of any particular
Portfolio may be authorized by vote of a Majority of the Trustees, subject
to the affirmative vote of "a majority of the outstanding voting
securities" of that Portfolio, as the quoted phrase is defined in the 1940
Act, determined in accordance with clause (iii) of the definition of
"Majority Shareholder Vote" in Section 1.4 hereof.
(e) Voting. The Shareholders shall have the voting rights set forth
in or determined under Article 7 hereof.
(f) Redemption by Shareholder. Each holder of Shares of a particular
Portfolio shall have the right at such times as may be permitted by the
Trust, but no less frequently than once each week, to require the Trust to
redeem all or any part of his Shares of that Portfolio at a redemption
price equal to the net asset value per Share of that Portfolio next
determined in accordance with subsection (h) of this Section 6.2 after the
Shares are properly tendered for redemption; provided, that the Trustees
may from time to time, in their discretion, determine and impose a fee for
such redemption. Payment of the redemption price shall be in cash;
provided, however, that if the Trustees determine, which determination
shall be conclusive, that conditions exist which make payment
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wholly in cash unwise or undesirable, the Trust may make payment wholly or
partly in Securities or other assets belonging to such Portfolio at the
value of such Securities or assets used in such determination of net asset
value. Notwithstanding the foregoing, the Trust may postpone payment of
the redemption price and may suspend the right of the holders of Shares of
any Portfolio to require the Trust to redeem Shares of that Portfolio
during any period or at any time when and to the extent permissible under
the 1940 Act.
(g) Redemption at the Option of the Trust. Each Share of any
Portfolio shall be subject to redemption at the option of the Trust at the
redemption price which would be applicable if such Share were then being
redeemed by the Shareholder pursuant to subsection (f) of this Section
6.2: (i) at any time, if the Trustees determine in their sole discretion
that failure to so redeem may have materially adverse consequences to the
holders of the Shares of the Trust or of any Portfolio, or (ii) upon such
other conditions with respect to maintenance of Shareholder accounts of a
minimum amount as may from time to time be determined by the Trustees and
set forth in the then current Prospectus of such Portfolio. Upon such
redemption the holders of the Shares so redeemed shall have no further
right with respect thereto other than to receive payment of such
redemption price.
(h) Net Asset Value. The net asset value per Share of any Portfolio
at any time shall be the quotient obtained by dividing the value of the
net assets of such Portfolio at such time (being the current value of the
assets belonging to such Portfolio, less its then existing liabilities) by
the total number of Shares of that Portfolio then outstanding, all
determined in accordance with the methods and procedures, including
without limitation those with respect to rounding, established by the
Trustees from time to time. The Trustees may determine to maintain the net
asset value per Share of any Portfolio at a designated constant dollar
amount and in connection therewith may adopt procedures not inconsistent
with the 1940 Act for the continuing declaration of income attributable to
that Portfolio as dividends payable in additional Shares of that Portfolio
at the designated constant dollar amount and for the handling of any
losses attributable to that Portfolio. Such procedures may provide that in
the event of any loss each Shareholder shall be deemed to have contributed
to the shares of beneficial interest account of that Portfolio his pro
rata portion of the total number of Shares required to be canceled in
order to permit the net asset value per Share of that Portfolio to be
maintained, after reflecting such loss, at the designated constant dollar
amount. Each Shareholder of the Trust shall be deemed to have expressly
agreed, by his investment in any Portfolio with respect to which the
Trustees shall have adopted any such procedure, to make the contribution
referred to in the preceding sentence in the event of any such loss.
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(i) Transfer. All Shares of each particular Portfolio shall be
transferable, but transfers of Shares of a particular Portfolio will be
recorded on the Share transfer records of the Trust applicable to that
Portfolio only at such times as Shareholders shall have the right to
require the Trust to redeem Shares of that Portfolio and at such other
times as may be permitted by the Trustees.
(j) Equality. All Shares of each particular Portfolio shall
represent an equal proportionate interest in the assets belonging to that
Portfolio (subject to the liabilities of that Portfolio), and each Share
of any particular Portfolio shall be equal to each other Share thereof;
but the provisions of this sentence shall not restrict any distinctions
permissible under subsection (c) of this Section 6.2 that may exist with
respect to dividends and distributions on Shares of the same Portfolio.
The Trustees may from time to time divide or combine the Shares of any
particular Portfolio into a greater or lesser number of Shares of that
Portfolio without thereby changing the proportionate beneficial interest
in the assets belonging to that Portfolio or in any way affecting the
rights of the holders of Shares of any other Portfolio.
(k) Rights of Fractional Shares. Any fractional Share of any Series
shall carry proportionately all the rights and obligations of a whole
Share of that Series, including rights and obligations with respect to
voting, receipt of dividends and distributions, redemption of Shares, and
liquidation of the Trust or of the Portfolio to which they pertain.
(l) Conversion Rights. Subject to compliance with the requirements
of the 1940 Act, the Trustees shall have the authority to provide that
holders of Shares of any Portfolio shall have the right to convert said
Shares into Shares of one or more other Portfolios in accordance with such
requirements and procedures as the Trustees may establish.
SECTION 6.3. Ownership of Shares. The ownership of Shares shall be
recorded on the books of the Trust or of a Transfer Agent or similar agent for
the Trust, which books shall be maintained separately for the Shares of each
Series that has been authorized. Certificates evidencing the ownership of Shares
need not be issued except as the Trustees may otherwise determine from time to
time, and the Trustees shall have power to call outstanding Share certificates
and to replace them with book entries. The Trustees may make such rules as they
consider appropriate for the issuance of Share certificates, the use of
facsimile signatures, the transfer of Shares and similar matters. The record
books of the Trust as kept by the Trust or any Transfer Agent or similar agent,
as the case may be, shall be conclusive as to who are the Shareholders and as to
the number of Shares of each Portfolio held from time to time by each such
Shareholder.
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The holders of Shares of each Portfolio shall upon demand disclose to the
Trustees in writing such information with respect to their direct and indirect
ownership of Shares of such Portfolio as the Trustees deem necessary to comply
with the provisions of the Internal Revenue Code, or to comply with the
requirements of any other authority.
SECTION 6.4. Investments in the Trust. The Trustees may accept investments
in any Portfolio of the Trust from such Persons and on such terms and for such
consideration, not inconsistent with the provisions of the 1940 Act, as they
from time to time authorize. The Trustees may authorize any Distributor,
Principal Underwriter, Custodian, Transfer Agent or other Person to accept
orders for the purchase of Shares that conform to such authorized terms and to
reject any purchase orders for Shares, whether or not conforming to such
authorized terms.
SECTION 6.5. No Pre-emptive Rights. No Shareholder, by virtue of holding
Shares of any Portfolio, shall have any pre-emptive or other right to subscribe
to any additional Shares of that Portfolio, or to any shares of any other
Portfolio, or any other Securities issued by the Trust.
SECTION 6.6. Status of Shares. Every Shareholder, by virtue of having
become a Shareholder, shall be held to have expressly assented and agreed to the
terms hereof and to have become a party hereto. Shares shall be deemed to be
personal property, giving only the rights provided herein. Ownership of Shares
shall not entitle the Shareholder to any title in or to the whole or any part of
the Trust Property or right to call for a partition or division of the same or
for an accounting, nor shall the ownership of Shares constitute the Shareholders
partners. The death of a Shareholder during the continuance of the Trust shall
not operate to terminate the Trust or any Portfolio, nor entitle the
representative of any deceased Shareholder to an accounting or to take any
action in court or elsewhere against the Trust or the Trustees, but only to the
rights of said decedent under this Declaration of Trust.
ARTICLE 7
SHAREHOLDERS' VOTING POWERS AND MEETINGS
SECTION 7.1. Voting Powers. The Shareholders shall have power to vote only
(i) for the election or removal of Trustees as provided in Sections 4.1(c) and
(e) hereof, (ii) with respect to the approval or termination in accordance with
the 1940 Act of any contract with a Contracting Party as provided in Section 5.2
hereof as to which Shareholder approval is as required by the 1940 Act, (iii)
with respect to any termination or reorganization of the Trust or any Portfolio
to the extent and as provided in Sections 9.1 and 9.2 hereof, (iv) with respect
to any amendment of this Declaration of Trust to the extent and as provided in
Section
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9.3 hereof, (v) to the same extent as the stockholders of a Massachusetts
business corporation as to whether or not a court action, proceeding or claim
should or should not be brought or maintained derivatively or as a class action
on behalf of the Trust or any Portfolio, or the Shareholders of any of them
(provided, however, that a Shareholder of a particular Portfolio shall not in
any event be entitled to maintain a derivative or class action on behalf of any
other Portfolio or the Shareholders thereof), and (vi) with respect to such
additional matters relating to the Trust as may be required by the 1940 Act,
this Declaration of Trust, the By-Laws or any registration of the Trust with the
Commission (or any successor agency) or any State, or as the Trustees may
consider necessary or desirable. If and to the extent that the Trustees shall
determine that such action is required by law, they shall cause each matter
required or permitted to be voted upon at a meeting or by written consent of
Shareholders to be submitted to a separate vote of the outstanding Shares of
each Portfolio entitled to vote thereon; provided, that (i) when expressly
required by this Declaration or by the 1940 Act, actions of Shareholders shall
be taken by Single Class Voting of all outstanding Shares of each Series whose
holders are entitled to vote thereon; and (ii) when the Trustees determine that
any matter to be submitted to a vote of Shareholders affects only the rights or
interests of Shareholders of one or more but not all Portfolios, then only the
Shareholders of the Portfolios so affected shall be entitled to vote thereon.
SECTION 7.2. Number of Votes and Manner of Voting; Proxies. On each matter
submitted to a vote of the Shareholders, each holder of Shares of any Series
shall be entitled to a number of votes equal to the number of Shares of such
Series standing in his name on the books of the Trust. There shall be no
cumulative voting in the election of Trustees. Shares may be voted in person or
by proxy. A proxy with respect to Shares held in the name of two (2) or more
Persons shall be valid if executed by any one of them unless at or prior to
exercise of the proxy the Trust receives a specific written notice to the
contrary from any one of them. A proxy purporting to be executed by or on behalf
of a Shareholder shall be deemed valid unless challenged at or prior to its
exercise and the burden of proving invalidity shall rest on the challenger.
Until Shares are issued, the Trustees may exercise all rights of Shareholders
and may take any action required by law, this Declaration of Trust or the
By-Laws to be taken by Shareholders.
SECTION 7.3. Meetings. Meetings of Shareholders may be called by the
Trustees from time to time for the purpose of taking action upon any matter
requiring the vote or authority of the Shareholders as herein provided, or upon
any other matter deemed by the Trustees to be necessary or desirable. Written
notice or any meeting of Shareholders shall be given or caused to be given by
the Trustees by mailing such notice at least seven (7) days before such meeting,
postage prepaid, stating the time, place and purpose of the meeting, to each
Shareholder at the Shareholder's
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address as it appears on the records of the Trust. The Trustees shall promptly
call and give notice of a meeting of Shareholders for the purpose of voting upon
removal of any Trustee of the Trust when requested to do so in writing by
Shareholders holding not less than ten percent (10%) of the Shares then
outstanding. If the Trustees shall fail to call or give notice of any meeting of
Shareholders for a period of thirty (30) days after written application by
Shareholders holding at least ten percent (10%) of the Shares then outstanding
requesting that a meeting be called for any other purpose requiring action by
the Shareholders as provided herein or in the By-Laws, then Shareholders holding
at least ten percent (10%) of the Shares then outstanding may call and give
notice of such meeting, and thereupon the meeting shall be held in the manner
provided for herein in case of call thereof by the Trustees.
SECTION 7.4. Record Dates. For the purpose of determining the Shareholders
who are entitled to vote or act at any meeting or any adjournment thereof, or
who are entitled to participate in any dividend or distribution, or for the
purpose of any other action, the Trustees may from time to time close the
transfer books for such period, not exceeding thirty (30) days (except at or in
connection with the termination of the Trust), as the Trustees may determine; or
without closing the transfer books the Trustees may fix a date and time not more
than sixty (60) days prior to the date of any meeting of Shareholders or other
action as the date and time of record for the determination of Shareholders
entitled to vote at such meeting or any adjournment thereof or to be treated as
Shareholders of record for purposes of such other action, and any Shareholder
who was a Shareholder at the date and time so fixed shall be entitled to vote at
such meeting or any adjournment thereof or to be treated as a Shareholder of
record for purposes of such other action, even though he has since that date and
time disposed of his Shares, and no Shareholder becoming such after that date
and time shall be so entitled to vote at such meeting or any adjournment thereof
or to be treated as a Shareholder of record for purposes of such other action.
SECTION 7.5. Quorum and Required Vote. A majority of the Shares entitled
to vote shall be a quorum for the transaction of business at a Shareholders'
meeting, but any lesser number shall be sufficient for adjournments. Any
adjourned session or sessions may be held within a reasonable time after the
date set for the original meeting without the necessity of further notice. A
Majority Shareholder Vote at a meeting of which a quorum is present shall decide
any question, except when a different vote is required or permitted by any
provision of the 1940 Act or other applicable law or by this Declaration of
Trust or the By-Laws, or when the Trustees shall in their discretion require a
larger vote or the vote of a majority or larger fraction of the Shares of one or
more particular Series.
SECTION 7.6. Action by Written Consent. Subject to the provisions of the
1940 Act and other applicable law, any action
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taken by Shareholders may be taken without a meeting if a majority of
Shareholders entitled to vote on the matter (or such larger proportion thereof
or of the Shares of any particular Series as shall be required by the 1940 Act
or by any express provision of this Declaration of Trust or the By-Laws or as
shall be permitted by the Trustees) consent to the action in writing and if the
writings in which such consent is given are filed with the records of the
meetings of Shareholders, to the same extent and for the same period as proxies
given in connection with a Shareholders' meeting. Such consent shall be treated
for all purposes as a vote taken at a meeting of Shareholders.
SECTION 7.7. Inspection of Records. The records of the Trust shall be open
to inspection by Shareholders to the same extent as is permitted stockholders of
a Massachusetts business corporation under the Massachusetts Business
Corporation Law.
SECTION 7.8. Additional Provisions. The By-Laws may include further
provisions for Shareholders' votes and meetings and related matters not
inconsistent with the provisions hereof.
ARTICLE 8
LIMITATION OF LIABILITY; INDEMNIFICATION
SECTION 8.1. Trustees, Shareholders, etc. Not Personally Liable; Notice.
The Trustees and officers of the Trust, in incurring any debts, liabilities or
obligations, or in limiting or omitting any other actions for or in connection
with the Trust, are or shall be deemed to be acting as Trustees or officers of
the Trust and not in their own capacities. No Shareholder shall be subject to
any personal liability whatsoever in tort, contract or otherwise to any other
Person or Persons in connection with the assets or the affairs of the Trust or
of any Portfolio, and subject to Section 8.4 hereof, no Trustee, officer,
employee or agent of the Trust shall be subject to any personal liability
whatsoever in tort, contract, or otherwise, to any other Person or Persons in
connection with the assets or affairs of the Trust or of any Portfolio, save
only that arising from his own willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of his office or the
discharge of his functions. The Trust (or if the matter relates only to a
particular Portfolio, that Portfolio) shall be solely liable for any and all
debts, claims, demands, judgments, decrees, liabilities or obligations of any
and every kind, against or with respect to the Trust or such Portfolio in tort,
contract or otherwise in connection with the assets or the affairs of the Trust
or such Portfolio, and all Persons dealing with the Trust or any Portfolio shall
be deemed to have agreed that resort shall be had solely to the Trust Property
of the Trust or the Portfolio Assets of such Portfolio, as the case may be, for
the payment or performance thereof.
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The Trustees shall use their best efforts to ensure that every note, bond,
contract, instrument, certificate or undertaking made or issued by the Trustees
or by any officers or officer shall give notice that this Declaration of Trust
is on file with the Secretary of The Commonwealth of Massachusetts and shall
recite to the effect that the same was executed or made by or on behalf of the
Trust or by them as Trustees or Trustee or as officers or officer, and not
individually, and that the obligations of such instrument are not binding upon
any of them or the Shareholders individually but are binding only upon the
assets and property of the Trust, or the particular Portfolio in question, as
the case may be, but the omission thereof shall not operate to bind any Trustees
or Trustee or officers or officer or Shareholders or Shareholder individually,
or to subject the Portfolio Assets of any Portfolio to the obligations of any
other Portfolio.
SECTION 8.2. Trustees' Good Faith Action; Expert Advice; No Bond or
Surety. The exercise by the Trustees of their powers and discretions hereunder
shall be binding upon everyone interested. Subject to Section 8.4 hereof, a
Trustee shall be liable for his own willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of the
office of Trustee, and for nothing else, and shall not be liable for errors of
judgment or mistakes of fact or law. Subject to the foregoing, (i) the Trustees
shall not be responsible or liable in any event for any neglect or wrongdoing of
any officer, agent, employee, consultant, Investment Adviser, Administrator,
Distributor or Principal Underwriter, Custodian or Transfer Agent, Dividend
Disbursing Agent, Shareholder Servicing Agent or Accounting Agent of the Trust,
nor shall any Trustee be responsible for the act or omission of any other
Trustee; (ii) the Trustees may take advice of counsel or other experts with
respect to the meaning and operation of this Declaration of Trust and their
duties as Trustees, and shall be under no liability for any act or omission in
accordance with such advice or for failing to follow such advice; and (iii) in
discharging their duties, the Trustees, when acting in good faith, shall be
entitled to rely upon the books of account of the Trust and upon written reports
made to the Trustees by any officer appointed by them, any independent public
accountant, and (with respect to the subject matter of the contract involved)
any officer, partner or responsible employee of a Contracting Party appointed by
the Trustees pursuant to Section 5.2 hereof. The Trustees as such shall not be
required to give any bond or surety or any other security for the performance of
their duties.
SECTION 8.3. Indemnification of Shareholders. If any Shareholder (or
former Shareholder) of the Trust shall be charged or held to be personally
liable for any obligation or liability of the Trust solely by reason of being or
having been a Shareholder and not because of such Shareholder's acts or
omissions or for some other reason, the Trust (upon proper and timely request by
the Shareholder) shall assume the defense against such charge and satisfy any
judgment thereon, and the Shareholder or former
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Shareholder (or the heirs, executors, administrators or other legal
representatives thereof, or in the case of a corporation or other entity, its
corporate or other general successor) shall be entitled (but solely out of the
assets of the Portfolio of which such Shareholder or former Shareholder is or
was the holder of Shares) to be held harmless from and indemnified against all
loss and expense arising from such liability.
SECTION 8.4. Indemnification of Trustees, Officers, etc. Subject to the
limitations set forth hereinafter in this Section 8.4, the Trust shall indemnify
(from the assets of the Portfolio or Portfolios to which the conduct in question
relates) each of its Trustees and officers (including Persons who serve at the
Trust's request as directors, officers or trustees of another organization in
which the Trust has any interest as a shareholder, creditor or otherwise
[hereinafter, together with such Person's heirs, executors, administrators or
personal representative, referred to as a "Covered Person"]) against all
liabilities, including but not limited to amounts paid in satisfaction of
judgments, in compromise or as fines and penalties, and expenses, including
reasonable accountants' and counsel fees, incurred by any Covered Person in
connection with the defense or disposition of any action, suit or other
proceeding, whether civil or criminal, before any court or administrative or
legislative body, in which such Covered Person may be or may have been involved
as a party or otherwise or with which such Covered Person may be or may have
been threatened, while in office or thereafter, by reason of being or having
been such a Trustee or officer, director or trustee, except with respect to any
matter as to which it has been determined that such Covered Person (i) did not
act in good faith in the reasonable belief that such Covered Person's action was
in or not opposed to the best interests of the Trust or (ii) had acted with
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of such Covered Person's office (either and both
of the conduct described in (i) and (ii) being referred to hereafter as
"Disabling Conduct"). A determination that the Covered Person is entitled to
indemnification may be made by (i) a final decision on the merits by a court or
other body before whom the proceeding was brought that the Covered Person to be
indemnified was not liable by reason of Disabling Conduct, (ii) dismissal of a
court action or an administrative proceeding against a Covered Person for
insufficiency of evidence of Disabling Conduct, or (iii) a reasonable
determination, based upon a review of the facts, that the indemnitee was not
liable by reason of Disabling Conduct by (a) a vote of a majority of a quorum of
Trustees who are neither "interested persons" of the Trust as defined in Section
2(a)(19) of the 1940 Act nor parties to the proceeding, or (b) an independent
legal counsel in a written opinion. Expenses, including accountants' and counsel
fees so incurred by any such Covered Person (but excluding amounts paid in
satisfaction of judgments, in compromise or as fines or penalties), may be paid
from time to time by the Portfolio or Portfolios to which the conduct in
question related in advance of the final disposition of any such
<PAGE>
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action, suit or proceeding; provided, that the Covered Person shall have
undertaken to repay the amounts so paid to such Portfolio or Portfolios if it is
ultimately determined that indemnification of such expenses is not authorized
under this Article 8 and (i) the Covered Person shall have provided security for
such undertaking, (ii) the Trust shall be insured against losses arising by
reason of any lawful advances, or (iii) a majority of a quorum of the
disinterested Trustees, or an independent legal counsel in a written opinion,
shall have determined, based on a review of readily available facts (as opposed
to a full trial-type inquiry), that there is reason to believe that the Covered
Person ultimately will be found entitled to indemnification.
SECTION 8.5. Compromise Payment. As to any matter disposed of by a
compromise payment by any such Covered Person referred to in Section 8.4 hereof,
pursuant to a consent decree or otherwise, no such indemnification either for
said payment or for any other expenses shall be provided unless such
indemnification shall be approved (i) by a majority of a quorum of the
disinterested Trustees or (ii) by an independent legal counsel in a written
opinion. Approval by the Trustees pursuant to clause (i) or by independent legal
counsel pursuant to clause (ii) shall not prevent the recovery from any Covered
Person of any amount paid to such Covered Person in accordance with either of
such clauses as indemnification if such Covered Person is subsequently
adjudicated by a court of competent jurisdiction not to have acted in good faith
in the reasonable belief that such Covered Person's action was in or not opposed
to the best interests of the Trust or to have been liable to the Trust or its
Shareholders by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of such Covered
Person's office.
SECTION 8.6. Indemnification Not Exclusive, etc. The right of
indemnification provided by this Article 8 shall not be exclusive of or affect
any other rights to which any such Covered Person may be entitled. As used in
this Article 8, a "disinterested" Person is one against whom none of the
actions, suits or other proceedings in question, and no other action, suit or
other proceeding on the same or similar grounds is then or has been pending or
threatened. Nothing contained in this Article 8 shall affect any rights to
indemnification to which personnel of the Trust, other than Trustees and
officers, and other Persons may be entitled by contract or otherwise under law,
nor the power of the Trust to purchase and maintain liability insurance on
behalf of any such Person.
SECTION 8.7. Liability of Third Persons Dealing with Trustees. No person
dealing with the Trustees shall be bound to make any inquiry concerning the
validity of any transaction made or to be made by the Trustees or to see to the
application of any payments made or property transferred to the Trust or upon
its order.
<PAGE>
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ARTICLE 9
DURATION; REORGANIZATION; AMENDMENTS
SECTION 9.1. Duration and Termination of Trust. Unless terminated as
provided herein, the Trust shall continue without limitation of time and,
without limiting the generality of the foregoing, no change, alteration or
modification with respect to any Portfolio or Series of Shares shall operate to
terminate the Trust. The Trust may be terminated at any time by a Majority of
the Trustees, subject to the favorable vote of the holders of not less than a
majority of the Shares outstanding and entitled to vote of each Portfolio of the
Trust, or by an instrument or instruments in writing without a meeting,
consented to by the holders of not less than a majority of such Shares, or by
such greater or different vote of Shareholders of any Series as may be
established by the Certificate of Designation by which such Series was
authorized. Upon termination, after paying or otherwise providing for all
charges, taxes, expenses and liabilities, whether due or accrued or anticipated
as may be determined by the Trustees, the Trust shall in accordance with such
procedures as the Trustees consider appropriate reduce the remaining assets to
distributable form in cash, Securities or other property, or any combination
thereof, and distribute the proceeds to the Shareholders, in conformity with the
provisions of Section 6.2(d) hereof.
SECTION 9.2. Reorganization. The Trustees may sell, convey and transfer
all or substantially all of the assets of the Trust, or the assets belonging to
any one or more Portfolios, to another trust, partnership, association or
corporation organized under the laws of any state of the United States, or may
transfer such assets to another Portfolio of the Trust, in exchange for cash,
Shares or other Securities (including, in the case of a transfer to another
Portfolio of the Trust, Shares of such other Portfolio), or to the extent
permitted by law then in effect may merge or consolidate the Trust or any
Portfolio with any other Trust or any corporation, partnership, or association
organized under the laws of any state of the United States, all upon such terms
and conditions and for such consideration when and as authorized by vote or
written consent of a Majority of the Trustees and approved by the affirmative
vote of the holders of not less than a majority of the Shares outstanding and
entitled to vote of each Portfolio whose assets are affected by such
transaction, or by an instrument or instruments in writing without a meeting,
consented to by the holders of not less than a majority of such Shares, and/or
by such other vote of any Series as may be established by the Certificate of
Designation with respect to such Series. Following such transfer, the Trustees
shall distribute the cash, Shares or other Securities or other consideration
received in such transaction (giving due effect to the assets belonging to and
indebtedness of, and any other differences among, the various Portfolios of
which the assets have so been transferred) among the Shareholders of the
Portfolio of which the assets have been so transferred; and if all of the assets
of the Trust have been so transferred, the Trust
<PAGE>
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shall be terminated. Nothing in this Section 9.2 shall be construed as requiring
approval of Shareholders for the Trustees to organize or assist in organizing
one or more corporations, trusts, partnerships, associations or other
organizations, and to sell, convey or transfer less than substantially all of
the Trust Property or the assets belonging to any Portfolio to such
organizations or entities.
SECTION 9.3. Amendments; etc. All rights granted to the Shareholders under
this Declaration of Trust are granted subject to the reservation of the right to
amend this Declaration of Trust as herein provided, except that no amendment
shall repeal the limitations on personal liability of any Shareholder or Trustee
or the prohibition of assessment upon the Shareholders (otherwise than as
permitted under Section 6.2(h)) without the express consent of each Shareholder
or Trustee involved. Subject to the foregoing, the provisions of this
Declaration of Trust (whether or not related to the rights of Shareholders) may
be amended at any time, so long as such amendment does not adversely affect the
rights of any Shareholder with respect to which such amendment is or purports to
be applicable and so long as such amendment is not in contravention of
applicable law, including the 1940 Act, by an instrument in writing signed by a
Majority of the Trustees (or by an officer of the Trust pursuant to the vote of
a Majority of the Trustees). Any amendment to this Declaration of Trust that
adversely affects the rights of all Shareholders may be adopted at any time by
an instrument in writing signed by a Majority of the Trustees (or by an officer
of the Trust pursuant to a vote of a Majority of the Trustees) when authorized
to do so by the vote in accordance with Section 7.1 hereof of Shareholders
holding a majority of all the Shares outstanding and entitled to vote, without
regard to Series, or if said amendment adversely affects the rights of the
Shareholders of less than all of the Portfolios, by the vote of the holders of a
majority of all the Shares entitled to vote of each Portfolio so affected.
Subject to the foregoing, any such amendment shall be effective when the
instrument containing the terms thereof and a certificate (which may be a part
of such instrument) to the effect that such amendment has been duly adopted, and
setting forth the circumstances thereof, shall have been executed and
acknowledged by a Trustee or officer of the Trust and filed as provided in
Section 9.4 hereof.
SECTION 9.4. Filing of Copies of Declaration and Amendments. The original
or a copy of this Declaration and of each amendment hereto (including each
Certificate of Designation and Certificate of Termination), as well as the
certificates called for by Section 4.1(k) hereof as to changes in the Trustees,
shall be kept at the office of the Trust where it may be inspected by any
Shareholder, and one copy of each such instrument shall be filed with the
Secretary of The Commonwealth of Massachusetts, as well as with any other
governmental office where such filing may from time to time be required by the
laws of Massachusetts. A restated Declaration, integrating into a single
instrument all of the provisions of this Declaration which are then in effect
and
<PAGE>
-39-
operative, may be executed from time to time by a Majority of the Trustees and
shall, upon filing with the Secretary of The Commonwealth of Massachusetts, be
conclusive evidence of all amendments contained therein and may thereafter be
referred to in lieu of the original Declaration and the various amendments
thereto.
ARTICLE 10
MISCELLANEOUS
SECTION 10.1. Governing Law. This Declaration of Trust is executed and
delivered in The Commonwealth of Massachusetts and with reference to the laws
thereof, and the rights of all parties and the construction and effect of every
provision hereof shall be subject to and construed according to the laws of said
Commonwealth.
SECTION 10.2. Counterparts. This Declaration of Trust and any amendment
thereto may be simultaneously executed in several counterparts, each of which so
executed shall be deemed to be an original, and such counterparts, together,
shall constitute but one and the same instrument, which shall be sufficiently
evidenced by any such original counterpart.
SECTION 10.3. Reliance by Third Parties. Any certificate executed by an
individual who, according to the records in the office of the Secretary of The
Commonwealth of Massachusetts appears to be a Trustee hereunder, certifying to:
(a) the number or identity of Trustees or Shareholders, (b) the due
authorization of the execution of any instrument or writing, (c) the form of any
vote passed as a meeting of Trustees or Shareholders, (d) the fact that the
number of Trustees or Shareholders present at any meeting or executing any
written instrument satisfies the requirements of this Declaration of Trust, (e)
the form of any By-Law adopted, or the identity of any officers elected, by the
Trustees, or (f) the existence or non-existence of any fact or facts which in
any manner relate to the affairs of the Trust, shall be conclusive evidence as
to the matters so certified in favor of any Person dealing with the Trustees, or
any of them, and the successors of such Person.
SECTION 10.4. References; Headings. The masculine gender shall include the
feminine and neuter genders. Headings are placed herein for convenience of
reference only and shall not be taken as a part of this Declaration or control
or affect the meaning, construction or effect hereof.
SECTION 10.5. Use of the Name "Alger". Alger Associates, Inc. ("Alger")
has consented to the use by the Trust of the identifying name "Alger" which is a
property right of Alger. The Trust will only use the name "Alger" as a component
of its name and for no other purpose, and will not purport to grant to any third
party the right to use the name "Alger" for any purpose. Alger or any corporate
affiliate of Alger may use or grant to
<PAGE>
-40-
others the right to use the name "Alger", as all or a portion of a corporate or
business name or for any commercial purpose, including a grant of such right to
any other investment company. At the request of Alger, the Trust will take such
action as may be required to provide its consent to the use of such name by
Alger, or any corporate affiliate of Alger or by any Person to whom Alger or an
affiliate of Alger shall have granted the right to the use of the name "Alger".
Upon the termination of any investment advisory or management agreement into
which Alger and the Trust may enter, the Trust shall, upon request by Alger,
cease to use the name "Alger" as a component of its name, and shall not use such
name or initials as a part of its name or for any other commercial purpose, and
shall cause its officers and Trustees to take any and all actions which Alger
may request to effect the foregoing and to reconvey to Alger or such corporate
affiliate any and all rights to such name.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal,
for himself and his assigns, and has thereby accepted the Trusteeship as the
Initial Trustee of The Alger Variable Insurance Products Fund hereby granted and
agreed to the provisions hereof, all as of the day and year first above written.
/s/ Thomas E. Weesner
----------------------------------
Thomas E. Weesner, Initial Trustee
The undersigned Settlor of The Alger Variable Insurance Products Fund
hereby accepts, approves and authorizes the foregoing Agreement and Declaration
of Trust of The Alger Variable Insurance Products Fund.
Dated: April 6, 1988
/s/ Bryan G. Tyson
----------------------------------
Bryan G. Tyson
<PAGE>
-41-
ACKNOWLEDGMENTS
M A S S A C H U S E T T S
Suffolk, ss.: April 6, 1988
Then personally appeared the above named Thomas E. Weesner and
acknowledged the foregoing instrument to be his free act and deed.
Before me,
/s/ Kerry R. Lyne
-----------------------------
Notary Public
Kerry R. Lyne
My commission expires: 12/28/90
M A S S A C H U S E T T S
Suffolk, ss.: April 6, 1988
Then personally appeared the above named Bryan G. Tyson and acknowledged
the foregoing instrument to be his free act and deed.
Before me,
/s/ Kerry R. Lyne
-----------------------------
Notary Public
Kerry R. Lyne
My commission expires: 12/28/90
EXHIBIT 1(d)
THE ALGER AMERICAN FUND
CERTIFICATE OF DESIGNATION
The undersigned, being the Secretary of The Alger American Fund
(hereinafter referred to as the "Trust"), a trust with transferable shares of
the type commonly called a Massachusetts business trust, DOES HEREBY CERTIFY
that, pursuant to the authority conferred upon the Trustees of the Trust by
Section 6.1(b) and Section 9.3 of the Agreement and Declaration of Trust, dated
April 6, 1983, as amended April 28, 1988 (hereinafter referred to as the
"Declaration of Trust"), and by the affirmative vote of a Majority of the
Trustees at a meeting duly called and held on February 24, 1993 the Declaration
of Trust is amended as follows:
(1) There is hereby established and designated the Alger American MidCap
Growth Portfolio (hereinafter referred to as the "MidCap Growth Portfolio"). The
beneficial interest in the Midcap Growth Portfolio shall be divided into Shares
having a nominal or par value of one mill ($.00l) per Share, of which an
unlimited number may be issued, which Shares shall represent interests only in
the MidCap Growth Portfolio. The Trustees shall have authority from time to time
to authorize separate Series of Shares for the MidCap Growth Portfolio (each of
which Series shall represent interests only in the MidCap Growth Portfolio), as
they deem necessary and desirable. The Shares of the MidCap Growth Portfolio
shall have the following rights and preferences:
(a) Assets Belonging to the MidCap Growth Portfolio. Any portion of
the Trust Property allocated to the MidCap Growth Portfolio, and all
consideration received by the Trust for the issue or sale of Shares of the
MidCap Growth Portfolio, together with all assets in which such
consideration is invested or reinvested, all interest, dividends, income,
earnings, profits and gains therefrom, and proceeds thereof, including any
proceeds derived from the sale, exchange or liquidation of such assets,
and any funds or payments derived from any reinvestment of such proceeds
in whatever form the same may be, shall be held by the Trustees in trust
for the benefit of the holders of Shares of the MidCap Growth Portfolio
and shall irrevocably belong to the MidCap Growth Portfolio for all
purposes, and shall be so recorded upon the books of account of the Trust,
and the Shareholders of any other Fund who are not Shareholders of the
MidCap Growth Portfolio shall not have, and shall be
<PAGE>
conclusively deemed to have waived, any claims to the assets of the MidCap
Growth Portfolio. Such consideration, assets, interest, dividends, income,
earnings, profits, gains and proceeds, together with any General Items
allocated to the Midcap Growth Portfolio as provided in the following
sentence, are herein referred to collectively as "Fund Assets" of the
Midcap Growth Portfolio, and as assets "belonging to" the MidCap Growth
Portfolio. In the event that there are any assets, income, earnings,
profits, and proceeds thereof, funds, or payments which are not readily
identifiable as belonging to any particular Fund (collectively "General
Items"), the Trustees shall allocate such General Items to and among any
one or more of the Funds established and designated from time to time in
such manner and on such basis as they, in their sole discretion, deem fair
and equitable; and any General Items so allocated to the MidCap Growth
Portfolio shall belong to and be part of the Fund Assets of the MidCap
Growth Portfolio. Each such allocation by the Trustees shall be conclusive
and binding upon the Shareholders of all the Funds for all purposes.
(b) Liabilities of the MidCap Growth Portfolio. The assets belonging
to the MidCap Growth Portfolio shall be charged with the liabilities in
respect of the Midcap Growth Portfolio and all expenses, costs, charges
and reserves attributable to the MidCap Growth Portfolio, and any general
liabilities, expenses, costs, charges or reserves of the Trust which are
not readily identifiable as pertaining to any particular Fund shall be
allocated and charged by the Trustees to and among any one or more of the
Funds established and designated from time to time in such manner and on
such basis as the Trustees in their sole discretion deem fair and
equitable. The indebtedness, expenses, costs, charges and reserves
allocated and so charged to the MidCap Growth Portfolio are herein
referred to as "liabilities of" the MidCap Growth Portfolio. Each
allocation of liabilities, expenses, costs, charges and reserves by the
Trustees shall be conclusive and binding upon the Shareholders of all the
Funds for all purposes. Any creditor of the MidCap Growth Portfolio may
look only to the assets of the Midcap Growth Portfolio to satisfy such
creditor's debt.
(c) Dividends. Dividends and distributions on Shares of the MidCap
Growth Portfolio may be paid with such frequency as the Trustees may
determine, which may be daily or otherwise pursuant to a standing
resolution or resolutions adopted only once or with such frequency as the
-2-
<PAGE>
Trustees may determine, to the Shareholders of the MidCap Growth
Portfolio, from such of the income, accrued or realized, and capital
gains, realized or unrealized, and out of the assets belonging to the
MidCap Growth Portfolio, as the Trustees may determine, after providing
for actual and accrued liabilities of the MidCap Growth Portfolio. All
dividends and distributions on Shares of the MidCap Growth Portfolio shall
be distributed pro rata to the Shareholders of the MidCap Growth Portfolio
in proportion to the number of such Shares held by such holders at the
date and time of record established for the payment of such dividends or
distributions, except that in connection with any dividend or distribution
program or procedure the Trustees may determine that no dividend or
distribution shall be payable on Shares as to which the Shareholder's
purchase order and/or payment have not been received by the time or times
established by the Trustees under such program or procedure, or that
dividends or distributions shall be payable on Shares which have been
tendered by the holder thereof for redemption or repurchase, but the
redemption or repurchase proceeds of which have not yet been paid to such
Shareholder. Such dividends and distributions may be made in cash or
Shares of the MidCap Growth Portfolio or a combination thereof as
determined by the Trustees, or pursuant to any program that the Trustees
may have in effect at the time for the election by each Shareholder of the
mode of the making of such dividend or distribution to that Shareholder.
Any such dividend or distribution paid in Shares will be paid at the net
asset value thereof as determined in accordance with subsection (h)
hereof.
(d) Liquidation. In the event of the liquidation or dissolution of
the Trust, the Shareholders of the MidCap Growth Portfolio shall be
entitled to receive, when and as declared by the Trustees, the excess of
the Fund Assets over the liabilities of the MidCap Growth Portfolio. The
assets so distributable to the Shareholders of the MidCap Growth Portfolio
shall be distributed among such Shareholders in proportion to the number
of Shares of the MidCap Growth Portfolio held by them and recorded on the
books of the Trust. The liquidation of the MidCap Growth Portfolio may be
authorized by vote of a Majority of the Trustees, subject to the
affirmative vote of "a majority of the outstanding voting securities" of
the Midcap Growth Portfolio, as the quoted phrase is defined in the 1940
Act, determined in accordance with clause (iii) of the definition of
"Majority Shareholder Vote" in Section 1.4 of the Declaration of Trust.
-3-
<PAGE>
(e) Voting. The Shareholders shall have the voting rights set forth
in or determined under Article 7 of the Declaration of Trust.
(f) Redemption by Shareholder. Each holder of Shares of the MidCap
Growth Portfolio shall have the right at such times as may be permitted by
the Trust, but no less frequently than once each week, to require the
Trust to redeem all or any part of his Shares of the MidCap Growth
Portfolio at a redemption price equal to the net asset value per Share of
the MidCap Growth Portfolio next determined in accordance with subsection
(h) hereof after the Shares are properly tendered for redemption;
provided, that the Trustees may from time to time, in their discretion,
determine and impose a fee for such redemption. Payment of the redemption
price shall be in cash; provided, however, that if the Trustees determine,
which determination shall be conclusive, that conditions exist which make
payment wholly in cash unwise or undesirable, the Trust may make payment
wholly or partly in Securities or other assets belonging to the MidCap
Growth Portfolio at the value of such Securities or assets used in such
determination of net asset value. Notwithstanding the foregoing, the Trust
may postpone payment of the redemption price and may suspend the right of
the holders of Shares of the MidCap Growth Portfolio to require the Trust
to redeem Shares of the MidCap Growth Portfolio during any period or at
any time when and to the extent permissible under the 1940 Act.
(g) Redemption at the Option of the Trust. Each Share of the Midcap
Growth Portfolio shall be subject to redemption at the option of the Trust
at the redemption price which would be applicable if such Share were then
being redeemed by the Shareholder pursuant to subsection (f) hereof: (i)
at any time, if the Trustees determine in their sole discretion that
failure to so redeem may have materially adverse consequences to the
holders of the Shares of the Trust or of any Fund, or (ii) upon such other
conditions with respect to maintenance of Shareholder accounts of a
minimum amount as may from time to time be determined by the Trustees and
set forth in the then current Prospectus of the MidCap Growth Portfolio.
Upon such redemption the holders of the Shares so redeemed shall have no
further right with respect thereto other than to receive payment of such
redemption price.
-4-
<PAGE>
(h) Net Asset Value. The net asset value per Share of the MidCap
Growth Portfolio at any time shall be the quotient obtained by dividing
the value of the net assets of the MidCap Growth Portfolio at such time
(being the current value of the assets belonging to the MidCap Growth
Portfolio, less its then existing liabilities) by the total number of
Shares of the MidCap Growth Portfolio then outstanding, all determined in
accordance with the methods and procedures, including without limitation
those with respect to rounding, established by the Trustees from time to
time. The Trustees may determine to maintain the net asset value per Share
of the MidCap Growth Portfolio at a designated constant dollar amount and
in connection therewith may adopt procedures not inconsistent with the
1940 Act for the continuing declaration of income attributable to the
MidCap Growth Portfolio as dividends payable in additional Shares of the
MidCap Growth Portfolio at the designated constant dollar amount and for
the handling of any losses attributable to the MidCap Growth Portfolio.
Such procedures may provide that in the event of any loss each Shareholder
shall be deemed to have contributed to the shares of beneficial interest
account of the MidCap Growth Portfolio his pro rata portion of the total
number of Shares required to be cancelled in order to permit the net asset
value per Share of the MidCap Growth Portfolio to be maintained, after
reflecting such loss, at the designated constant dollar amount. Each
Shareholder of the MidCap Growth Portfolio shall be deemed to have
expressly agreed, by his investment in the MidCap Growth Portfolio, to
make the contribution referred to in the preceding sentence in the event
of any such loss.
(i) Transfer. All Shares of the MidCap Growth Portfolio shall be
transferable, but transfers of Shares of the MidCap Growth Portfolio will
be recorded on the Share transfer records of the Trust applicable to the
MidCap Growth Portfolio only at such times as Shareholders shall have the
right to require the Trust to redeem Shares of the MidCap Growth Portfolio
and at such other times as may be permitted by the Trustees.
(j) Equality. All Shares of the MidCap Growth Portfolio shall
represent an equal proportionate interest in the assets belonging to the
MidCap Growth Portfolio (subject to the liabilities of the MidCap Growth
Portfolio), and each Share of the MidCap Growth Portfolio shall be equal
to each other Share thereof; but the provisions of this sentence shall not
restrict any distinctions permissible under sub-
-5-
<PAGE>
section (c) hereof that may exist with respect to dividends and
distributions on Shares of the MidCap Growth Portfolio. The Trustees may
from time to time divide or combine the Shares of the MidCap Growth
Portfolio into a greater or lesser number of Shares of the MidCap Growth
Portfolio without thereby changing the proportionate beneficial interest
in the assets belonging to the MidCap Growth Portfolio or in any way
affecting the rights of the holders of Shares of any other Fund.
(k) Rights of Fractional Shares. Any fractional Share of any Series
shall carry proportionately all the rights and obligations of a whole
Share of that Series, including rights and obligations with respect to
voting, receipt of dividends and distributions, redemption of Shares, and
liquidation of the Trust or of the MidCap Growth Portfolio.
(l) Conversion Rights. Subject to compliance with the requirements
of the 1940 Act, the Trustees shall have the authority to provide that
holders of Shares of the MidCap Growth Portfolio shall have the right to
convert said Shares into Shares of one or more other Funds in accordance
with such requirements and procedures as the Trustees may establish.
(m) Amendment, etc. Subject to the provisions and limitations of
Section 9.3 of the Declaration of Trust and applicable law, this
Certificate of Designation may be amended by an instrument signed in
writing by a Majority of the Trustees (or by an officer of the Trust
pursuant to the vote of a Majority of the Trustees), provided that, if any
amendment adversely affects the rights of the Shareholders of the MidCap
Growth Portfolio, such amendment may be adopted by an instrument signed in
writing by a Majority of the Trustees (or by an officer of the Trust
pursuant to the vote of a Majority of the Trustees) when authorized to do
so by the vote in accordance with Section 7.1 of the Declaration of Trust
of the holders of a majority of all the Shares of the MidCap Growth
Portfolio outstanding and entitled to vote.
(n) Incorporation of Defined Terms. All capitalized terms which are
not defined herein shall have the same meanings as are assigned to those
terms in the Declaration of Trust filed with the Secretary of the
Commonwealth of Massachusetts.
-6-
<PAGE>
The Trustees further direct that, upon the execution of this Certificate
of Designation, the Trust take all necessary action to file a copy of this
Certificate of Designation with the Secretary of State of The Commonwealth of
Massachusetts and at any other place required by law or by the Declaration of
Trust.
IN WITNESS WHEREOF, the undersigned has set her hand and seal this
24th day of February, 1993.
/s/ Nanci K. Staple
------------------------
Nanci K. Staple
Secretary
-7-
<PAGE>
ACKNOWLEDGMENT
State of New York )
): ss
County of New York )
February 24, 1993
Then personally appeared the above named Nanci K. Staple and acknowledged
the foregoing instrument to be her free act and deed.
Before me,
/s/ Dolores M. Costa
--------------------------------
Dolores M. Costa
Notary Public, State of New York
No. 31-4941104
Qualified in New York County
Commission Expires 8/12/94
-8-
EXHIBIT 1(e)
THE ALGER AMERICAN FUND
CERTIFICATE OF DESIGNATION
The undersigned, being the Secretary of The Alger American Fund
(hereinafter referred to as the "Trust"), a trust with transferable shares at
the type commonly called a Massachusetts business trust, DOES HEREBY CERTIFY
that, pursuant to the authority conferred upon the Trustees of the Trust by
Section 6.1(b) and Section 9.3 of the Agreement and Declaration of Trust, dated
April 6, 1988, as amended April 28, 1988, January 19, 1989, June 26, 1992 and
February 25, 1993 (hereinafter referred to as the "Declaration of Trust"), and
by the affirmative vote of a Majority of the Trustees at a meeting duly called
and held on February 16, 1994 the Declaration of Trust is amended as follows:
(1) There is hereby established and designated the Alger American
Leveraged AllCap Portfolio (hereinafter referred to as the "Portfolio"). The
beneficial interest in the Portfolio shall be divided into Shares having a
nominal or par value of one mill ($.001) per Share, of which an unlimited number
may be issued, which Shares shall represent interests only in the Portfolio.
The Trustees shall have authority from time to time to authorize separate Series
of Shares for the Portfolio (each of which Series shall represent interests only
in the Portfolio), as they deem necessary and desirable. The Shares of the
Portfolio shall have the following rights and preferences:
(a) Assets Belonging to the Portfolio. Any portion of the Trust
Property allocated to the Portfolio, and all consideration received by the
Trust for the issue or sale of Shares of the Portfolio, together with all
assets in which such consideration is invested or reinvested, all
interest, dividends, income, earnings, profits and gains therefrom, and
proceeds thereof, including any proceeds derived from the sale, exchange
or liquidation of such assets, and any funds or payments derived from any
reinvestment of such proceeds in whatever form the same may be, shall be
held by the Trustees in trust for the benefit of the holders of Shares of
the Portfolio and shall irrevocably belong to the Portfolio for all
purposes, and shall be so recorded upon the books of account of the Trust,
and the Shareholders of any other Fund who are not Shareholders of the
Portfolio shall not have, and shall be conclusively deemed to have waived,
<PAGE>
any claims to the assets of the Portfolio. Such consideration, assets,
interest, dividends, income, earnings, profits, gains and proceeds,
together with any General Items allocated to the Portfolio as provided in
the following sentence, are herein referred to collectively as "Fund
Assets" of the Portfolio, and as assets "belonging to" the Portfolio. In
the event that there are any assets, income, earnings, profits, and
proceeds thereof, funds, or payments which are not readily identifiable as
belonging to any particular Fund (collectively "General Items"), the
Trustees shall allocate such General Items to and among any one or more of
the Funds established and designated from time to time in such manner and
on such basis as they, in their sole discretion, deem fair and equitable;
and any General Items so allocated to the Portfolio shall belong to and be
part of the Fund Assets of the Portfolio. Each such allocation by the
Trustees shall be conclusive and binding upon the Shareholders of all the
Funds for all purposes.
(b) Liabilities of the Portfolio. The assets belonging to the
Portfolio shall be charged with the liabilities in respect of the
Portfolio and all expenses, costs, charges and reserves attributable to
the Portfolio, and any general liabilities, expenses, costs, charges or
reserves of the Trust which are not readily identifiable as pertaining to
any particular Fund shall be allocated and charged by the Trustees to and
among any one or more of the Funds established and designated from time to
time in such manner and on such basis as the Trustees in their sole
discretion deem fair and equitable. The indebtedness, expenses, costs,
charges and reserves allocated and so charged to the Portfolio are herein
referred to as "liabilities of" the Portfolio. Each allocation of
liabilities, expenses, costs, charges and reserves by the Trustees shall
be conclusive and binding upon the Shareholders of all the Funds for all
purposes. Any creditor of the Portfolio may look only to the assets of the
Portfolio to satisfy such creditor's debt.
(c) Dividends. Dividends and distributions on Shares of the
Portfolio may be paid with such frequency as the Trustees may determine,
which may be daily or otherwise pursuant to a standing resolution or
resolutions adopted only once or with such frequency as the Trustees may
determine, to the Shareholders of the Portfolio, from such of the income,
accrued or realized, and capital gains, realized or unrealized, and out of
the assets belonging to the Portfolio, as the Trustees may determine,
after providing for actual and accrued liabilities of the Portfolio. All
dividends and distributions on Shares of the Portfolio shall be
<PAGE>
distributed pro rata to the Shareholders of the Portfolio in proportion to
the number of such Shares held by such holders at the date and time of
record established for the payment of such dividends or distributions,
except that in connection with any dividend or distribution program or
procedure the Trustees may determine that no dividend or distribution
shall be payable on Shares as to which the Shareholder's purchase order
and/or payment have not been received by the time or times established by
the Trustees under such program or procedure, or that dividends or
distributions shall be payable on Shares which have been tendered by the
holder thereof for redemption or repurchase, but the redemption or
repurchase proceeds of which have not yet been paid to such Shareholder.
Such dividends and distributions may be made in cash or Shares of the
Portfolio or a combination thereof as determined by the Trustees, or
pursuant to any program that the Trustees may have in effect at the time
for the election by each Shareholder of the mode of the making of such
dividend or distribution to that Shareholder. Any such dividend or
distribution paid in Shares will be paid at the net asset value thereof as
determined in accordance with subsection (h) hereof.
(d) Liquidation. In the event of the liquidation or dissolution of
the Trust, the Shareholders of the Portfolio shall be entitled to receive,
when and as declared by the Trustees, the excess of the Fund Assets over
the liabilities of the Portfolio. The assets so distributable to the
Shareholders of the Portfolio shall be distributed among such Shareholders
in proportion to the number of Shares of the Portfolio held by them and
recorded on the books of the Trust. The liquidation of the Portfolio may
be authorized by vote of a Majority of the Trustees, subject to the
affirmative vote of "a majority of the outstanding voting securities" of
the Portfolio, as the quoted phrase is defined in the 1940 Act, determined
in accordance with clause (iii) of the definition of "Majority Shareholder
Vote" in Section 1.4 of the Declaration of Trust.
(e) Voting. The Shareholders shall have the voting rights set forth
in or determined under Article 7 of the Declaration of Trust.
(f) Redemption by Shareholder. Each holder of Shares of the
Portfolio shall have the right at such times as may be permitted by the
Trust, but no less frequently than once each week, to require the Trust to
redeem all or any part of his Shares of the Portfolio at a redemption
price equal to the net asset value per Share of the Port-
<PAGE>
folio next determined in accordance with subsection (h) hereof after the
Shares are properly tendered for redemption; provided, that the Trustees
may from time to time, in their discretion, determine and impose a fee for
such redemption. Payment of the redemption price shall be in cash;
provided, however, that if the Trustees determine, which determination
shall be conclusive, that conditions exist which make payment wholly in
cash unwise or undesirable, the Trust may make payment wholly or partly in
Securities or other assets belonging to the Portfolio at the value of such
Securities or assets used in such determination of net asset value.
Notwithstanding the foregoing, the Trust may postpone payment of the
redemption price and may suspend the right of the holders of Shares of the
Portfolio to require the Trust to redeem Shares of the Portfolio during
any period or at any time when and to the extent permissible under the
1940 Act.
(g) Redemption at the Option of the Trust. Each Share of the
Portfolio shall be subject to redemption at the option of the Trust at the
redemption price which would be applicable if such Share were then being
redeemed by the Shareholder pursuant to subsection (f) hereof: (i) at any
time, if the Trustees determine in their sole discretion that failure to
so redeem may have materially adverse consequences to the holders of the
Shares of the Trust or of any Fund, or (ii) upon such other conditions
with respect to maintenance of Shareholder accounts of a minimum amount as
may from time to time be determined by the Trustees and set forth in the
then current Prospectus of the Portfolio. Upon such redemption the holders
of the Shares so redeemed shall have no further right with respect thereto
other than to receive payment of such redemption price.
(h) Net Asset Value. The net asset value per Share of the Portfolio
at any time shall be the quotient obtained by dividing the value of the
net assets of the Portfolio at such time (being the current value of the
assets belonging to the Portfolio, less its then existing liabilities) by
the total number of Shares of the Portfolio then outstanding, all
determined in accordance with the methods and procedures, including
without limitation those with respect to rounding, established by the
Trustees from time to time. The Trustees may determine to maintain the net
asset value per Share of the Portfolio at a designated constant dollar
amount and in connection therewith may adopt procedures not inconsistent
with the 1940 Act for the continuing declaration of income attributable to
the Portfolio as dividends payable in additional Shares of the Portfolio
at the desig-
<PAGE>
nated constant dollar amount and for the handling of any losses
attributable to the Portfolio. Such procedures may provide that in the
event of any loss each Shareholder shall be deemed to have contributed to
the shares of beneficial interest account of the Portfolio his pro rata
portion of the total number of Shares required to be cancelled in order to
permit the net asset value per Share of the Portfolio to be maintained,
after reflecting such loss, at the designated constant dollar amount. Each
Shareholder of the Portfolio shall be deemed to have expressly agreed, by
his investment in the Portfolio, to make the contribution referred to in
the preceding sentence in the event of any such loss.
(i) Transfer. All Shares of the Portfolio shall be transferable, but
transfers of Shares of the Portfolio will be recorded on the Share
transfer records of the Trust applicable to the Portfolio only at such
times as Shareholders shall have the right to require the Trust to redeem
Shares of the Portfolio and at such other times as may be permitted by the
Trustees.
(j) Equality. All Shares of the Portfolio shall represent an equal
proportionate interest in the assets belonging to the Portfolio (subject
to the liabilities of the Portfolio), and each Share of the Portfolio
shall be equal to each other Share thereof; but the provisions of this
sentence shall not restrict any distinctions permissible under subsection
(c) hereof that may exist with respect to dividends and distributions on
Shares of the Portfolio. The Trustees may from time to time divide or
combine the Shares of the Portfolio into a greater or lesser number of
Shares of the Portfolio without thereby changing the proportionate
beneficial interest in the assets belonging to the Portfolio or in any way
affecting the rights of the holders of Shares of any other Fund.
(k) Rights of Fractional Shares. Any fractional Share of any Series
shall carry proportionately all the rights and obligations of a whole
Share of that Series, including rights and obligations with respect to
voting, receipt of dividends and distributions, redemption of Shares, and
liquidation of the Trust or of the Portfolio.
(l) Conversion Rights. Subject to compliance with the requirements
of the 1940 Act, the Trustees shall have the authority to provide that
holders of Shares of the Portfolio shall have the right to convert said
Shares into Shares of one or more other Funds in accordance with such
requirements and procedures as the Trustees may establish.
<PAGE>
(m) Amendment, etc. Subject to the provisions and limitations of
Section 9.3 of the Declaration of Trust and applicable law, this
Certificate of Designation may be amended by an instrument signed in
writing by a Majority of the Trustees (or by an officer of the Trust
pursuant to the vote of a Majority of the Trustees), provided that, if any
amendment adversely affects the rights of the Shareholders of the
Portfolio, such amendment may be adopted by an instrument signed in
writing by a Majority of the Trustees (or by an officer of the Trust
pursuant to the vote of a Majority of the Trustees) when authorized to do
so by the vote in accordance with Section 7.1 of the Declaration of Trust
of the holders of a majority of all the Shares of the Portfolio
outstanding and entitled to vote.
(n) Incorporation of Defined Terms. All capitalized terms which are
not defined herein shall have the same meanings as are assigned to those
terms in the Declaration of Trust filed with the Secretary of the
Commonwealth of Massachusetts.
The Trustees further direct that, upon the execution of this Certificate
of Designation, the Trust take all necessary action to file a copy of this
Certificate of Designation with the Secretary of State of The Commonwealth of
Massachusetts and at any other place required by law or by the Declaration of
Trust.
IN WITNESS WHEREOF, the undersigned has set her hand and seal this
16th day of February, 1994.
/s/ Nanci K. Staple
----------------------
Nanci K. Staple
Secretary
<PAGE>
ACKNOWLEDGMENT
State of New York )
) : ss
County of New York)
February 16, 1994
Then personally appeared the above named Nanci K. Staple and acknowledged
the foregoing instrument to be her free act and deed.
Before me,
/s/ LOUISE M. ULITTO
------------------------
LOUISE M. ULITTO
Notary Public, State of New York
No. 24-4814711
Qualified in Kings County
Commission Expires January 31,1995
EXHIBIT 2
THE ALGER VARIABLE INSURANCE PRODUCTS FUND
------------------
By-Laws
------------------
<PAGE>
THE ALGER VARIABLE INSURANCE PRODUCTS FUND
By-Laws
Index
Page No.
RECITALS ...................................... 1
ARTICLE 1 - SHAREHOLDERS AND SHAREHOLDERS' MEETINGS ....... 1
Section 1.1 Meetings ............................. 1
Section 1.2 Presiding Officer; Secretary.......... 1
Section 1.3 Authority of Chairman of
Meeting to Interpret Declaration
and By-Laws ....................... 1
Section 1.4 Voting; Quorum ....................... 2
Section 1.5 Inspectors ........................... 2
Section 1.6 Shareholders' Action in Writing ...... 2
ARTICLE 2 - TRUSTEES AND TRUSTEES' MEETINGS ................ 2
Section 2.1 Number of Trustees ................... 2
Section 2.2 Regular Meetings of Trustees ......... 2
Section 2.3 Special Meetings of Trustees ......... 3
Section 2.4 Notice of Meetings ................... 3
Section 2 5 Quorum ............................... 3
Section 2.6 Participation by Telephone ........... 3
Section 2.7 Location of Meetings ................. 4
Section 2.8 Votes ................................ 4
Section 2.9 Rulings of Chairman ................. 4
Section 2.10 Trustees' Action in Writing .......... 4
Section 2.11 Resignations ......................... 4
<PAGE>
Page No.
ARTICLE 3 - OFFICERS ...................................... 4
Section 3.1 Officers of the Trust ................ 4
Section 3.2 Time and Terms of Election ........... 4
Section 3.3 Resignation and Removal .............. 4
Section 3.4 Fidelity Bond ........................ 5
Section 3.5 Chairman of the Trustees ............. 5
Section 3.6 Vice Chairmen ........................ 5
Section 3.7 President ............................ 5
Section 3.8 Vice Presidents ...................... 5
Section 3.9 Treasurer and Assistant
Treasurers ......................... 6
Section 3.10 Controller and Assistant
Controllers ........................ 6
Section 3.11 Secretary and Assistant
Secretaries ........................ 6
Section 3.12 Substitutions ........................ 7
Section 3.13 Execution of Deeds, etc .............. 7
Section 3.14 Power to Vote Securities ............. 7
ARTICLE 4 - COMMITTEES ..................................... 7
Section 4.1 Power of Trustees to
Designate Committees ............... 7
Section 4.2 Rules for Conduct of
Committee Affairs .................. 8
Section 4.3 Trustees may Alter, Abolish,
etc., Committees ................... 8
Section 4.4 Minutes; Review by Trustees .......... 8
ARTICLE 5 - SEAL ........................................... 8
ARTICLE 6 - SHARES ......................................... 8
Section 6.1 Issuance of Shares ................... 8
Section 6.2 Uncertificated Shares ................ 9
<PAGE>
Page No.
Section 6.3 Share Certificates 9
Section 6.4 Lost, Stolen, etc.,
Certificates ....................... 9
Section 6.5 Record Transfer of
Pledged Shares ..................... 9
ARTICLE 7 - CUSTODIAN ..................................... 10
ARTICLE 8 - AMENDMENTS .................................... 10
Section 8.1 By-Laws Subject to Amendment ......... 10
Section 8.2 Notice of Proposal to
Amend By-Laws Required ............. 10
<PAGE>
THE ALGER VARIABLE INSURANCE PRODUCTS FUND
BY-LAWS
These Articles are the By-Laws of The Alger Variable Insurance Products
Fund, a trust with transferable shares established under the laws of The
Commonwealth of Massachusetts (the "Trust"), pursuant to an Agreement and
Declaration of Trust of the Trust (the "Declaration") made the 6th day of April,
1988, and filed in the office of the Secretary of the Commonwealth. These
By-Laws have been adopted by the Trustees pursuant to the authority granted by
Section 3.1 of the Declaration.
All words and terms capitalized in these By-Laws, unless otherwise defined
herein, shall have the same meanings as they have in the Declaration.
ARTICLE 1
SHAREHOLDERS AND SHAREHOLDERS' MEETINGS
SECTION 1.1. Meetings. A meeting of the Shareholders of the Trust shall be
held whenever called by the Trustees and whenever election of a Trustee or
Trustees by Shareholders is required by the provisions of the 1940 Act. Meetings
of Shareholders shall also be called by the Trustees when requested in writing
by Shareholders holding at least ten percent (10%) of the Shares then
outstanding for the purpose of voting upon removal of any Trustee, or if the
Trustees shall fail to call or give notice of any such meeting of Shareholders
for a period of thirty (30) days after such application, then Shareholders
holding at least ten percent (10%) of the Shares then outstanding may call and
give notice of such meeting. Notice of Shareholders' meetings shall be given as
provided in the Declaration.
SECTION 1.2. Presiding Officer; Secretary. The Chairman of the Trustees,
or in his absence the Vice Chairman or Chairmen, if any, in the order of their
seniority or as the Trustees shall otherwise determine, and in the absence of
the Chairman and all Vice Chairmen, if any, the President, shall preside at each
Shareholders' meeting as chairman of the meeting, or in the absence of the
Chairman, all Vice Chairmen and the President, the Trustees present at the
meeting shall elect one of their number as chairman of the meeting. Unless
otherwise provided for by the Trustees, the Secretary of the Trust shall be the
secretary of all meetings of Shareholders and shall record the minutes thereof.
SECTION 1.3. Authority of Chairman of Meeting to Interpret Declaration and
By-Laws. At any Shareholders' meeting the chairman of the meeting shall be
empowered to determine the construction or interpretation of the Declaration or
these By-
<PAGE>
- 2 -
Laws, or any part thereof or hereof, and his ruling shall be final.
SECTION 1.4. Voting; Quorum. At each meeting of Shareholders, except as
otherwise provided by the Declaration, every, holder of record of Shares
entitled to vote shall be entitled to a number of votes equal to the number of
Shares standing in his name on the Share register of the Trust. Shareholders may
vote by proxy and the form of any such proxy may be prescribed from time to time
by the Trustees. A quorum shall exist if the holders of a majority of the
outstanding Shares of the Trust entitled to vote without regard to Series are
present in person or by proxy, but any lesser number shall be sufficient for
adjournments. At all meetings of the Shareholders, votes shall be taken by
ballot for all matters which may be binding upon the Trustees pursuant to
Section 7.1 of the Declaration. On other matters, votes of Shareholders need not
be taken by ballot unless otherwise provided for by the Declaration or by vote
of the Trustees, or as required by the Act or the Regulations, but the chairman
of the meeting may in his discretion authorize any matter to be voted upon by
ballot.
SECTION 1.5. Inspectors. At any meeting of Shareholders, the chairman of
the meeting may appoint one or more Inspectors of Election or Balloting to
supervise the voting at such meeting or any adjournment thereof. If Inspectors
are not so appointed, the chairman of the meeting may, and on the request of any
Shareholder present or represented and entitled to vote shall, appoint one or
more Inspectors for such purpose. Each Inspector, before entering upon the
discharge of his duties, shall take and sign an oath faithfully to execute the
duties of Inspector of Election or Balloting, as the case may be, at such
meeting with strict impartiality and according to the best of his ability. If
appointed, Inspectors shall take charge of the polls and, when the vote is
completed, shall make a certificate of the result of the vote taken and of such
other facts as may be required by law.
SECTION 1.6. Shareholders' Action in Writing. Nothing in this Article I
shall limit the power of the Shareholders to take any action by means of written
instruments without a meeting, as permitted by Section 7.6 of the Declaration.
ARTICLE 2
TRUSTEES AND TRUSTEES' MEETINGS
SECTION 2.1. Number of Trustees. There shall initially be one (1) Trustee,
and the number of Trustees shall thereafter be such number, authorized by the
Declaration, as from time to time shall be fixed by a vote adopted by a Majority
of the Trustees.
SECTION 2.2. Regular Meetings of Trustees. Regular meetings of the
Trustees may be held without call or notice at such places and at such times as
the Trustees may from time to time
<PAGE>
- 3 -
determine; provided, that notice of such determination, and of the time, place
and purposes of the first regular meeting thereafter, shall be given to each
absent Trustee in accordance with Section 2.4 hereof.
SECTION 2.3. Special Meetings of Trustees. Special meetings of the
Trustees may be held at any time and at any place when called by the Chairman of
the Trustees, any Vice Chairman, the President or the Treasurer or by two (2) or
more Trustees, or if there shall be fewer than three (3) Trustees, by any
Trustee; provided, that notice of the time, place and purposes thereof is given
to each Trustee in accordance with Section 2.4 hereof by the Secretary or an
Assistant Secretary or by the officer or the Trustees calling the meeting.
SECTION 2.4. Notice of Meetings. Notice of any regular or special meeting
of the Trustees shall be sufficient if given in writing to each Trustee, and if
sent by mail at least five (5) days, or by telegram, Federal Express or other
similar delivery service at least twenty-four (24) hours, before the meeting,
addressed to his usual or last known business or residence address, or if
delivered to him in person at least twenty-four (24) hours before the meeting.
Notice of a special meeting need not be given to any Trustee who was present at
an earlier meeting, not more than thirty-one (31) days prior to the subsequent
meeting, at which the subsequent meeting was called. Notice of a meeting may be
waived by any Trustee by written waiver of notice, executed by him before or
after the meeting, and such waiver shall be filed with the records of the
meeting Attendance by a Trustee at a meeting shall constitute a waiver of
notice, except where a Trustee attends a meeting for the purpose of protesting
prior thereto or at its commencement the lack of notice.
SECTION 2.5. Quorum; Presiding Officer. At any meeting of the Trustees, a
Majority of the Trustees shall constitute a quorum. Any meeting may be adjourned
from time to time by a majority of the votes cast upon the question, whether or
not a quorum is present, and the meeting may be held as adjourned without
further notice. Unless the Trustees shall otherwise elect, generally or in a
particular case, the Chairman of the Trustees, or in his absence the Vice
Chairman or Vice Chairmen, any, in the order of their seniority or as the
Trustees shall otherwise determine, or in the absence of the Chairman and all
Vice Chairmen, if any, the President, shall preside at each meeting of the
Trustees as chairman of the meeting.
SECTION 2.6. Participation by Telephone. One or more of the Trustees may
participate in a meeting thereof or of any Committee of the Trustees by means of
a conference telephone or similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time. Participation
by such means shall constitute presence in person at a meeting.
<PAGE>
- 4 -
SECTION 2.7. Location of Meetings. Trustees meetings may be held at any
place, within or without Massachusetts.
SECTION 2.8. Votes. Voting at Trustees' meetings may be conducted orally,
by show of hands or, if requested by any Trustee, by written ballot. The results
of all voting shall be recorded by the Secretary in the minute book.
SECTION 2.9. Rulings of Chairman. All other rules of conduct adopted and
used at any Trustees' meeting shall be determined by the chairman of such
meeting, whose ruling on all procedural matters shall be final.
SECTION 2.10. Trustees' Action in Writing. Nothing in this Article II
shall limit the power of the Trustees to take action by means of a written
instrument without a meeting, as provided in Section 4.2 of the Declaration.
SECTION 2.11. Resignations. Any Trustee may resign at any time by written
instrument signed by him and delivered to the Chairman, the President or the
Secretary or to a meeting of the Trustees. Such resignation shall be effective
upon receipt unless specified to be effective at some other time.
ARTICLE 3
OFFICERS
SECTION 3.1. Officers of the Trust. The officers of the Trust shall
consist of a Chairman of the Trustees, a President, a Treasurer and a Secretary,
and may include one or more Vice Chairmen, Vice Presidents, Assistant Treasurers
and Assistant Secretaries, and such other officers as the Trustees may
designate. Any person may hold more than one office. Except for the Chairman and
any Vice Chairmen, no officer need be a Trustee.
SECTION 3.2. Time and Terms of Election. The Chairman, the President, the
Treasurer and the Secretary shall be elected by the Trustees at their first
meeting and thereafter at the annual meeting of the Trustees, as provided in
Section 4.2 of the Declaration. Such officers shall hold office until the next
annual meeting of the Trustees and until their successors shall have been duly
elected and qualified, and may be removed at any meeting by the affirmative vote
of a Majority of the Trustees. All other officers of the Trust may be elected or
appointed at any meeting of the Trustees. Such officers shall hold office for
any term, indefinitely, as determined by the Trustees, and shall be subject to
removal, with or without cause, at any time by the Trustees.
SECTION 3.3. Resignation and Removal. Any officer may resign at any time
by giving written notice to the Trustees. Such resignation shall take effect at
the time specified therein, and, unless otherwise specified therein, the
acceptance of such
<PAGE>
- 5 -
resignation shall not be necessary to make it effective. If the office of any
officer or agent becomes vacant by reason of death, resignation, retirement,
disqualification, removal from office or otherwise, the Trustees may choose a
successor, who shall hold office for the unexpired term in respect of which such
vacancy occurred. Except to the extent expressly provided in a written agreement
with the Trust, no officer resigning or removed shall have any right to any
compensation for any period following such resignation or removal, or any right
to damage on account of such removal.
SECTION 3.4. Fidelity Bond. The Trustees may, in their discretion, direct
any officer appointed by them to furnish at the expense of the Trust a fidelity
bond approved by the Trustees, in such amount as the Trustees may prescribe.
SECTION 3.5. Chairman of the Trustees. Unless the Trustees otherwise
provide, the Chairman of the Trustees shall preside at all meetings of the
Shareholders and of the Trustees. The Chairman, subject to the supervision of
the Trustees, shall have general charge and supervision of the business,
property and affairs of the Trust and such other powers and duties as the
Trustees may prescribe, and unless otherwise provided by law, the Declaration,
these By-Laws or specific vote of the Trustees, shall have and may exercise all
of the powers given to the Trustees by the Declaration and by these By-Laws.
SECTION 3.6. Vice Chairmen. If the Trustees shall elect one or more Vice
Chairmen, the Vice Chairman or if there shall be more than one, such Vice
Chairmen in the order of their seniority or as otherwise designated by the
Trustees, shall preside at meetings of the Shareholders and of the Trustees, and
shall exercise such other powers and duties of the Chairman as the Trustees
shall determine.
SECTION 3.7. President. The President shall be the chief administrative
officer of the Trust and, subject to the supervision of the Chairman, shall have
general charge of the operations of the Trust and general supervision of the
personnel of the Trust, and such other powers and duties as the Trustees or the
Chairman shall prescribe. In the absence or disability of the Chairman, the
President shall exercise the powers and duties of the Chairman, except to the
extent that the Trustees shall have delegated such powers and duties to the Vice
Chairman or Chairmen, and except that he shall not preside at meetings of the
Trustees if he is not himself a Trustee.
SECTION 3.8. Vice Presidents. In the absence or disability of the
President, the Vice President or, if there shall be more than one, the Vice
Presidents in the order of their seniority as otherwise designated by the
Trustees, shall exercise all of the powers and duties of the President. The Vice
Presidents shall have the power to execute bonds, notes, mortgages and other
contracts, agreements and instruments in the name of the Trust,
<PAGE>
- 6 -
and shall do and perform such other duties as the Trustees, the Chairman or the
president shall direct.
SECTION 3.9. Treasurer and Assistant Treasurers. The Treasurer shall be
the chief financial officer of the Trust, and shall have the custody of the
Trust's funds and Securities, and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Trust and shall deposit all
moneys, and other valuable effects in the name and to the credit of the Trust,
in such depositories as may be designated by the Trustees, taking proper
vouchers for such disbursements, shall have such other duties and powers as may
be prescribed from time to time by the Trustees or the Chairman, and shall
render to the Trustees, whenever they may require it, an account of all his
transactions as Treasurer and of the financial condition of the Trust. If no
Controller is elected, the Treasurer shall also have the duties and powers of
the Controller, as provided in these By-Laws. Any Assistant Treasurer shall have
such duties and powers as shall be prescribed from time to time by the Trustees
or the Treasurer, and shall be responsible to and shall report to the Treasurer.
In the absence or disability of the Treasurer, the Assistant Treasurer or, if
there shall be more than one, the Assistant Treasurers in the order of their
seniority or as otherwise designated by the Trustees or the Chairman, shall have
the powers and duties of the Treasurer.
SECTION 3.10. Controller and Assistant Controllers. If a Controller is
elected, he shall be the chief accounting officer of the Trust and shall be in
charge of its books of account and accounting records and of its accounting
procedures, and shall have such duties and powers as are commonly incident to
the office of a controller, and such other duties and powers as may be
prescribed from time to time by the Trustees. The Controller shall be
responsible to and shall report to the Trustees, but in the ordinary conduct of
the Trust's business, shall be under the supervision of the Treasurer. Any
Assistant Controller shall have such duties and powers as shall be prescribed
from time to time by the Trustees or the Controller, and shall be responsible to
and shall report to the Controller. In the absence or disability of the
Controller, the Assistant Controller or, if there shall be more than one, the
Assistant Controllers in the order of their seniority or as otherwise designated
by the Trustees or the Chairman, shall have the powers and duties of the
Controller.
SECTION 3.11. Secretary and Assistant Secretaries. The Secretary shall,
if and to the extent requested by the Trustees, attend all meetings of the
Trustees, any Committee of the Trustees and/or the Shareholders and record all
votes and the minutes of proceedings in a book to be kept for that purpose,
shall give or cause to be given notice of all meetings of the Trustees, any
Committee of the Trustees, and of the Shareholders and shall perform such other
duties as may be prescribed by the Trustees. The Secretary, or in his absence
any Assistant Secretary, shall affix the Trust's seal to any instrument
requiring it, and when so
<PAGE>
- 7 -
affixed, it shall be attested by the signature of the Secretary or an Assistant
Secretary. The Secretary shall be the custodian of the Share records and all
other books, records and papers of the Trust (other than financial) and shall
see that all books, reports, statements, certificates and other documents and
records required by law are properly kept and filed. In the absence or
disability of the Secretary, the Assistant Secretary or, if there shall be more
than one, the Assistant Secretaries in the order of their seniority or as
otherwise designated by the Trustees or the Chairman, shall have the powers and
duties of the Secretary.
SECTION 3.12. Substitutions. In case of the absence or disability of any
officer of the Trust, or for any other reason that the Trustees may deem
sufficient, the Trustees may delegate for the time being the powers or duties,
or any of them, of such officer to any other officer, or to any Trustee.
SECTION 3.13. Execution of Deeds, etc. Except as the Trustees may
generally or in particular cases otherwise authorize or direct, all deeds,
leases, transfers, contracts, proposals, bonds, notes, checks, drafts and other
obligations made, accepted or endorsed by the Trust shall be signed or endorsed
on behalf of the Trust by the Chairman, the President, one of the Vice
Presidents or the Treasurer.
SECTION 3.14. Power to Vote Securities. Unless otherwise ordered by the
Trustees, the Treasurer and the Secretary each shall have full power and
authority on behalf of the Trust to give proxies for and/or to attend and to act
and to vote at any meeting of stockholders of any corporation in which the Trust
may hold stock, and at any such meeting the Treasurer or the Secretary, as the
case may be, his proxy shall possess and may exercise any and all rights and
powers incident to the ownership of such stock which, as the owner thereof, the
Trust might have possessed and exercised if present. The Trustees, by resolution
from time to time, or, in the absence thereof, either the Treasurer or the
Secretary, may confer like powers upon any other person or persons as attorneys
and proxies of the Trust.
ARTICLE 4
COMMITTEES
SECTION 4.1. Power of Trustees to Designate Committees. The Trustees, by
vote of a Majority of the Trustees, may elect from their number an Executive
Committee and any other Committees and may delegate thereto some or all of their
powers except those which by law, by the Declaration or by these By-Laws may not
be delegated; provided, that the Executive Committee shall not be empowered to
elect the Chairman of the Trustees, the President, the Treasurer or the
Secretary, to amend the By-Laws, to exercise the powers or the Trustees under
this Section 4.1 or under Section 4.3 hereof, or to perform any act for which
the action of a
<PAGE>
- 8 -
Majority of the Trustees is required by law, by the Declaration or by these
By-Laws. The members of any such Committee shall serve at the pleasure of the
Trustees.
SECTION 4.2. Rules for Conduct of Committee Affairs. Except as otherwise
provided by the Trustees, each Committee elected or appointed pursuant to this
Article IV may adopt such standing rules and regulations for the conduct of its
affairs as it may deem desirable, subject to review and approval of such rules
and regulations by the Trustees at the next succeeding meeting of the Trustees,
but in the absence of any such action or any contrary provisions by the
Trustees, the business of each Committee shall be conducted, so far as
practicable, in the same manner as provided herein and in the Declaration for
the Trustees.
SECTION 4.3. Trustees May Alter, Abolish, etc., Committees. The Trustees
may at any time alter or abolish any Committee, change the membership of any
Committee, or revoke, rescind or modify any action of any Committee or the
authority of any Committee with respect to any matter or class of matters;
provided, that no such action shall impair the rights of any third parties.
SECTION 4.4. Minutes; Review by Trustees. Any Committee to which the
Trustees delegate any of their powers or duties shall keep records of its
meetings and shall report its actions to the Trustees.
ARTICLE 5
SEAL
The seal of the Trust shall consist of a flat-faced circular die with the
word "Massachusetts", together with the name of the Trust, the words "Trust
Seal", and the year of its organization cut or engraved thereon, but, unless
otherwise required by the Trustees, the seal shall not be necessary to be placed
on, and its absence shall not impair the validity of, any document, instrument
or other paper executed and delivered by or on behalf of the Trust.
ARTICLE 6
SHARES
SECTION 6.1. Issuance of Shares. The Trustees may issue Shares of any or
all Series either in certificated or uncertificated form, they may issue
certificates to the holders or Shares of a Series which was originally issued in
uncertificated form, and if they have issued Shares of any Series in
uncertificated form, they may at any time discontinue the issuance of Share
certificates for such Series and may, by written notice to such Shareholders of
such Series require the surrender of their Share certificates to the Trust for
cancellation, which surrender and
<PAGE>
- 9 -
cancellation shall not affect the ownership of Shares for such Series.
SECTION 6.2. Uncertificated Shares. For any Series of Shares for which the
Trustees issue Shares without certificates, the Trust or the Transfer Agent may
either issue receipts therefor or may keep accounts upon the books of the Trust
for the record holders of such Shares, who shall in either case be deemed, for
all purposes hereunder, to be the holders of such Shares as if they had received
certificates therefor and shall be held to have expressly assented and agreed to
the terms hereof and of the Declaration.
SECTION 6.3. Share Certificates. For any Series of Shares for which the
Trustees shall issue Share certificates, each Shareholder of such Series shall
be entitled to a certificate stating the number of Shares owned by him in such
form as shall be prescribed from time to time by the Trustees. Such certificate
shall be signed by the Chairman or a Vice Chairman, or the President or a
Vice-President, and by the Treasurer or an Assistant Treasurer or the Secretary
or an Assistant Secretary of the Trust. Such signatures may be facsimiles if the
certificate is countersigned by a Transfer Agent, or by a Registrar, other than
a Trustee, officer or employee of the Trust. In case any officer who has signed
or whose facsimile signature has been placed on such certificate shall cease to
be such officer before such certificate is issued, it may be issued by the Trust
with the same effect as if he were such officer at the time of its issue.
SECTION 6.4. Lost, Stolen, etc., Certificates. If any certificate for
certificated Shares shall be lost, stolen, destroyed or mutilated, the Trustees
may authorize the issuance of a new certificate of the same tenor and for the
same number of Shares in lieu thereof. The Trustees shall require the surrender
of any mutilated certificate in respect of which a new certificate is issued,
and may, in their discretion, before the issuance of a new certificate, require
the owner of a lost, stolen or destroyed certificate, or the owner's legal
representative, to make an affidavit or affirmation setting forth such facts as
to the loss, theft or destruction as they deem necessary, and to give the Trust
a bond in such reasonable sum as the Trustees direct, in order to indemnify the
Trust.
SECTION 6.5. Record Transfer of Pledged Shares. A pledgee of Shares
pledged as collateral security shall be entitled to a new certificate in his
name as pledgee, in the case of certificated Shares, or to be registered as the
holder in pledge of such Shares in the case of uncertificated Shares; provided,
that the instrument of pledge substantially describes the debt or duty that is
intended to be secured thereby. Any such new certificate shall express on its
face that it is held as collateral security, and the name of the pledgor shall
be stated thereon, and any such registration or uncertificated Shares shall be
in a form which indicates that the registered holder holds such
<PAGE>
- 10 -
Shares in pledge. After such issue or registration, and unless and until such
pledge is released, such pledgee and his successors and assigns shall alone be
entitled to the rights of a Shareholder, and entitled to vote such Shares.
ARTICLE 7
CUSTODIAN
The Trust shall at all times employ a bank or trust company having a
capital, surplus and undivided profits of at least Two Million Dollars
($2,000,000) as Custodian of the capital assets of the Trust. The Custodian
shall be compensated for its services by the Trust upon such basis as shall be
agreed upon from time to time between the Trust and the Custodian.
ARTICLE 8
AMENDMENTS
SECTION 8.1. By-Laws Subject to Amendment. These By-Laws may be altered,
amended or repealed, in whole or in part, at any time by vote of the holders of
a majority of the Shares (or whenever there shall be more than one Series of
Shares, of the holders of a majority of the Shares of each Series) issued,
outstanding and entitled to vote. The Trustees, by vote of a Majority of the
Trustees, may alter, amend or repeal these By-Laws, in whole or in part,
including By-Laws adopted by the Shareholders, except with respect to any
provision hereof which by law, the Declaration or these By-Laws requires action
by the Shareholders. By-Laws adopted by the Trustees may be altered, amended or
repealed by the Shareholders.
SECTION 8.2. Notice of Proposal to Amend By-Laws Required. No proposal
to amend or repeal these By-Laws or to adopt new By-Laws shall be acted upon at
a meeting unless either (i) such proposal is stated in the notice or in the
waiver of notice, as the case may be, of the meeting of the Trustees or
Shareholders at which such action is taken, or (ii) all of the Trustees or
Shareholders, as the case may be, are present at such meeting and all agree to
consider such proposal without protesting the lack of notice.
EXHIBIT 4(a)
The Commonwealth of Massachusetts
Number Shares
-0- -0-
THE ALGER VARIABLE INSURANCE PRODUCTS FUND
per value $.001 per share
This Certifies that Specimen of ------- is the owner of -0- Shares in the
Portfolio of The Alger Variable Insurance Products Fund created by a Declaration
of Trust dated April 6, 1988 and recorded with the Secretary of State of the
Commonwealth of Massachusetts which shares are fully paid and non-assessable,
and subject to the provisions of this Trust, are transferable by assignment
endorsed thereon, and, the surrender of this certificate.
IN WITNESS WHEREOF, the Trust hereunto set their hands and have caused their
seal to be affixed hereto this ______ day of _______ A.D. 19__.
- -------------------- ------------------------
President Treasurer
TRUST CERTIFICATE
No. -0-
For -0- Shares
Issued to
Specimen
- ----------------------
- ----------------------
- ----------------------
Dated __________, 19__
From whom Transferred
- ----------------------
Dated __________, 19__
No. Original Certificate No. Original Shares No. of Shares Transferred
Received Certificate No.__________________
For ________________________ Shares
This __________ day of ______________, 19__
- -------------------------------------------
- -------------------------------------------
FORM 368-259 HOBBS & WARREN, INC.
Boston Mass 02101
<PAGE>
THE ALGER VARIABLE
INSURANCE PRODUCTS FUND
Certificate
FOR
ISSUED TO
Specimen
DATED
For Value Received, _____________ hereby sell, assign and transfer unto
________________________ Shares of the Capital represented by the within
Certificate, and do hereby irrevocably constitute and appoint __________________
Attorney to transfer the said Shares on the books of the within named
Organization with full power of substitution in the premises.
Dated ___________, 19__
In presence of
- -------------------------- -------------------------
NOTICE: THE SIGNATURE OF THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT ALTERATION
OR ENLARGEMENT, OR ANY CHANGE WHATEVER.
EXHIBIT 4(c)
The Commonwealth of Massachusetts
Number Shares
-0- -0-
THE ALGER AMERICAN FUND
Alger American Balanced Portfolio
Par value $.001 per share
This Certifies that Specimen of ------- is the owner of -0- Shares in the Alger
American Balanced Portfolio created by a Declaration of Trust dated
______________ and recorded with the Secretary of State of the Commonwealth of
Massachusetts which shares are fully paid and non-assessable, and subject to the
provisions of this Trust, are transferable by assignment endorsed thereon, and,
the surrender of this certificate.
IN WITNESS WHEREOF, the Trust hereunto set their hands and have caused their
seal to be affixed hereto this ______ day of _______ A.D. 19__.
- -------------------- ------------------------
President Treasurer
FORM 368-259 H. & W. INC.
<PAGE>
Certificate
FOR
ISSUED TO
---------------------
DATED
---------------------
For Value Received, _____________ hereby sell, assign and transfer unto
________________________ Shares of the Capital represented by the within
Certificate, and do hereby irrevocably constitute and appoint __________________
Attorney to transfer the said Shares on the books of the within named
Organization with full power of substitution in the premises.
Dated ___________, 19__
In presence of
- -------------------------- -------------------------
NOTICE: THE SIGNATURE OF THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR WITHOUT ALTERATION
OR ENLARGEMENT, OR ANY CHANGE WHATEVER.
EXHIBIT 4(d)
THE ALGER AMERICAN FUND
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
MC 0001 CUSIP
SEE REVERSE
FOR CERTAIN DEFINITIONS
This Certifies that is the owner of
Shares of beneficial interest with a $.001 par value of the Alger American
MidCap Growth Portfolio of the Fund (hereinafter called the "Fund"),
transferable on the books of the Fund by the holder hereof in person or by duly
authorized attorney, upon surrender of this certificate properly endorsed. This
certificate and the shares represented hereby are issued and shall be held
subject to all of the provisions of the Agreement and Declaration of Trust of
the Fund, a copy of which is on file with the Secretary of State of the
Commonwealth of Massachusetts, to all of which the holder by acceptance hereof
assents. This certificate is not valid until countersigned by the Transfer
Agent.
Witness the signatures of the Fund's duly authorized officers or
facsimiles thereof.
Dated:
/s/ [ILLEGIBLE] /s/ [ILLEGIBLE]
TREASURER PRESIDENT AND CHAIRMAN OF THE BOARD
AUTHORIZED SIGNATURE
COUNTERSIGNED AND REGISTERED:
ALGER SHAREHOLDER SERVICES, INC.
30 MONTGOMERY STREET
JERSEY CITY, NEW JERSEY 07302
TRANSFER AGENT AND REGISTRAR
<PAGE>
[ILLEGIBLE TEXT]
FOR VALUE RECEIVED _____________________ hereby sells, assigns and
transfers unto
PLEASE INSERT SOCIAL SECURITY OR TAX IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------------------------------------------------
(Please print or typewrite name and address of assignee
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
______________________________________________________________________Shares
of the Shares represented by the within Certificate, and do hereby irrevocably
constitute and appoint
_________________________________________________________________ Attorney, to
transfer the said instrument on the books of the within-named Trust with full
power of substitution in the premises.
Dated______________________ Signed____________________________
----------------------------------
(Both must sign if joint tenancy)
Signature(s)
Guaranteed_________________________
Firm or Bank
By
-----------------------------------
Officer
Signatures must be guaranteed by a commercial bank or a member firm of a
domestic stock exchange.
-----------------------------------
NOTICE: The signature to this
assignment must correspond with the
name as written upon the face of the
certificate in every particular,
without alteration or enlargement or
any change whatever.
EXHIBIT 4(e)
The Commonwealth of Massachusetts
NUMBER SHARES
THE ALGER AMERICAN FUND
Alger American Leveraged AllCap Portfolio
Par value $.001 per share
This Certifies that Specimen of ------- is the owner of -0- Shares in the Alger
American Leveraged AllCap Portfolio created by a Declaration of Trust dated
April 6, 1988 and recorded with the Secretary of State of the Commonwealth of
Massachusetts which shares are fully paid and non-assessable, and subject to the
provisions of this Trust, are transferable by assignment endorsed thereon, and,
the surrender of this certificate.
IN WITNESS WHEREOF, the Trust hereunto set their hands and have caused their
seal to be affixed hereto this ______ day of _______ A.D. 19__.
- -------------------- ------------------------
President Treasurer
<PAGE>
For Value Received, _______________ hereby sell, assign, and transfer unto
- --------------------------------------------------------------------------
_____________________________________________________________ Shares of the
Capital represented by the within Certificate, and do hereby irrevocably
constitute and appoint ________________________ Attorney to transfer the said
Shares on the books of the within named Organization with full power of
substitution in the premises.
Dated ________ 19__
In presence of ______________________________________________
- --------------------------------------------------
NOTICE: THE SIGNATURE OF THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE, IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER.
EXHIBIT 5(a)
INVESTMENT MANAGEMENT AGREEMENT
THE ALGER AMERICAN FUND
ALGER AMERICAN BALANCED PORTFOLIO
July 1, 1992
Fred Alger Management, Inc.
75 Maiden Lane
New York, NY 10038
Dear Sirs:
The Alger American Fund (the "Fund"), an unincorporated business
trust organized under the laws of the Commonwealth of Massachusetts, hereby
confirms its agreement with Fred Alger Management, Inc. ("Alger Management") as
follows:
1. Investment Description; Appointment
The Fund desires to employ the capital of the Alger American
Balanced Portfolio (the "Portfolio") by investing and reinvesting in investments
of the kind and in accordance with the limitations specified in its Agreement
and Declaration of Trust and in its Prospectus and Statement of Additional
Information, as from time to time in effect, and in such manner and to such
extent as may from time to time be approved by the Board of Trustees of the
Fund. Copies of the Fund's Prospectus, Statement of Additional Information and
Agreement and Declaration of Trust, as each may from time to time be amended,
have been or will be submitted to Alger Management. The Fund desires to employ
and hereby appoints Alger Management to act as the investment manager for the
Portfolio. Alger Management accepts the appointment and agrees to furnish the
services for the compensation set forth below.
2. Services as Investment Manager
Subject to the supervision and direction of the Board of Trustees of
the Fund, Alger Management will (a) act in strict conformity with the Fund's
Agreement and Declaration of Trust, the Investment Company Act of 1940 (the
"Act") and the Investment Advisers Act of 1940, as the same may from time to
time be amended; (b) manage the Portfolio in accordance with the Portfolio's
<PAGE>
investment objective and policies as stated in the Fund's Prospectus and
Statement of Additional Information as from time to time in effect; (c) make
general investment decisions for the Portfolio involving decisions concerning
(i) the specific types of securities to be held by the Portfolio and the
proportion of the Portfolio's assets that should be allocated to such
investments during particular market cycles and (ii) the specific issuers whose
securities will be purchased or sold by the Portfolio; and (d) supply office
facilities (which may be in Alger Management's own offices); statistical and
research data; data processing services; clerical, accounting and bookkeeping
services; internal auditing services; internal executive and administrative
services; stationery and office supplies; preparation of reports to shareholders
of the Portfolio; preparation of tax returns, reports to and filings with the
Securities and Exchange Commission (the "SEC") and state Blue Sky authorities;
calculation of the net asset value of shares of the Portfolio; maintenance of
the Portfolio's financial accounts and records; and general assistance in all
aspects of the Fund's operations with respect to the Portfolio. In providing
those services, Alger Management will supervise the Portfolio's investments
generally and conduct a continual program of evaluation of the Portfolio's
assets.
In connection with the performance of its duties under this
Agreement, it is understood that Alger Management may from time to time employ
or associate with itself such person or persons as Alger Management may believe
to be particularly fitted to assist it in the performance of this Agreement, it
being understood that the compensation of such person or persons shall be paid
by Alger Management and that no obligation may be incurred on the Fund's behalf
in any such respect.
3. Brokerage
In executing transactions for the Portfolio and selecting brokers or
dealers, Alger Management will use its best efforts to seek the best overall
terms available. In assessing the best overall terms available for any Portfolio
transactions, Alger Management will consider all factors it deems relevant
including, but not limited to, breadth of the market in the security, the price
of the security, the financial condition and execution capability of the broker
or dealer and the reasonableness of any commission for the specific transaction
and on a continuing basis. In selecting brokers or dealers to execute a
particular transaction and in evaluating the best overall terms available,
-2-
<PAGE>
Alger Management may 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 and/or other accounts over which Alger Management or
an affiliate exercises investment discretion.
4. Information Provided to the Fund
Alger Management will keep the Fund informed of developments
materially affecting the Portfolio, and will, on its own initiative, furnish the
Fund from time to time with whatever information Alger Management believes is
appropriate for this purpose.
In compliance with the requirements of Rule 31a-3 under the Act,
Alger Management hereby agrees that all records that it maintains for the Fund
in respect of the Portfolio are the property of the Fund and further agrees to
surrender promptly to the Fund any of such records upon the Fund's request.
5. Standard of Care
Alger Management shall exercise its best judgment in rendering the
services listed in paragraph 2 above. Alger Management shall not be liable for
any error of judgment or mistake of law or for any loss suffered by the
Portfolio in connection with the matters to which this Agreement relates,
provided that nothing herein shall be deemed to protect or purport to protect
Alger Management against any liability to the Portfolio or to its shareholders
to which Alger Management would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence on its part in the performance of its
duties or by reason of Alger Management's reckless disregard of its obligations
and duties under this Agreement.
6. Compensation
In consideration of the services rendered pursuant to this
Agreement, the Portfolio will pay Alger Management on the first business day of
each month a fee for the previous month at the annual rate of .75 of 1.00% of
the Portfolio's average daily net assets. The fee for the period from the date
the Fund's registration statement is declared effective by the SEC to the end of
the month during which its registration statement is declared effective shall be
prorated according to the proportion that such
-3-
<PAGE>
period bears to the full monthly period. Upon any termination if this Agreement
before the end of a month, the fee for such part of that month shall be prorated
according to the proportion that such period bears to the full monthly period
and shall be payable upon the date of termination of this Agreement. For the
purpose of determining fees payable to Alger Management, the value of the
Portfolio's net assets shall be computed at the times and in the manner
specified in the Fund's Prospectus and Statement of Additional Information as
from time to time in effect.
7. Expenses
Alger Management will bear all expenses in connection with the
performance of its services under this Agreement. The Portfolio will bear
certain other expenses to be incurred in its operation, including: taxes,
interest, brokerage fees and commissions, if any; fees of Trustees of the Fund
who are not officers, directors or employees of Alger Management or any of its
affiliates; SEC fees and state Blue Sky qualification fees; charges of
custodians and transfer and dividend disbursing agents; charges of any
independent pricing service retained to assist in valuing the assets of the
Portfolio; the Fund's proportionate share of insurance premiums; outside
auditing and legal expenses; costs of maintenance of the Fund's existence; costs
attributable to shareholder services, including, without limitation, telephone
and personnel expenses; costs of preparing and printing prospectuses and
statements of additional information for regulatory purposes and for
distribution to existing shareholders; costs of shareholders' reports and
meetings of the shareholders of the Fund and of the officers or Board of
Trustees of the Fund; and any extraordinary expenses. Fund-wide expenses not
specifically identifiable to the Portfolio or any other portfolio of the Fund
will be allocated to all portfolios pro rata on the basis of their relative net
assets.
8. Reimbursement to the Portfolio
If in any fiscal year the aggregate operating expenses of the
Portfolio (including fees pursuant to this Agreement, but excluding interest,
taxes, fees for brokerage expenses and extraordinary expenses) exceed 1.25%,
Alger Management will reimburse the Portfolio for such excess expense. Such
expense reimbursement, if any, will be estimated, reconciled and paid on a
monthly basis.
-4-
<PAGE>
9. Services to Other Companies or Accounts
The Fund understands that Alger Management now acts, will continue
to act and may act in the future as investment adviser to fiduciary and other
managed accounts and as investment manager to one or more other investment
companies (including other portfolios of the Fund), and the Fund has no
objection to Alger Management so acting, provided that whenever the Portfolio
and one or more other accounts or investment companies advised by Alger
Management have available funds for investment, investments suitable and
appropriate for each will be allocated in accordance with a formula believed to
be equitable to each entity. The Fund recognizes that in some cases this
procedure may adversely affect the size of the position obtainable for the
Portfolio. In addition, the Fund understands that the persons employed by Alger
Management to assist in the performance of Alger Management's duties hereunder
will not devote their full time to such service and nothing contained herein
shall be deemed to limit or restrict the right of Alger Management or any
affiliate of Alger Management to engage in and devote time and attention to
other businesses or to render services of whatever kind or nature.
10. Term of Agreement
This Agreement shall become effective as of the date the Portfolio
commences its investment operations and shall continue until October 1, 1994 and
thereafter shall continue automatically for successive annual periods, provided
such continuance is specifically approved at least annually by (i) the Board of
Trustees of the Fund or (ii) a vote of a "majority" (as defined in the Act) of
the Portfolio's outstanding voting securities, provided that in either event the
continuance is also approved by a majority of the Board of Trustees who are not
"interested persons" (as defined in the Act) of any party to this Agreement, by
vote cast in person at a meeting called for the purpose of voting on such
approval. This Agreement is terminable, without penalty, on sixty (60) days'
written notice, by the Board of Trustees of the Fund or by vote of holders of a
majority of the Portfolio's outstanding voting securities, or upon sixty (60)
days' written notice, by Alger Management. This Agreement will also terminate
automatically in the event of its assignment (as defined in the Act and the
rules thereunder).
11. Representation by the Fund
The Fund represents that a copy of its Agreement and Declaration of
Trust, dated April 6, 1988, together with all amend-
-5-
<PAGE>
ments thereto, is on file in the office of the Secretary of the Commonwealth of
Massachusetts.
12. Limitation of Liability
This Agreement has been executed on behalf of the Fund in respect of
the Portfolio by the undersigned officer of the Fund in his capacity as an
officer of the Fund. The obligations of this Agreement shall be binding on the
assets and property of the Portfolio only and shall not be binding on any other
portfolio of the Fund or any Trustee, officer or shareholder of the Fund
individually.
13. Governing Law
This Agreement shall be governed by and construed in accordance with
the laws (except the conflict of law rules) of the State of New York.
If the foregoing is in accordance with your understanding, kindly
indicate your acceptance hereof by signing and returning the enclosed copy
hereof.
Very truly yours,
THE ALGER AMERICAN FUND
By: /s/ Gregory S. Duch
---------------------
Authorized Officer
Accepted and Agreed:
FRED ALGER MANAGEMENT, INC.
By: /s/ Gregory S. Duch
-------------------------
Authorized Officer
-6-
EXHIBIT 5(b)
INVESTMENT MANAGEMENT AGREEMENT
THE ALGER AMERICAN FUND
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
March 29, 1993
Fred Alger Management, Inc.
75 Maiden Lane
New York, NY 10038
Dear Sirs:
The Alger American Fund (the "Fund"), an unincorporated business
trust organized under the laws of the Commonwealth of Massachusetts, hereby
confirms its agreement with Fred Alger Management, Inc. ("Alger Management") as
follows:
1. Investment Description; Appointment
The Fund desires to employ the capital of the Alger American MidCap
Growth Portfolio (the "Portfolio") by investing and reinvesting in investments
of the kind and in accordance with the limitations specified in its Agreement
and Declaration of Trust and in its Prospectus and Statement of Additional
Information, as from time to time in effect, and in such manner and to such
extent as may from time to time be approved by the Board of Trustees of the
Fund. Copies of the Fund's Prospectus, Statement of Additional Information and
Agreement and Declaration of Trust, as each may from time to time be amended,
have been or will be submitted to Alger Management. The Fund desires to employ
and hereby appoints Alger Management to act as the investment manager for the
Portfolio. Alger Management accepts the appointment and agrees to furnish the
services for the compensation set forth below.
2. Services as Investment Manager
Subject to the supervision and direction of the Board of Trustees of
the Fund, Alger Management will (a) act in strict conformity with the Fund's
Agreement and Declaration of Trust, the Investment Company Act of 1940 (the
"Act") and the Investment Advisers Act of 1940, as the same may from time to
time be amended; (b) manage the Portfolio in accordance with the Portfolio's
<PAGE>
investment objective and policies as stated in the Fund's Prospectus and
Statement of Additional Information as from time to time in effect; (c) make
general investment decisions for the Portfolio involving decisions concerning
(i) the specific types of securities to be held by the Portfolio and the
proportion of the Portfolio's assets that should be allocated to such
investments during particular market cycles and (ii) the specific issuers whose
securities will be purchased or sold by the Portfolio; and (d) supply office
facilities (which may be in Alger Management's own offices); statistical and
research data; data processing services; clerical, accounting and bookkeeping
services; internal auditing services; internal executive and administrative
services; stationery and office supplies; preparation of reports to shareholders
of the Portfolio; preparation of tax returns, reports to and filings with the
Securities and Exchange Commission (the "SEC") and state Blue Sky authorities;
calculation of the net asset value of shares of the Portfolio; maintenance of
the Portfolio's financial accounts and records; and general assistance in all
aspects of the Fund's operations with respect to the Portfolio. In providing
those services, Alger Management will supervise the Portfolio's investments
generally and conduct a continual program of evaluation of the Portfolio's
assets.
In connection with the performance of its duties under this
Agreement, it is understood that Alger Management may from time to time employ
or associate with itself such person or persons as Alger Management may believe
to be particularly fitted to assist it in the performance of this Agreement, it
being understood that the compensation of such person or persons shall be paid
by Alger Management and that no obligation may be incurred on the Fund's behalf
in any such respect.
3. Brokerage
In executing transactions for the Portfolio and selecting brokers or
dealers, Alger Management will use its best efforts to seek the best overall
terms available. In assessing the best overall terms available for any Portfolio
transactions, Alger Management will consider all factors it deems relevant
including, but not limited to, breadth of the market in the security, the price
of the security, the financial condition and execution capability of the broker
or dealer and the reasonableness of any commission for the specific transaction
and on a continuing basis. In selecting brokers or dealers to execute a
particular transaction and in evaluating the best overall terms available,
-2-
<PAGE>
Alger Management may 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 and/or other accounts over which Alger Management or
an affiliate exercises investment discretion.
4. Information Provided to the Fund
Alger Management will keep the Fund informed of developments
materially affecting the Portfolio, and will, on its own initiative, furnish the
Fund from time to time with whatever information Alger Management believes is
appropriate for this purpose.
In compliance with the requirements of Rule 31a-3 under the Act,
Alger Management hereby agrees that all records that it maintains for the Fund
in respect of the Portfolio are the property of the Fund and further agrees to
surrender promptly to the Fund any of such records upon the Fund's request.
5. Standard of Care
Alger Management shall exercise its best judgment in rendering the
services listed in paragraph 2 above. Alger Management shall not be liable for
any error of judgment or mistake of law or for any loss suffered by the
Portfolio in connection with the matters to which this Agreement relates,
provided that nothing herein shall be deemed to protect or purport to protect
Alger Management against any liability to the Portfolio or to its shareholders
to which Alger Management would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence on its part in the performance of its
duties or by reason of Alger Management's reckless disregard of its obligations
and duties under this Agreement.
6. Compensation
In consideration of the services rendered pursuant to this
Agreement, the Portfolio will pay Alger Management on the first business day of
each month a fee for the previous month at the annual rate of .80 of 1.00% of
the Portfolio's average daily net assets. The fee for the period from the date
the Fund's registration statement is declared effective by the SEC to the end of
the month during which its registration statement is declared effective shall be
prorated according to the proportion that such
-3-
<PAGE>
period bears to the full monthly period. Upon any termination if this Agreement
before the end of a month, the fee for such part of that month shall be prorated
according to the proportion that such period bears to the full monthly period
and shall be payable upon the date of termination of this Agreement. For the
purpose of determining fees payable to Alger Management, the value of the
Portfolio's net assets shall be computed at the times and in the manner
specified in the Fund's Prospectus and Statement of Additional Information as
from time to time in effect.
7. Expenses
Alger Management will bear all expenses in connection with the
performance of its services under this Agreement. The Portfolio will bear
certain other expenses to be incurred in its operation, including: taxes,
interest, brokerage fees and commissions, if any; fees of Trustees of the Fund
who are not officers, directors or employees of Alger Management or any of its
affiliates; SEC fees and state Blue Sky qualification fees; charges of
custodians and transfer and dividend disbursing agents; charges of any
independent pricing service retained to assist in valuing the assets of the
Portfolio; the Fund's proportionate share of insurance premiums; outside
auditing and legal expenses; costs of maintenance of the Fund's existence; costs
attributable to shareholder services, including, without limitation, telephone
and personnel expenses; costs of preparing and printing prospectuses and
statements of additional information for regulatory purposes and for
distribution to existing shareholders; costs of shareholders' reports and
meetings of the shareholders of the Fund and of the officers or Board of
Trustees of the Fund; and any extraordinary expenses. Fund-wide expenses not
specifically identifiable to the Portfolio or any other portfolio of the Fund
will be allocated to all portfolios pro rata on the basis of their relative net
assets.
8. Reimbursement to the Portfolio
If in any fiscal year the aggregate operating expenses of the
Portfolio (including fees pursuant to this Agreement, but excluding interest,
taxes, fees for brokerage expenses and extraordinary expenses) exceed 1.50%,
Alger Management will reimburse the Portfolio for such excess expense. Such
expense reimbursement, if any, will be estimated, reconciled and paid on a
monthly basis.
-4-
<PAGE>
9. Services to Other Companies or Accounts
The Fund understands that Alger Management now acts, will continue
to act and may act in the future as investment adviser to fiduciary and other
managed accounts and as investment manager to one or more other investment
companies (including other portfolios of the Fund), and the Fund has no
objection to Alger Management so acting, provided that whenever the Portfolio
and one or more other accounts or investment companies advised by Alger
Management have available funds for investment, investments suitable and
appropriate for each will be allocated in accordance with a formula believed to
be equitable to each entity. The Fund recognizes that in some cases this
procedure may adversely affect the size of the position obtainable for the
Portfolio. In addition, the Fund understands that the persons employed by Alger
Management to assist in the performance of Alger Management's duties hereunder
will not devote their full time to such service and nothing contained herein
shall be deemed to limit or restrict the right of Alger Management or any
affiliate of Alger Management to engage in and devote time and attention to
other businesses or to render services of whatever kind or nature.
10. Term of Agreement
This Agreement shall become effective as of the date the Portfolio
commences its investment operations and shall continue until 1995 and
thereafter shall continue automatically for successive annual periods, provided
such continuance is specifically approved at least annually by (i) the Board of
Trustees of the Fund or (ii) a vote of a "majority" (as defined in the Act) of
the Portfolio's outstanding voting securities, provided that in either event the
continuance is also approved by a majority of the Board of Trustees who are not
"interested persons" (as defined in the Act) of any party to this Agreement, by
vote cast in person at a meeting called for the purpose of voting on such
approval. This Agreement is terminable, without penalty, on sixty (60) days'
written notice, by the Board of Trustees of the Fund or by vote of holders of a
majority of the Portfolio's outstanding voting securities, or upon sixty (60)
days' written notice, by Alger Management. This Agreement will also terminate
automatically in the event of its assignment (as defined in the Act and the
rules thereunder).
11. Representation by the Fund
The Fund represents that a copy of its Agreement and Declaration of
Trust, Dated April 6, 1988, together with all amend-
-5-
<PAGE>
ments thereto, is on file in the office of the Secretary of the Commonwealth of
Massachusetts.
12. Limitation of Liability
This Agreement has been executed on behalf of the Fund in respect of
the Portfolio by the undersigned officer of the Fund in his capacity as an
officer of the Fund. The obligations of this Agreement shall be binding on the
assets and property of the Portfolio only and shall not be binding on any other
portfolio of the Fund or any Trustee, officer or shareholder of the Fund
individually.
13. Governing Law
This Agreement shall be governed by and construed in accordance with
the laws (except the conflict of law rules) of the State of New York.
If the foregoing is in accordance with your understanding, kindly
indicate your acceptance hereof by signing and returning the enclosed copy
hereof.
Very truly yours,
THE ALGER AMERICAN FUND
By: /s/ Gregory S. Duch
-----------------------
Authorized Officer
Accepted and Agreed:
FRED ALGER MANAGEMENT, INC.
By: /s/ Gregory S. Duch
----------------------------
Authorized Officer
-6-
EXHIBIT 5(c)
INVESTMENT MANAGEMENT AGREEMENT
THE ALGER AMERICAN FUND
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
March 1, 1994
Fred Alger Management, Inc.
75 Maiden Lane
New York, NY 10038
Dear Sirs:
The Alger American Fund (the "Fund"), an unincorporated business
trust organized under the laws of the Commonwealth of Massachusetts, hereby
confirms its agreement with Fred Alger Management, Inc. ("Alger Management") as
follows:
1. Investment Description; Appointment
The Fund desires to employ the capital of the Alger American
Leveraged AllCap Portfolio (the "Portfolio") by investing and reinvesting in
investments of the kind and in accordance with the limitations specified in its
Agreement and Declaration of Trust and in its Prospectus and Statement of
Additional Information, as from time to time in effect, and in such manner and
to such extent as may from time to time be approved by the Board of Trustees of
the Fund. Copies of the Fund's Prospectus, Statement of Additional Information
and Agreement and Declaration of Trust, as each may from time to time be
amended, have been or will be submitted to Alger Management. The Fund desires to
employ and hereby appoints Alger Management to act as the investment manager for
the Portfolio. Alger Management accepts the appointment and agrees to furnish
the services for the compensation set forth below.
2. Services as Investment Manager
Subject to the supervision and direction of the Board of Trustees of
the Fund, Alger Management will (a) act in strict conformity with the Fund's
Agreement and Declaration of Trust, the Investment Company Act of 1940 (the
"Act") and the Investment Advisers Act of 1940, as the same may from time to
time be amended; (b) manage the Portfolio in accordance with the Portfolio's
<PAGE>
investment objective and policies as stated in the Fund's Prospectus and
Statement of Additional Information as from time to tine in effect; (c) make
general investment decisions for the Portfolio involving decisions concerning
(i) the specific types of securities to be held by the Portfolio and the
proportion of the Portfolio's assets that should be allocated to such
investments during particular market cycles and (ii) the specific issuers whose
securities will be purchased or sold by the Portfolio; and (d) supply office
facilities (which may be in Alger Management's own offices); statistical and
research data; data processing services; clerical, accounting and bookkeeping
services; internal auditing services; internal executive and administrative
services; stationery and office supplies; preparation of reports to shareholders
of the Portfolio; preparation of tax returns, reports to and filings with the
Securities and Exchange Commission (the "SEC") and state Blue Sky authorities;
calculation of the net asset value of shares of the Portfolio; maintenance of
the Portfolio's financial accounts and records; and general assistance in all
aspects of the Fund's operations with respect to the Portfolio. In providing
those services, Alger Management will supervise the Portfolio's investments
generally and conduct a continual program of evaluation of the Portfolio's
assets.
In connection with the performance of its duties under this
Agreement, it is understood that Alger Management may from time to time employ
or associate with itself such person or persons as Alger Management may believe
to be particularly fitted to assist it in the performance of this Agreement, it
being understood that the compensation of such person or persons shall be paid
by Alger Management and that no obligation may be incurred on the Funds' behalf
in any such respect.
3. Brokerage
In executing transactions for the Portfolio and selecting brokers or
dealers, Alger Management will use its best efforts to seek the best overall
terms available. In assessing the best overall terms available for any Portfolio
transactions, Alger Management will consider all factors it deems relevant
including, but not limited to, breadth of the market in the security, the price
of the security, the financial condition and execution capability of the broker
or dealer and the reasonableness of any commission for the specific transaction
and on a continuing basis. In selecting brokers or dealers to execute a
particular transaction and in evaluating the best overall terms available,
<PAGE>
Alger Management may 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 and/or other accounts over which Alger Management or
an affiliate exercises investment discretion.
4. Information Provided to the Fund
Alger Management will keep the Fund informed of developments
materially affecting the Portfolio, and will, on its own initiative, furnish the
Fund from time to time with whatever information Alger Management believes is
appropriate for this purpose.
In compliance with the requirements of Rule 31a-3 under the Act,
Alger Management hereby agrees that all records that it maintains for the Fund
in respect of the Portfolio are the property of the Fund and further agrees to
surrender promptly to the Fund any of such records upon the Fund's request.
5. Standard of Care
Alger Management shall exercise its best judgment in rendering the
services listed in paragraph 2 above. Alger Management shall not be liable for
any error of judgment or mistake of law or for any loss suffered by the
Portfolio in connection with the matters to which this Agreement relates,
provided that nothing herein shall be deemed to protect or purport to protect
Alger Management against any liability to the Portfolio or to its shareholders
to which Alger Management would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence on its part in the performance of its
duties or by reason of Alger Management's reckless disregard of its obligations
and duties under this Agreement.
6. Compensation
In consideration of the services rendered pursuant to this
Agreement, the Portfolio will pay Alger Management on the first business day of
each month a fee for the previous month at the annual rate of .85 of 1.00% of
the Portfolios' average daily net assets. The fee for the period from the date
the Fund's registration statement is declared effective by the SEC to the end of
the month during which its registration statement is declared effective shall be
prorated according to the proportion that such
<PAGE>
period bears to the full monthly period. Upon any termination of this Agreement
before the end of a month, the fee for such part of that month shall be prorated
according to the proportion that such period bears to the full monthly period
and shall be payable upon the date of termination of this Agreement. For the
purpose of determining fees payable to Alger Management, the value of the
Portfolio's net assets shall be computed at the times and in the manner
specified in the Fund's Prospectus and Statement of Additional Information as
from time to time in effect.
7. Expenses
Alger Management will bear all expenses in connection with the
performance of its services under this Agreement. The Portfolio will bear
certain other expenses to be incurred in its operation, including: taxes,
interest, brokerage fees and commissions, if any; fees of Trustees of the Fund
who are not officers, directors or employees of Alger Management or any of its
affiliates; SEC fees and state Blue Sky qualification fees; charges of
custodians and transfer and dividend disbursing agents; charges of any
independent pricing service retained to assist in valuing the assets of the
Portfolio; the Fund's proportionate share of insurance premiums; outside
auditing and legal expenses; costs of maintenance of the Fund's existence; costs
attributable to shareholder services, including, without limitation, telephone
and personnel expenses; costs of preparing and printing prospectuses and
statements of additional information for regulatory purposes and for
distribution to existing shareholders; costs of shareholders' reports and
meetings of the shareholders of the Fund and of the officers or Board of
Trustees of the Fund; and any extraordinary expenses. Fund-wide expenses not
specifically identifiable to the Portfolio or any other portfolio of the Fund
will be allocated to all portfolios pro rata on the basis of their relative net
assets.
8. Reimbursement to the Portfolio
If in any fiscal year the aggregate operating expenses of the
Portfolio (including fees pursuant to this Agreement, but excluding interest,
taxes, fees for brokerage expenses and extraordinary expenses) exceed 1.50%,
Alger Management will reimburse the Portfolio for such excess expense. Such
expense reimbursement, if any, will be estimated, reconciled and paid on a
monthly basis.
<PAGE>
9. Services to Other Companies or Accounts
The Fund understands that Alger Management now acts, will continue
to act and may act in the future as investment adviser to fiduciary and other
managed accounts and as investment manager to one or more other investment
companies (including other portfolios of the Fund), and the Fund has no
objection to Alger Management so acting, provided that whenever the Portfolio
and one or more other accounts or investment companies advised by Alger
Management have available funds for investment, investments suitable and
appropriate for each will be allocated in accordance with a formula believed to
be equitable to each entity. The Fund recognizes that in some cases this
procedure may adversely affect the size of the position obtainable for the
Portfolio. In addition, the Fund understands that the persons employed by Alger
Management to assist in the performance of Alger Management's duties hereunder
will not devote their full time to such service and nothing contained herein
shall be deemed to limit or restrict the right of Alger Management or any
affiliate of Alger Management to engage in and devote time and attention to
other businesses or to render services of whatever kind or nature.
10. Term of Agreement
This Agreement shall become effective as of the date the Portfolio
commences its investment operations and shall continue Until March 1, 1996 and
thereafter shall continue automatical1y for successive annual periods, provided
such continuance is specifically approved at least annually by (i) the Board of
Trustees of the Fund or (ii) a vote of a "majority" (as defined in the Act) of
the Portfolio's outstanding voting securities, provided that in either event the
continuance is also approved by a majority of the Board of Trustees who are not
"interested persons" (as defined in the Act) of any party to this Agreement, by
vote cast in person at a meeting called for the purpose of voting on such
approval. This Agreement is terminable, without penalty, on sixty (60) days'
written notice, by the Board of Trustees of the Fund or by vote of holders of a
majority of the Portfolio's outstanding voting securities, or upon sixty (60)
days' written notice, by Alger Management. This Agreement will also terminate
automatically in the event of its assignment (as defined in the Act and the
rules thereunder).
11. Representation by the Fund
The fund represents that a copy of its Agreement and Declaration of
Trust, dated April 6, 1988, together with all amend-
<PAGE>
ments thereto, is on file in the office of the Secretary of the Commonwealth of
Massachusetts.
12. Limitation of Liability
This Agreement has been executed on behalf of the Fund in respect of
the Portfolio by the undersigned officer of the Fund in his capacity as an
officer of the Fund. The obligations of this Agreement shall be binding on the
assets and property of the Portfolio only and shall not be binding on any other
portfolio of the Fund or any Trustee, officer or shareholder of the Fund
individually.
13. Governing Law
This Agreement shall be governed by and construed in accordance with
the laws (except the conflict of law rules) of the State of New York.
If the foregoing is in accordance with your understanding, kindly
indicate your acceptance hereof by signing and returning the enclosed copy
hereof.
Very truly yours,
THE ALGER AMERICAN FUND
By: /s/ Gregory S. Duch
------------------------
Authorized Officer
Accepted and Agreed:
FRED ALGER MANAGEMENT, INC.
By: /s/ Gregory S. Duch
-------------------------
Authorized Officer
EXHIBIT 5(d)
1363Q
INVESTMENT MANAGEMENT AGREEMENT
THE ALGER AMERICAN FUND
ALGER AMERICAN MONEY MARKET PORTFOLIO
July 22, 1988
Fred Alger Management, Inc.
75 Maiden Lane
New York, New York 10038
Dear Sirs:
The Alger American Fund (the "Fund"), an unincorporated business
trust organized under the laws of the Commonwealth of Massachusetts, hereby
confirms its agreement with Fred Alger Management, Inc. ("Alger Management") as
follows:
1. Investment Description; Appointment
The Fund desires to employ the capital of the Alger American Money
Market Portfolio (the "Portfolio") by investing and reinvesting in investments
of the kind and in accordance with the limitations specified in its Agreement
and Declaration of Trust and in its Prospectus and Statement of Additional
Information, as from time to time in effect, and in such manner and to such
extent as may from time to time be approved by the Board of Trustees of the
Fund. Copies of the Fund's Prospectus, Statement of Additional Information and
Agreement and Declaration of Trust, as each may from time to time be amended,
have been or will be submitted to Alger Management. The Fund desires to employ
and hereby appoints Alger Management to act as the investment manager for the
Portfolio. Alger Management accepts the appointment and agrees to furnish the
services for the compensation set forth below.
2. Services as Investment Manager
Subject to the supervision and direction of the Board of Trustees of
the Fund, Alger Management will (a) act in strict conformity with the Fund's
Agreement and Declaration of Trust, the Investment Company Act of 1940 (the
"1940 Act"), and the Investment Advisers Act of 1940, as the same may from time
to time be amended; (b) manage the Portfolio in accordance with the Portfolio's
investment objective and policies as stated in the Fund's Prospectus and
Statement of Additional Information as from time to time in effect; (c) make
general investment decisions for the Portfolio involving decisions concerning
<PAGE>
1363Q
(i) the specific types of securities to be held by the Portfolio and the
proportion of the Portfolio's assets that should be allocated to such
investments during particular market cycles and (ii) the specific issuers whose
securities will be purchased or sold by the Portfolio; and (d) supply office
facilities (which may be in Alger Management's own offices); statistical and
research data; data processing services; clerical, accounting and bookkeeping
services; internal auditing services; internal executive and administrative
services; stationery and office supplies; preparation of reports to shareholders
of the Portfolio; preparation of tax returns, reports to and filings with the
Securities and Exchange Commission (the "SEC") and state Blue Sky authorities;
calculation of the net asset value of shares of the Portfolio; maintenance of
the Portfolio's financial accounts and records; and general assistance in all
aspects of the Fund's operations with respect to the Portfolio. In providing
those services, Alger Management will supervise the Portfolio's investments
generally and conduct a continual program of evaluation of the Portfolio's
assets.
In connection with the performance of its duties under this
Agreement, it is understood that Alger Management may from time to time employ
or associate with itself such person or persons as Alger Management may believe
to be particularly fitted to assist it in the performance of this Agreement, it
being understood that the compensation of such person or persons shall be paid
by Alger Management and that no obligation may be incurred on the Fund's behalf
in any such respect.
3. Brokerage
In executing transactions for the Portfolio and selecting brokers or
dealers, Alger Management will use its best efforts to seek the best overall
terms available. In assessing the best overall terms available for any Portfolio
transaction, Alger Management will consider all factors it deems relevant
including, but not limited to, the breadth of the market in the security, the
price of the security, the financial condition and execution capability of the
broker or dealer and the reasonableness of any commission for the specific
transaction and on a continuing basis. In selecting brokers or dealers to
execute a particular transaction and in evaluating the best overall terms
available, Alger Management may consider the brokerage and research services (as
those terms are defined in Section 28(e) of the Securities Exchange Act of 1934,
as amended) provided to the Portfolio and/or other accounts over which Alger
Management or an affiliate exercises investment discretion.
-2-
<PAGE>
1363Q
4. Information Provided to the Fund
Alger Management will keep the Fund informed of developments
materially affecting the Portfolio, and will, on its own initiative, furnish the
Fund from time to time with whatever information Alger Management believes is
appropriate for this purpose.
In compliance with the requirements of Rule 31a-3 under the 1940
Act, Alger Management hereby agrees that all records that it maintains for the
Fund in respect of the Portfolio are the property of the Fund and further agrees
to surrender promptly to the Fund any of such records upon the Fund's request.
5. Standard of Care
Alger Management shall exercise its best judgment in rendering the
services listed in paragraph 2 above. Alger Management shall not be liable for
any error of judgment or mistake of law or for any loss suffered by the
Portfolio in connection with the matters to which this Agreement relates,
provided that nothing herein shall be deemed to protect or purport to protect
Alger Management against any liability to the Portfolio or to its shareholders
to which Alger Management would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence on its part in the performance of its
duties or by reason of Alger Management's reckless disregard of its obligations
and duties under this Agreement.
6. Compensation
In consideration of the services rendered pursuant to this
Agreement, the Portfolio will pay Alger Management on the first business day of
each month a fee for the previous month at the annual rate of .50 of 1.00% of
the Portfolio's average daily net assets. The fee for the period from the date
the Fund's registration statement is declared effective by the SEC to the end of
the month during which its registration statement is declared effective shall be
prorated according to the proportion that such period bears to the full monthly
period. Upon any termination of this Agreement before the end of a month, the
fee for such part of that month shall be prorated according to the proportion
that such period bears to the full monthly period and shall be payable upon the
date of termination of this Agreement. For the purpose of determining fees
payable to Alger Management, the value of the Portfolio's net assets shall be
computed at the times and in the manner specified in the Fund's Prospectus and
Statement of Additional Information as from time to time in effect.
-3-
<PAGE>
1363Q
7. Expenses
Alger Management will bear all expenses in connection with the
performance of its services under this Agreement. The Portfolio will bear
certain other expenses to be incurred in its operation, including: taxes,
interest, brokerage fees and commissions, if any; fees of Trustees of the Fund
who are not officers, directors or employees of Alger Management or any of its
affiliates; SEC fees and state Blue Sky qualification fees; charges of
custodians and transfer and dividend disbursing agents; charges of any
independent pricing service retained to assist in valuing the assets of the
Portfolio; the Fund's proportionate share of insurance premiums; outside
auditing and legal expenses; costs of maintenance of the Fund's existence; costs
attributable to shareholder services, including, without limitation, telephone
and personnel expenses; costs of preparing and printing prospectuses and
statements of additional information for regulatory purposes, and for
distribution to existing shareholders; costs of shareholders' reports and
meetings of the shareholders of the Fund and of the officers or Board of
Trustees of the Fund; and any extraordinary expenses. Fund-wide expenses not
specifically identifiable to the Portfolio or any other portfolio of the Fund
will be allocated to all portfolios pro rata on the basis of their relative net
assets.
8. Reimbursement to the Portfolio
If in any fiscal year the aggregate operating expenses of the
Portfolio (including fees pursuant to this Agreement, but excluding interest,
taxes, fees for brokerage expenses and extraordinary expenses) exceed 1%, Alger
Management will reimburse the Portfolio for such excess expense. Such expense
reimbursement, if any, will be estimated, reconciled and paid on a monthly
basis.
9. Services to Other Companies or Accounts
The Fund understands that Alger Management now acts, will continue
to act and may act in the future as investment adviser to fiduciary and other
managed accounts and as investment manager to one or more other investment
companies (including other portfolios of the Fund), and the Fund has no
objection to Alger Management so acting, provided that whenever the Portfolio
and one or more other accounts or investment companies advised by Alger
Management have available funds for investment, investments suitable and
appropriate for each will be allocated in accordance with a formula believed to
be equitable to each entity. The Fund recognizes that in some cases this
procedure may adversely affect the size of the position obtainable for the
Portfolio. In addition, the Fund understands that the persons employed by Alger
Management to assist in the performance of Alger Management's duties under
-4-
<PAGE>
1363Q
this Agreement will not devote their full time to such service and nothing
contained herein shall be deemed to limit or restrict the right of Alger
Management or any affiliate of Alger Management to engage in and devote time and
attention to other businesses or to render services of whatever kind or nature.
10. Term of Agreement
This Agreement shall become effective as of the date the Fund
commences its investment operations and shall continue until October 30, 1989
and thereafter shall continue automatically for successive annual periods,
provided such continuance is specifically approved at least annually by (i) the
Board of Trustees of the Fund or (ii) a vote of a "majority" (as defined in the
1940 Act) of the Portfolio's outstanding voting securities, provided that in
either event the continuance is also approved by a majority of the Board of
Trustees who are not "interested persons" (as defined in the 1940 Act) of any
party to this Agreement, by vote cast in person at a meeting called for the
purpose of voting on such approval. This Agreement is terminable, without
penalty, on 60 days' written notice, by the Board of Trustees of the Fund or by
vote of holders of a majority of the Portfolio's outstanding voting securities,
or upon 60 days' written notice, by Alger Management. This Agreement will also
terminate automatically in the event of its assignment (as defined in the 1940
Act and the rules thereunder).
11. Representation by the Fund
The Fund represents that a copy of its Agreement and Declaration of
Trust, dated April 6, 1988, together with all amendments thereto, is on file in
the office of the Secretary of the Commonwealth of Massachusetts.
12. Limitation of Liability
This Agreement has been executed on behalf of the Fund in respect of
the Portfolio by the undersigned officer of the Fund in his capacity as an
officer of the Fund. The obligations of this Agreement shall be binding on the
assets and property of the Portfolio only and shall not be binding on any other
portfolio of the Fund or any Trustee, officer or shareholder of the Fund
individually.
13. Governing Law
This Agreement shall be governed by and construed in accordance with
the laws (except the conflict of law rules) of the State of New York.
-5-
<PAGE>
1363Q
If the foregoing is in accordance with your understanding, kindly
indicate your acceptance of this Agreement by signing and returning the enclosed
copy of this Agreement.
Very truly yours,
THE ALGER AMERICAN FUND
By: /s/ Fred M. Alger
--------------------
Authorized Officer
Accepted and Agreed:
FRED ALGER MANAGEMENT, INC.
By: /s/ Irwin Schwartz
------------------------
Authorized Officer
-6-
EXHIBIT 5(e)
1362Q
INVESTMENT MANAGEMENT AGREEMENT
THE ALGER AMERICAN FUND
ALGER AMERICAN INCOME AND GROWTH PORTFOLIO
July 22, 1988
Fred Alger Management, Inc.
75 Maiden Lane
New York, New York 10038
Dear Sirs:
The Alger American Fund (the "Fund"), an unincorporated business
trust organized under the laws of the Commonwealth of Massachusetts, hereby
confirms its agreement with Fred Alger Management, Inc. ("Alger Management") as
follows:
1. Investment Description; Appointment
The Fund desires to employ the capital of the Alger American Income
and Growth Portfolio (the "Portfolio") by investing and reinvesting in
investments of the kind and in accordance with the limitations specified in its
Agreement and Declaration of Trust and in its Prospectus and Statement of
Additional Information, as from time to time in effect, and in such manner and
to such extent as may from time to time be approved by the Board of Trustees of
the Fund. Copies of the Fund's Prospectus, Statement of Additional Information
and Agreement and Declaration of Trust, as each may from time to time be
amended, have been or will be submitted to Alger Management. The Fund desires to
employ and hereby appoints Alger Management to act as the investment manager for
the Portfolio. Alger Management accepts the appointment and agrees to furnish
the services for the compensation set forth below.
2. Services as Investment Manager
Subject to the supervision and direction of the Board of Trustees of
the Fund, Alger Management will (a) act in strict conformity with the Fund's
Agreement and Declaration of Trust, the Investment Company Act of 1940 (the
"1940 Act"), and the Investment Advisers Act of 1940, as the same may from time
to time be amended; (b) manage the Portfolio in accordance with the Portfolio's
investment objective and policies as stated in the Fund's Prospectus and
Statement of Additional Information as from time to time in effect; (c) make
general investment decisions for the Portfolio involving decisions concerning
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1362Q
(i) the specific types of securities to be held by the Portfolio and the
proportion of the Portfolio's assets that should be allocated to such
investments during particular market cycles and (ii) the specific issuers whose
securities will be purchased or sold by the Portfolio; and (d) supply office
facilities (which may be in Alger Management's own offices); statistical and
research data; data processing services; clerical, accounting and bookkeeping
services; internal auditing services; internal executive and administrative
services; stationery and office supplies; preparation of reports to shareholders
of the Portfolio; preparation of tax returns, reports to and filings with the
Securities and Exchange Commission (the "SEC") and state Blue Sky authorities;
calculation of the net asset value of shares of the Portfolio; maintenance of
the Portfolio's financial accounts and records; and general assistance in all
aspects of the Fund's operations with respect to the Portfolio. In providing
those services, Alger Management will supervise the Portfolio's investments
generally and conduct a continual program of evaluation of the Portfolio's
assets.
In connection with the performance of its duties under this
Agreement, it is understood that Alger Management may from time to time employ
or associate with itself such person or persons as Alger Management may believe
to be particularly fitted to assist it in the performance of this Agreement, it
being understood that the compensation of such person or persons shall be paid
by Alger Management and that no obligation may be incurred on the Fund's behalf
in any such respect.
3. Brokerage
In executing transactions for the Portfolio and selecting brokers or
dealers, Alger Management will use its best efforts to seek the best overall
terms available. In assessing the best overall terms available for any Portfolio
transaction, Alger Management will consider all factors it deems relevant
including, but not limited to, the breadth of the market in the security, the
price of the security, the financial condition and execution capability of the
broker or dealer and the reasonableness of any commission for the specific
transaction and on a continuing basis. In selecting brokers or dealers to
execute a particular transaction and in evaluating the best overall terms
available, Alger Management may consider the brokerage and research services (as
those terms are defined in Section 28(e) of the Securities Exchange Act of 1934,
as amended) provided to the Portfolio and/or other accounts over which Alger
Management or an affiliate exercises investment discretion.
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1362Q
4. Information Provided to the Fund
Alger Management will keep the Fund informed of developments
materially affecting the Portfolio, and will, on its own initiative, furnish the
Fund from time to time with whatever information Alger Management believes is
appropriate for this purpose.
In compliance with the requirements of Rule 31a-3 under the 1940
Act, Alger Management hereby agrees that all records that it maintains for the
Fund in respect of the Portfolio are the property of the Fund and further agrees
to surrender promptly to the Fund any of such records upon the Fund's request.
5. Standard of Care
Alger Management shall exercise its best judgment in rendering the
services listed in paragraph 2 above. Alger Management shall not be liable for
any error of judgment or mistake of law or for any loss suffered by the
Portfolio in connection with the matters to which this Agreement relates,
provided that nothing herein shall be deemed to protect or purport to protect
Alger Management against any liability to the Portfolio or to its shareholders
to which Alger Management would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence on its part in the performance of its
duties or by reason of Alger Management's reckless disregard of its obligations
and duties under this Agreement.
6. Compensation
In consideration of the services rendered pursuant to this
Agreement, the Portfolio will pay Alger Management on the first business day of
each month a fee for the previous month at the annual rate of .625 of 1.00% of
the Portfolio's average daily net assets. The fee for the period from the date
the Fund's registration statement is declared effective by the SEC to the end of
the month during which its registration statement is declared effective shall be
prorated according to the proportion that such period bears to the full monthly
period. Upon any termination of this Agreement before the end of a month, the
fee for such part of that month shall be prorated according to the proportion
that such period bears to the full monthly period and shall be payable upon the
date of termination of this Agreement. For the purpose of determining fees
payable to Alger Management, the value of the Portfolio's net assets shall be
computed at the times and in the manner specified in the Fund's Prospectus and
Statement of Additional Information as from time to time in effect.
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1362Q
7. Expenses
Alger Management will bear all expenses in connection with the
performance of its services under this Agreement. The Portfolio will bear
certain other expenses to be incurred in its operation, including: taxes,
interest, brokerage fees and commissions, if any; fees of Trustees of the Fund
who are not officers, directors or employees of Alger Management or any of its
affiliates; SEC fees and state Blue Sky qualification fees; charges of
custodians and transfer and dividend disbursing agents; charges of any
independent pricing service retained to assist in valuing the assets of the
Portfolio; the Fund's proportionate share of insurance premiums; outside
auditing and legal expenses; costs of maintenance of the Fund's existence; costs
attributable to shareholder services, including, without limitation, telephone
and personnel expenses; costs of preparing and printing prospectuses and
statements of additional information for regulatory purposes and for
distribution to existing shareholders; costs of shareholders reports and
meetings of the shareholders of the Fund and of the officers or Board of
Trustees of the Fund; and any extraordinary expenses. Fund-wide expenses not
specifically identifiable to the Portfolio or any other portfolio of the Fund
will be allocated to all portfolios pro rata on the basis of their relative net
assets.
8. Reimbursement to the Portfolio
If in any fiscal year the aggregate operating expenses of the
Portfolio (including fees pursuant to this Agreement, but excluding interest,
taxes, fees for brokerage expenses and extraordinary expenses) exceed 1.25%,
Alger Management will reimburse the Portfolio for such excess expense. Such
expense reimbursement, if any, will be estimated, reconciled and paid on a
monthly basis.
9. Services to Other Companies or Accounts
The Fund understands that Alger Management now acts, will continue
to act and may act in the future as investment adviser to fiduciary and other
managed accounts and as investment manager to one or more other investment
companies (including other portfolios of the Fund), and the Fund has no
objection to Alger Management so acting, provided that whenever the Portfolio
and one or more other accounts or investment companies advised by Alger
Management have available funds for investment, investments suitable and
appropriate for each will be allocated in accordance with a formula believed to
be equitable to each entity. The Fund recognizes that in some cases this
procedure may adversely affect the size of the position obtainable for the
Portfolio. In addition, the Fund understands that the persons employed by Alger
Management to assist in the performance of Alger Management's duties under
-4-
<PAGE>
1362Q
this Agreement will not devote their full time to such service and nothing
contained herein shall be deemed to limit or restrict the right of Alger
Management or any affiliate of Alger Management to engage in and devote time and
attention to other businesses or to render services of whatever kind or nature.
10. Term of Agreement
This Agreement shall become effective as of the date the Fund
commences its investment operations and shall continue until October 30, 1989
and thereafter shall continue automatically for successive annual periods,
provided such continuance is specifically approved at least annually by (i) the
Board of Trustees of the Fund or (ii) a vote of a "majority" (as defined in the
1940 Act) of the Portfolio's outstanding voting securities, provided that in
either event the continuance is also approved by a majority of the Board of
Trustees who are not "interested persons" (as defined in the 1940 Act) of any
party to this Agreement, by vote cast in person at a meeting called for the
purpose of voting on such approval. This Agreement is terminable, without
penalty, on 60 days' written notice, by the Board of Trustees of the Fund or by
vote of holders of a majority of the Portfolio's outstanding voting securities,
or upon 60 days' written notice, by Alger Management. This Agreement will also
terminate automatically in the event of its assignment (as defined in the 1940
Act and the rules thereunder).
11. Representation by the Fund
The Fund represents that a copy of its Agreement and Declaration of
Trust, dated April 6, 1988, together with all amendments thereto, is on file in
the office of the Secretary of the Commonwealth of Massachusetts.
12. Limitation of Liability
This Agreement has been executed on behalf of the Fund in respect of
the Portfolio by the undersigned officer of the Fund in his capacity as an
officer of the Fund. The obligations of this Agreement shall be binding on the
assets and property of the Portfolio only and shall not be binding on any other
portfolio of the Fund or any Trustee, officer or shareholder of the Fund
individually.
13. Governing Law
This Agreement shall be governed by and construed in accordance with
the laws (except the conflict of law rules) of the State of New York.
-5-
<PAGE>
1362Q
If the foregoing is in accordance with your understanding, kindly
indicate your acceptance of this Agreement by signing and returning the enclosed
copy of this Agreement.
Very truly yours,
THE ALGER AMERICAN FUND
By: /s/ Fred M. Alger
----------------------
Authorized Officer
Accepted and Agreed:
FRED ALGER MANAGEMENT, INC.
By: /s/ Irwin Schwartz
-------------------------
Authorized Officer
-6-
EXHIBIT 5(f)
1361Q
INVESTMENT MANAGEMENT AGREEMENT
THE ALGER AMERICAN FUND
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
July 22, 1988
Fred Alger Management, Inc.
75 Maiden Lane
New York, New York 10038
Dear Sirs:
The Alger American Fund (the "Fund"), an unincorporated business
trust organized under the laws of the Commonwealth of Massachusetts, hereby
confirms its agreement with Fred Alger Management, Inc. ("Alger Management") as
follows:
1. Investment Description; Appointment
The Fund desires to employ the capital of the Alger American Small
Capitalization Portfolio (the "Portfolio") by investing and reinvesting in
investments of the kind and in accordance with the limitations specified in its
Agreement and Declaration of Trust and in its Prospectus and Statement of
Additional Information, as from time to time in effect, and in such manner and
to such extent as may from time to time be approved by the Board of Trustees of
the Fund. Copies of the Fund's Prospectus, Statement of Additional Information
and Agreement and Declaration of Trust, as each may from time to time be
amended, have been or will be submitted to Alger Management. The Fund desires to
employ and hereby appoints Alger Management to act as the investment manager for
the Portfolio. Alger Management accepts the appointment and agrees to furnish
the services for the compensation set forth below.
2. Services as Investment Manager
Subject to the supervision and direction of the Board of Trustees of
the Fund, Alger Management will (a) act in strict conformity with the Fund's
Agreement and Declaration of Trust, the Investment Company Act of 1940 (the
"1940 Act"), and the Investment Advisers Act of 1940, as the same may from time
to time be amended; (b) manage the Portfolio in accordance with the Portfolio's
investment objective and policies as stated in the Fund's Prospectus and
Statement of Additional Information as from time to time in effect; (c) make
general investment decisions for the Portfolio involving decisions concerning
<PAGE>
1361Q
(i) the specific types of securities to be held by the Portfolio and the
proportion of the Portfolio's assets that should be allocated to such
investments during particular market cycles and (ii) the specific issuers whose
securities will be purchased or sold by the Portfolio; and (d) supply office
facilities (which may be in Alger Management's own offices); statistical and
research data; data processing services; clerical, accounting and bookkeeping
services; internal auditing services; internal executive and administrative
services; stationery and office supplies; preparation of reports to shareholders
of the Portfolio; preparation of tax returns, reports to and filings with the
Securities and Exchange Commission (the "SEC") and state Blue Sky authorities;
calculation of the net asset value of shares of the Portfolio; maintenance of
the Portfolio's financial accounts and records; and general assistance in all
aspects of the Fund's operations with respect to the Portfolio. In providing
those services, Alger Management will supervise the Portfolio's investments
generally and conduct a continual program of evaluation of the Portfolio's
assets.
In connection with the performance of its duties under this
Agreement, it is understood that Alger Management may from time to time employ
or associate with itself such person or persons as Alger Management may believe
to be particularly fitted to assist it in the performance of this Agreement, it
being understood that the compensation of such person or persons shall be paid
by Alger Management and that no obligation may be incurred on the Fund's behalf
in any such respect.
3. Brokerage
In executing transactions for the Portfolio and selecting brokers or
dealers, Alger Management will use its best efforts to seek the best overall
terms available. In assessing the best overall terms available for any Portfolio
transaction, Alger Management will consider all factors it deems relevant
including, but not limited to, the breadth of the market in the security, the
price of the security, the financial condition and execution capability of the
broker or dealer and the reasonableness of any commission for the specific
transaction and on a continuing basis. In selecting brokers or dealers to
execute a particular transaction and in evaluating the best overall terms
available, Alger Management may consider the brokerage and research services (as
those terms are defined in Section 28(e) of the Securities Exchange Act of 1934,
as amended) provided to the Portfolio and/or other accounts over which Alger
Management or an affiliate exercises investment discretion.
-2-
<PAGE>
1361Q
4. Information Provided to the Fund
Alger Management will keep the Fund informed of developments
materially affecting the Portfolio, and will, on its own initiative, furnish the
Fund from time to time with whatever information Alger Management believes is
appropriate for this purpose.
In compliance with the requirements of Rule 31a-3 under the 1940
Act, Alger Management hereby agrees that all records that it maintains for the
Fund in respect of the Portfolio are the property of the Fund and further agrees
to surrender promptly to the Fund any of such records upon the Fund's request.
5. Standard of Care
Alger Management shall exercise its best judgment in rendering the
services listed in paragraph 2 above. Alger Management shall not be liable for
any error of judgment or mistake of law or for any loss suffered by the
Portfolio in connection with the matters to which this Agreement relates,
provided that nothing herein shall be deemed to protect or purport to protect
Alger Management against any liability to the Portfolio or to its shareholders
to which Alger Management would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence on its part in the performance of its
duties or by reason of Alger Management's reckless disregard of its obligations
and duties under this Agreement.
6. Compensation
In consideration of the services rendered pursuant to this
Agreement, the Portfolio will pay Alger Management on the first business day of
each month a fee for the previous month at the annual rate of .85 of 1.00% of
the Portfolio's average daily net assets. The fee for the period from the date
the Fund's registration statement is declared effective by the SEC to the end of
the month during which its registration statement is declared effective shall be
prorated according to the proportion that such period bears to the full monthly
period. Upon any termination of this Agreement before the end of a month, the
fee for such part of that month shall be prorated according to the proportion
that such period bears to the full monthly period and shall be payable upon the
date of termination of this Agreement. For the purpose of determining fees
payable to Alger Management, the value of the Portfolio's net assets shall be
computed at the times and in the manner specified in the Fund's Prospectus and
Statement of Additional Information as from time to time in effect.
-3-
<PAGE>
1361Q
7. Expenses
Alger Management will bear all expenses in connection with the
performance of its services under this Agreement. The Portfolio will bear
certain other expenses to be incurred in its operation, including: taxes,
interest, brokerage fees and commissions, if any; fees of Trustees of the Fund
who are not officers, directors or employees of Alger Management or any of its
affiliates; SEC fees and state Blue Sky qualification fees; charges of
custodians and transfer and dividend disbursing agents; charges of any
independent pricing service retained to assist in valuing the assets of the
Portfolio; the Fund's proportionate share of insurance premiums; outside
auditing and legal expenses; costs of maintenance of the Fund's existence; costs
attributable to shareholder services, including, without limitation, telephone
and personnel expenses; costs of preparing and printing prospectuses and
statements of additional information for regulatory purposes and for
distribution to existing shareholders; costs of shareholders' reports and
meetings of the shareholders of the Fund and of the officers or Board of
Trustees of the Fund; and any extraordinary expenses. Fund-wide expenses not
specifically identifiable to the Portfolio or any other portfolio of the Fund
will be allocated to all portfolios pro rata on the basis of their relative net
assets.
8. Reimbursement to the Portfolio
If in any fiscal year the aggregate operating expenses of the
Portfolio (including fees pursuant to this Agreement, but excluding interest,
taxes, fees for brokerage expenses and extraordinary expenses) exceed 1.50%,
Alger Management will reimburse the Portfolio for such excess expense. Such
expense reimbursement, if any, will be estimated, reconciled and paid on a
monthly basis.
9. Services to Other Companies or Accounts
The Fund understands that Alger Management now acts, will continue
to act and may act in the future as investment adviser to fiduciary and other
managed accounts and as investment manager to one or more other investment
companies (including other portfolios of the Fund), and the Fund has no
objection to Alger Management so acting, provided that whenever the Portfolio
and one or more other accounts or investment companies advised by Alger
Management have available funds for investment, investments suitable and
appropriate for each will be allocated in accordance with a formula believed to
be equitable to each entity. The Fund recognizes that in some cases this
procedure may adversely affect the size of the position obtainable for the
Portfolio. In addition, the Fund understands that the persons employed by Alger
Management to assist in the performance of Alger Management's duties under
-4-
<PAGE>
1361Q
this Agreement will not devote their full time to such service and nothing
contained herein shall be deemed to limit or restrict the right of Alger
Management or any affiliate of Alger Management to engage in and devote time and
attention to other businesses or to render services of whatever kind or nature.
10. Term of Agreement
This Agreement shall become effective as of the date the Fund
commences its investment operations and shall continue until October 30, 1989
and thereafter shall continue automatically for successive annual periods,
provided such continuance is specifically approved at least annually by (i) the
Board of Trustees of the Fund or (ii) a vote of a "majority" (as defined in the
1940 Act) of the Portfolio's outstanding voting securities, provided that in
either event the continuance is also approved by a majority of the Board of
Trustees who are not "interested persons" (as defined in the 1940 Act) of any
party to this Agreement, by vote cast in person at a meeting called for the
purpose of voting on such approval. This Agreement is terminable, without
penalty, on 60 days' written notice, by the Board of Trustees of the Fund or by
vote of holders of a majority of the Portfolio's outstanding voting securities,
or upon 60 days' written notice, by Alger Management. This Agreement will also
terminate automatically in the event of its assignment (as defined in the 1940
Act and the rules thereunder).
11. Representation by the Fund
The Fund represents that a copy of its Agreement and Declaration of
Trust, dated April 6, 1988, together with all amendments thereto, is on file in
the office of the Secretary of the Commonwealth of Massachusetts.
12. Limitation of Liability
This Agreement has been executed on behalf of the Fund in respect of
the Portfolio by the undersigned officer of the Fund in his capacity as an
officer of the Fund. The obligations of this Agreement shall be binding on the
assets and property of the Portfolio only and shall not be binding on any other
portfolio of the Fund or any Trustee, officer or shareholder of the Fund
individually.
13. Governing Law
This Agreement shall be governed by and construed in accordance with
the laws (except the conflict of law rules) of the State of New York.
-5-
<PAGE>
1361Q
If the foregoing is in accordance with your understanding, kindly
indicate your acceptance of this Agreement by signing and returning the enclosed
copy of this Agreement.
Very truly yours,
THE ALGER AMERICAN FUND
By: /s/ Fred M. Alger
------------------------
Authorized Officer
Accepted and Agreed:
FRED ALGER MANAGEMENT, INC.
By: /s/ Irwin Schwartz
--------------------------
Authorized Officer
-6-
EXHIBIT 5(g)
1359Q
INVESTMENT MANAGEMENT AGREEMENT
THE ALGER AMERICAN FUND
ALGER AMERICAN GROWTH PORTFOLIO
July 22, 1988
Fred Alger Management, Inc.
75 Maiden Lane
New York, New York 10038
Dear Sirs:
The Alger American Fund (the "Fund"), an unincorporated business
trust organized under the laws of the Commonwealth of Massachusetts, hereby
confirms its agreement with Fred Alger Management, Inc. (Alger Management") as
follows:
1. Investment Description; Appointment
The Fund desires to employ the capital of the Alger American Growth
Portfolio (the "Portfolio") by investing and reinvesting in investments of the
kind and in accordance with the limitations specified in its Agreement and
Declaration of Trust and in its Prospectus and Statement of Additional
Information, as from time to time in effect, and in such manner and to such
extent as may from time to time be approved by the Board of Trustees of the
Fund. Copies of the Fund's Prospectus, Statement of Additional Information and
Agreement and Declaration of Trust, as each may from time to time be amended,
have been or will be submitted to Alger Management. The Fund desires to employ
and hereby appoints Alger Management to act as the investment manager for the
Portfolio. Alger Management accepts the appointment and agrees to furnish the
services for the compensation set forth below.
2. Services as Investment Manager
Subject to the supervision and direction of the Board of Trustees of
the Fund, Alger Management will (a) act in strict conformity with the Fund's
Agreement and Declaration of Trust, the Investment Company Act of 1940 (the
"1940 Act"), and the Investment Advisers Act of 1940, as the same may from time
to time be amended; (b) manage the Portfolio in accordance with the Portfolio's
investment objective and policies as stated in the Fund's Prospectus and
Statement of Additional Information as from time to time in effect; (c) make
general investment decisions for the Portfolio involving decisions concerning
<PAGE>
1359Q
(i) the specific types of securities to be held by the Portfolio and the
proportion of the Portfolio's assets that should be allocated to such
investments during particular market cycles and (ii) the specific issuers whose
securities will be purchased or sold by the Portfolio; and (d) supply office
facilities (which may be in Alger Management's own offices); statistical and
research data; data processing services; clerical, accounting and bookkeeping
services; internal auditing services; internal executive and administrative
services; stationery and office supplies; preparation of reports to shareholders
of the Portfolio; preparation of tax returns, reports to and filings with the
Securities and Exchange Commission (the "SEC") and state Blue Sky authorities;
calculation of the net asset value of shares of the Portfolio; maintenance of
the Portfolio's financial accounts and records; and general assistance in all
aspects of the Fund's operations with respect to the Portfolio. In providing
those services, Alger Management will supervise the Portfolio's investments
generally and conduct a continual program of evaluation of the Portfolio's
assets.
In connection with the performance of its duties under this
Agreement, it is understood that Alger Management may from time to time employ
or associate with itself such person or persons as Alger Management may believe
to be particularly fitted to assist it in the performance of this Agreement, it
being understood that the compensation of such person or persons shall be paid
by Alger Management and that no obligation may be incurred on the Fund's behalf
in any such respect.
3. Brokerage
In executing transactions for the Portfolio and selecting brokers or
dealers, Alger Management will use its best efforts to seek the best overall
terms available. In assessing the best overall terms available for any Portfolio
transaction, Alger Management will consider all factors it deems relevant
including, but not limited to, the breadth of the market in the security, the
price of the security, the financial condition and execution capability of the
broker or dealer and the reasonableness of any commission for the specific
transaction and on a continuing basis. In selecting brokers or dealers to
execute a particular transaction and in evaluating the best overall terms
available, Alger Management may consider the brokerage and research services (as
those terms are defined in Section 28(e) of the Securities Exchange Act of 1934,
as amended) provided to the Portfolio and/or other accounts over which Alger
Management or an affiliate exercises investment discretion.
-2-
<PAGE>
1359Q
4. Information Provided to the Fund
Alger Management will keep the Fund informed of developments
materially affecting the Portfolio, and will, on its own initiative, furnish the
Fund from time to time with whatever information Alger Management believes is
appropriate for this purpose.
In compliance with the requirements of Rule 31a-3 under the 1940
Act, Alger Management hereby agrees that all records that it maintains for the
Fund in respect of the Portfolio are the property of the Fund and further agrees
to surrender promptly to the Fund any of such records upon the Fund's request.
5. Standard of Care
Alger Management shall exercise its best judgment in rendering the
services listed in paragraph 2 above. Alger Management shall not be liable for
any error of judgment or mistake of law or for any loss suffered by the
Portfolio in connection with the matters to which this Agreement relates,
provided that nothing herein shall be deemed to protect or purport to protect
Alger Management against any liability to the Portfolio or to its shareholders
to which Alger Management would otherwise be subject by reason of willful
misfeasance, bad faith or gross negligence on its part in the performance of its
duties or by reason of Alger Management's reckless disregard of its obligations
and duties under this Agreement.
6. Compensation
In consideration of the services rendered pursuant to this
Agreement, the Portfolio will pay Alger Management on the first business day of
each month a fee for the previous month at the annual rate of .75 of 1.00% of
the Portfolio's average daily net assets. The fee for the period from the date
the Fund's registration statement is declared effective by the SEC to the end of
the month during which its registration statement is declared effective shall be
prorated according to the proportion that such period bears to the full monthly
period. Upon any termination of this Agreement before the end of a month, the
fee for such part of that month shall be prorated according to the proportion
that such period bears to the full monthly period and shall be payable upon the
date of termination of this Agreement. For the purpose of determining fees
payable to Alger Management, the value of the Portfolio's net assets shall be
computed at the times and in the manner specified in the Fund's Prospectus and
Statement of Additional Information as from time to time in effect.
-3-
<PAGE>
1359Q
7. Expenses
Alger Management will bear all expenses in connection with the
performance of its services under this Agreement. The Portfolio will bear
certain other expenses to be incurred in its operation, including: taxes,
interest, brokerage fees and commissions, if any; fees of Trustees of the Fund
who are not officers, directors or employees of Alger Management or any of its
affiliates; SEC fees and state Blue Sky qualification fees; charges of
custodians and transfer and dividend disbursing agents; charges of any
independent pricing service retained to assist in valuing the assets of the
Portfolio; the Fund's proportionate share of insurance premiums; outside
auditing and legal expenses; costs of maintenance of the Fund's existence; costs
attributable to shareholder services, including, without limitation, telephone
and personnel expenses; costs of preparing and printing prospectuses and
statements of additional information for regulatory purposes and for
distribution to existing shareholders; costs of shareholders' reports and
meetings of the shareholders of the Fund and of the officers or Board of
Trustees of the Fund; and any extraordinary expenses. Fund-wide expenses not
specifically identifiable to the Portfolio or any other portfolio of the Fund
will be allocated to all portfolios pro rata on the basis of their relative net
assets.
8. Reimbursement to the Portfolio
If in any fiscal year the aggregate operating expenses of the
Portfolio (including fees pursuant to this Agreement, but excluding interest,
taxes, fees for brokerage expenses and extraordinary expenses) exceed 1.50%,
Alger Management will reimburse the Portfolio for such excess expense. Such
expense reimbursement, if any, will be estimated, reconciled and paid on a
monthly basis.
9. Services to Other Companies or Accounts
The Fund understands that Alger Management now acts, will continue
to act and may act in the future as investment adviser to fiduciary and other
managed accounts and as investment manager to one or more other investment
companies (including other portfolios of the Fund), and the Fund has no
objection to Alger Management so acting, provided that whenever the Portfolio
and one or more other accounts or investment companies advised by Alger
Management have available funds for investment, investments suitable and
appropriate for each will be allocated in accordance with a formula believed to
be equitable to each entity. The Fund recognizes that in some cases this
procedure may adversely affect the size of the position obtainable for the
Portfolio. In addition, the Fund understands that the persons employed by Alger
Management to assist in the performance of Alger Management's duties under
-4-
<PAGE>
1359Q
this Agreement will not devote their full time to such service and nothing
contained herein shall be deemed to limit or restrict the right of Alger
Management or any affiliate of Alger Management to engage in and devote time and
attention to other businesses or to render services of whatever kind or nature.
10. Term of Agreement
This Agreement shall become effective as of the date the Fund
commences its investment operations and shall continue until October 30, 1989
and thereafter shall continue automatically for successive annual periods,
provided such continuance is specifically approved at least annually by (i) the
Board of Trustees of the Fund or (ii) a vote of a "majority" (as defined in the
1940 Act) of the Portfolio's outstanding voting securities, provided that in
either event the continuance is also approved by a majority of the Board of
Trustees who are not "interested persons" (as defined in the 1940 Act) of any
party to this Agreement, by vote cast in person at a meeting called for the
purpose of voting on such approval. This Agreement is terminable, without
penalty, on 60 days' written notice, by the Board of Trustees of the Fund or by
vote of holders of a majority of the Portfolio's outstanding voting securities,
or upon 60 days' written notice, by Alger Management. This Agreement will also
terminate automatically in the event of its assignment (as defined in the 1940
Act and the rules thereunder).
11. Representation by the Fund
The Fund represents that a copy of its Agreement and Declaration of
Trust, dated April 6, 1988, together with all amendments thereto, is on file in
the office of the Secretary of the Commonwealth of Massachusetts.
12. Limitation of Liability
This Agreement has been executed on behalf of the Fund in respect of
the Portfolio by the undersigned officer of the Fund in his capacity as an
officer of the Fund. The obligations of this Agreement shall be binding on the
assets and property of the Portfolio only and shall not be binding on any other
portfolio of the Fund or any Trustee, officer or shareholder of the Fund
individually.
13. Governing Law
This Agreement shall be governed by and construed in accordance with
the laws (except the conflict of law rules) of the State of New York.
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<PAGE>
1359Q
If the foregoing is in accordance with your understanding, kindly
indicate your acceptance of this Agreement by signing and returning the enclosed
copy of this Agreement.
Very truly yours,
THE ALGER AMERICAN FUND
By: /s/ Fred M. Alger
---------------------------
Authorized Officer
Accepted and Agreed:
FRED ALGER MANAGEMENT, INC.
By: /s/ Irwin Schwartz
---------------------------
Authorized Officer
-6-
1358Q EXHIBIT 6
DISTRIBUTION AGREEMENT
July 22, 1988
Fred Alger & Company, Incorporated
30 Montgomery Street
Jersey City, New Jersey 07302
Dear Sirs:
This is to confirm that, in consideration of the agreements contained in
this Agreement, the undersigned, The Alger American Fund (the "Fund"), an
unincorporated business trust organized under the laws of the Commonwealth of
Massachusetts, has agreed that Fred Alger & Company, Incorporated ("Alger Inc.")
shall be, for the period of this Agreement, the distributor of shares of
beneficial interest of the Fund.
1. Services as Distributor
1.1 Alger Inc. will act as agent for the distribution of each series
of shares of beneficial interest of the Fund (the "Shares") covered by the
registration statement, prospectus and statement of additional information then
in effect (the "Registration Statement") under the Securities Act of 1933, as
amended (the "1933 Act"), and the Investment Company Act of 1940, as amended
(the "1940 Act").
1.2 All activities by Alger Inc. as distributor of the Shares shall
comply with all applicable laws, rules and regulations, including, without
limitation, all rules and regulations made or adopted by the Securities and
Exchange Commission (the "SEC") or by any securities association registered
under the Securities Exchange Act of 1934, as amended.
<PAGE>
l358Q
1.3 Alger Inc. will provide one or more persons during normal
business hours to respond to telephone inquiries concerning the Fund.
1.4 Alger Inc. acknowledges that whenever in the judgment of the
Fund's officers such action is warranted for any reason, including, without
limitation, market, economic or political conditions, those officers may decline
to accept any orders for, or make any sales of, the Shares until such time as
those officers deem it advisable to accept such orders and to make such sales.
1.5 Alger Inc. will act only on its own behalf as principal should
it choose to enter into selling agreements with selected dealers or others.
2. Duties of the Fund
The Fund shall furnish from time to time, for use in connection with
the sale of the Shares, such information reports with respect to the Fund and
the Shares as Alger Inc. may reasonably request, all of which shall be signed by
one or more of the Fund's duly authorized officers; and the Fund warrants that
the statements contained in any such reports, when so signed by one or more of
the Fund's officers, shall be true and correct. The Fund shall also furnish
Alger Inc. upon request with: (a) annual audits of the Fund's books and accounts
made by independent public accountants regularly retained by the Fund, (b)
semiannual unaudited financial statements pertaining to the Fund, (c) quarterly
earnings statements prepared by the Fund, (d) a monthly itemized list of the
securities in each Portfolio, (e) monthly balance sheets as soon as practicable
after the end of each month and (f) from time to time such additional
information regarding the Fund's financial condition as Alger Inc. may
reasonably request.
3. Representations and Warranties
The Fund represents to Alger Inc. that all registration statements,
prospectuses and statements of additional information filed by the Fund with the
SEC under the 1933 Act and the 1940 Act with respect to the Shares have been
prepared in conformity with the requirements of the 1933 Act, the 1940 Act and
the rules and regulations of the SEC thereunder. As used in this Agreement the
terms "registration statement", "prospectus" and "statement of additional
information" shall mean any registration statement, prospectus and statement of
additional information filed by the Fund with
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<PAGE>
1358Q
the SEC and any amendments and supplements thereto that at any time shall have
been filed with the SEC. The Fund represents and warrants to Alger Inc. that any
registration statement, prospectus and statement of additional information, when
such registration statement becomes effective, will include all statements
required to be contained therein in conformity with the 1933 Act, the 1940 Act
and the rules and regulations of the SEC; that all statements of fact contained
in any registration statement, prospectus or statement of additional information
will be true and correct when such registration statement becomes effective; and
that neither any registration statement nor any prospectus or statement of
additional information when such registration statement becomes effective will
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading to a purchaser of the Shares. Alger Inc. may, but shall not be
obligated to, propose from time to time such amendment or amendments to any
registration statement and such supplement or supplements to any prospectus or
statement of additional information as, in the light of future developments,
may, in the opinion of counsel to Alger Inc. be necessary or advisable. If the
Fund shall not propose such amendment or amendments and/or supplement or
supplements within fifteen days after receipt by the Fund of a written request
from Alger Inc. to do so, Alger Inc. may, at its option, terminate this
Agreement. The Fund shall not file any amendment to any registration statement
or supplement to any prospectus or statement of additional information without
giving Alger Inc. reasonable notice thereof in advance; provided, however, that
nothing contained in this Agreement shall in any way limit the Fund's right to
file at any time such amendments to any registration statement and/or
supplements to any prospectus or statement of additional information, of
whatever character, as the Fund may deem advisable, such right being in all
respects absolute and unconditional.
4. Indemnification
4.1 The Fund authorizes Alger Inc. and any dealers with whom Alger
Inc. has entered into dealer agreements to use any prospectus or statement of
additional information furnished by the Fund from time to time, in connection
with the sale of the Fund's shares. The Fund agrees to indemnify, defend and
hold Alger Inc., its several officers and directors, and any person who controls
Alger Inc. within the meaning of Section 15 of the 1933 Act, free and harmless
from and against any and all claims, demands, liabilities and expenses
(including the cost of investigating or defending such claims, demands or
liabilities and any counsel fees incurred in connection
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<PAGE>
1358Q
therewith) that Alger Inc., its officers and directors, or any such controlling
person, may incur under the 1933 Act, the 1940 Act or common law or otherwise,
arising out of or based upon any untrue statement or alleged untrue statement of
a material fact contained in any registration statement, any prospectus or any
statement of additional information, or arising out of or based upon any
omission or alleged omission to state a material fact required to be stated in
any registration statement, any prospectus or any statement of additional
information, or necessary to make the statements in any of them not misleading;
provided, however, that the Fund's agreement to indemnify Alger Inc., its
officers or directors, and any such controlling person shall not be deemed to
cover any claims, demands, liabilities or expenses arising out of or based upon
any statements or representations made by Alger Inc. or its representatives or
agents other than such statements and representations as are contained in any
registration statement, prospectus or statement of additional information and in
such financial and other statements as are furnished to Alger Inc. pursuant to
paragraph 2 of this Agreement; and further provided that the Fund's agreement to
indemnify Alger Inc. and the Fund's representations and warranties set forth in
paragraph 3 of this Agreement shall not be deemed to cover any liability to the
Fund or its shareholders to which Alger Inc. would otherwise be subject by
reason of willful misfeasance, bad faith or gross negligence in the performance
of its duties, or by reason of the reckless disregard of the obligations and
duties of Alger Inc. under this Agreement. The Fund's agreement to indemnify
Alger Inc., its officers and directors, and any such controlling person is
expressly conditioned upon the Fund's being notified of any action brought
against Alger Inc., its officers or directors, or any such controlling person,
such notification to be given by letter or by telegram addressed to the Fund at
its principal office in New York, New York and sent to the Fund by the person
against whom such action is brought, within ten days after the summons or other
first legal process shall have been served. The failure so to notify the Fund of
any such action shall not relieve the Fund from any liability that the Fund may
have to the person against whom such action is brought by reason of any such
untrue or alleged untrue statement or omission or alleged omission otherwise
than on account of the Fund's indemnity agreement contained in this paragraph
4.1. The Fund will be entitled to assume the defense of any suit brought to
enforce any such claim, demand or liability, but, in such case, such defense
shall be conducted by counsel of good standing chosen by the Fund and approved
by Alger Inc. In the event the Fund elects to assume the defense of any such
suit and retain counsel of good standing approved by Alger Inc., the defendant
or
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<PAGE>
1358Q
defendants in such suit shall bear the fees and expenses of any additional
counsel retained by any of them; but in case the Fund does not elect to assume
the defense of any such suit, or in case Alger Inc. does not approve of counsel
chosen by the Fund, the Fund will reimburse Alger Inc., its officers and
directors, or the controlling person or persons named as defendant or defendants
in such suit, for the fees and expenses or any counsel retained by Alger Inc. or
them. The Fund's indemnification agreement contained in this paragraph 4.1 and
the Fund's representations and warranties in this Agreement shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of Alger Inc., its officers and directors, or any controlling
person, and shall survive the delivery of any of the Fund's shares. This
agreement of indemnity will inure exclusively to the benefit of Alger Inc., to
the benefit of its several officers and directors, and their respective estates,
and to the benefit of the controlling persons and their successors. The Fund
agrees to notify Alger Inc. promptly of the commencement of any litigation or
proceedings against the Fund or any of its officers or Trustees in connection
with the issuance and sale of any of the Shares.
4.2 Alger Inc. agrees to indemnify, defend and hold the Fund, its
several officers and Trustees, and any person who controls the Fund within the
meaning of Section 15 of the 1933 Act, free and harmless from and against any
and all claims, demands, liabilities and expenses (including the costs of
investigating or defending such claims, demands or liabilities and any counsel
fees incurred in connection therewith) that the Fund, its officers or Trustees
or any such controlling person may incur under the 1933 Act, the 1940 Act or
common law or otherwise, but only to the extent that such liability or expense
incurred by the Fund, its officers or Trustees or such controlling person
resulting from such claims or demands shall arise out of or be based upon (a)
any unauthorized sales literature, advertisements, information, statements or
representations or (b) any untrue or alleged untrue statement of a material fact
contained in information furnished in writing by Alger Inc. to the Fund and used
in the answers to any of the items of the registration statement or in the
corresponding statements made in the prospectus or statement of additional
information, or shall arise out of or be based upon any omission or alleged
omission to state a material fact in connection with such information furnished
in writing by Alger Inc. to the Fund and required to be stated in such answers
or necessary to make such information not misleading. The indemnification by
Alger Inc. of the Fund, its officers and
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<PAGE>
1358Q
Trustees, and any controlling person, is expressly conditioned upon notification
to Alger Inc. of any action brought against the Fund, its officers or Trustees,
or any controlling person, such notification to be given by letter or telegram
addressed to Alger Inc. at its executive office in New York, New York and sent
to Alger Inc. by the person against whom such action is brought, within ten days
after the summons or other first legal process shall have been served. Alger
Inc. shall have the right of first control of the defense of such action, with
counsel of its own choosing, satisfactory to the Fund, if such action is based
solely upon such alleged misstatement or omission on the part of Alger Inc., and
in any other event the Fund, its officers or Trustees or such controlling person
shall each have the right to participate in the defense or preparation of the
defense of any such action. The failure so to notify Alger Inc. of any such
action shall not relieve Alger Inc. from any liability that Alger Inc. may have
to the Fund, its officers or Trustees, or to such controlling person by reason
of any such untrue or alleged untrue statement or omission or alleged omission
otherwise than on account of the indemnity agreement by Alger Inc. contained in
this paragraph 4.2. Alger Inc. agrees to notify the Fund promptly of the
commencement of any litigation or proceedings against Alger Inc. or any of its
officers or directors in connection with the issuance and sale of any of the
Shares.
5. Effectiveness of Registration
None of the Shares shall be offered by either Alger Inc. or the Fund
under any of the provisions of this Agreement and no orders for the purchase or
sale of the Shares hereunder shall be accepted by the Fund if and so long as the
effectiveness of the registration statement then in effect or any necessary
amendments thereto shall be suspended under any of the provisions of the 1933
Act or if and so long as a current prospectus as required by Section 5(b)(2) of
the 1933 Act is not on file with the SEC; provided, however, that nothing
contained in this paragraph 5 shall in any way restrict or have an application
to or bearing upon the Fund's obligation to redeem its shares from any
shareholder in accordance with the provisions of the Fund's prospectus,
statement of additional information or Agreement and Declaration of Trust.
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<PAGE>
1358Q
6. Notice to Alger Inc.
The Fund agrees to advise Alger Inc. immediately in writing:
(a) of any request by the SEC for amendments to the registration
statement, prospectus or statement of additional information then in effect
or for additional information;
(b) in the event of the issuance by the SEC of any stop order
suspending the effectiveness of the registration statement, prospectus or
statement of additional information then in effect or the initiation of any
proceeding for that purpose;
(c) of the happening of any event that makes untrue any statement of
a material fact made in the registration statement, prospectus or
statement of additional information then in effect or that requires the
making of a change in such registration statement, prospectus or statement
of additional information in order to make the statements therein not
misleading; and
(d) of all actions of the SEC with respect to any amendment to any
registration statement, prospectus or statement of additional information
which may from time to time be filed with the SEC.
7. Term of Agreement
This Agreement shall become effective as of the date the Fund
commences its investment operations and shall continue until October 30, 1989
and thereafter shall continue automatically for successive annual periods,
provided such continuance is specifically approved at least annually by (a) the
Fund's Board of Trustees or (b) a vote of a majority (as defined in the 1940
Act) of the Fund's outstanding voting securities, provided that in either event
the continuance is also approved by a majority of the Trustees of the Fund who
are not interested persons (as defined in the 1940 Act) of any party to this
Agreement, by vote cast in person at a meeting called for the purpose of voting
on such approval. This Agreement is terminable, without penalty, on 60 days'
written notice, by the Fund's Board of Trustees or by vote of the holders of a
majority of the Fund's shares, or on 90 days' written notice, by Alger Inc. This
Agreement will also terminate automatically in the event of its assignment (as
defined in the 1940 Act and the rules thereunder).
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<PAGE>
1358Q
8. Representation by the Fund
The Fund represents that a copy of its Agreement and Declaration of
Trust, dated April 6, 1988, together with all amendments thereto, is on file in
the office of the Secretary of the Commonwealth of Massachusetts.
9. Limitation of Liability
This Agreement has been executed on behalf of the Fund by the
undersigned officer of the Fund in his capacity as an officer of the Fund. The
obligations of this Agreement shall be binding upon the assets and property of
the Fund only and shall not be binding upon any Trustee, officer or shareholder
of the Fund individually.
10. Governing Law
This Agreement shall be governed by and construed in accordance with
the laws (except the conflict of law rules) of the State of New York.
If the foregoing is in accordance with your understanding, kindly
indicate your acceptance of this Agreement by signing and returning the enclosed
copy of this Agreement.
Very truly yours,
THE ALGER AMERICAN FUND
By: /s/ Fred M. Alger
----------------------
Authorized Officer
Accepted and Agreed:
FRED ALGER & COMPANY, INCORPORATED
By: /s/ Irwin Schwartz
----------------------
Authorized Officer
- 8 -
EXHIBIT 8(a)
CUSTODY AGREEMENT
This AGREEMENT, dated as of July 22, 1988, by and between THE ALGER
AMERICAN FUND (the "Fund"), a Massachusetts business trust, and CUSTODIAL TRUST
COMPANY, a trust company organized under the laws of the State of New Jersey
(the "Custodian").
WITNESSETH:
WHEREAS, the Fund desires that its Securities and cash be held and
administered by the Custodian pursuant to this Agreement;
WHEREAS, the Fund is an open-end diversified management investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act");
WHEREAS, the Custodian represents that it is a bank having the
qualifications prescribed in Section 26(a)(i) of the 1940 Act;
NOW, THEREFORE, in consideration of the mutual agreements herein made, the
Fund and the Custodian hereby agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the following meanings:
(1) "Authorized Person" means any Officer or other person duly authorized
by resolution of the Board of Trustees to give Oral Instructions and Written
Instructions on behalf of the Fund and named in Exhibit A hereto or in such
resolutions of the Board of Trustees, certified by an Officer, as may be
received by the Custodian from time to time.
(2) "Board of Trustees" means the Board of Trustees of the Fund or, when
permitted under the 1940 Act, the Executive Committee thereof, if any.
(3) "Book-Entry System" means a federal book-entry system as provided in
Subpart O of Treasury Circular No. 300, 31 CFR 306, in Subpart B of 31 CFR Part
350, or in such book-entry regulations of federal agencies as are substantially
in the form of such Subpart O.
(4) "Business Day" means any day recognized as a settlement day by The New
York Stock Exchange, Inc. and on which banks in the State of New Jersey are open
for business.
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<PAGE>
(5) "Master Repurchase Agreement" means that certain Master Repurchase
Agreement of even date herewith between the Fund and Bear, Stearns & Co. Inc.
("Bear Stearns"), as it may from time to time be amended.
(6) "NASD" means The National Association of Securities Dealers, Inc.
(7) "Officer" means the President, any Vice President, the Secretary,
any Assistant Secretary, the Treasurer, or any Assistant Treasurer of the Fund.
(8) "Oral Instructions" means instructions orally transmitted to and
accepted by the Custodian because such instructions are: (i) reasonably believed
by the Custodian to have been given by an Authorized Person, (ii) recorded and
kept among the records of the Custodian made in the ordinary course of business
and (iii) orally confirmed by the Custodian. The Fund shall cause all Oral
Instructions to be confirmed by Written Instructions. If such Written
Instructions confirming Oral Instructions are not received by the Custodian
prior to a transaction, it shall in no way affect the validity of the
transaction or the authorization thereof by the Fund. If Oral Instructions vary
from the Written Instructions which purport to confirm them, the Custodian shall
notify the Fund of such variance but unless confirming Written Instructions are
received promptly after such notification, such Oral Instructions will govern.
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<PAGE>
(9) "Portfolio" means a separate investment portfolio represented by one
of the several separate series of Shares into which the capital stock of the
Fund may from time to time be divided.
(10) "Portfolio Custody Account" means any of the accounts in the name of
the Fund, which are provided for in Section 2 of Article III below.
(11) "Proper Instructions" means Oral Instructions or Written
Instructions. Proper Instructions may be continuing Written Instructions when
deemed appropriate by both parties.
(12) "Securities Depository" means The Depository Trust Company and
(provided that Custodian has received a copy of a resolution of the Board of
Trustees, certified by an Officer, specifically approving the use of such
clearing agency as a depository for the Fund) any other clearing agency
registered with the Securities and Exchange Commission under Section 17A of the
Securities and Exchange Act of 1934, which acts as a system for the central
handling of Securities where all Securities of any particular class or series of
an issuer deposited within the system are treated as fungible and may be
transferred or pledged by bookkeeping entry without physical delivery of the
Securities.
(13) "Securities Loan Agreement" means that certain Securities Loan
Agreement of even date herewith between
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<PAGE>
Custodian and Bear Stearns, as it may from time to time be amended.
(14) "Securities" includes, without limitation, common and preferred
stocks, bonds, call options, put options, debentures, notes, bank certificates
of deposit, bankers' acceptances, mortgage-backed securities or other
obligations, and any certificates, receipts, warrants or other instruments or
documents representing rights to receive, purchase or subscribe for the same, or
evidencing or representing any other rights or interests therein, or any similar
property or assets that the Custodian has the facilities to clear and to
service.
(15) "Shares" means the units of beneficial interest into which the
capital stock of the Fund is divided.
(16) "Written Instructions" means (i) written communications actually
received by the Custodian and signed by an Authorized Person, or (ii)
communications by telex or any other such system from a person reasonably
believed by the Custodian to be an Authorized Person, or (iii) communications
between electro-mechanical or electronic devices provided that the use of such
devices and the procedures for the use thereof shall have been approved by
resolutions of the Board of Trustees, a copy of which, certified by an Officer,
shall have been delivered to the Custodian.
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<PAGE>
ARTICLE II
APPOINTMENT OF CUSTODIAN
(1) Appointment. The Fund hereby constitutes and appoints the Custodian as
custodian of all Securities and cash owned by or in the possession of the Fund
at any time during the period of this Agreement.
(2) Acceptance. The Custodian hereby accepts appointment as such custodian
and agrees to perform the duties thereof as hereinafter set forth.
ARTICLE III
CUSTODY OF CASH AND SECURITIES
(1) Segregation. All Securities and non-cash property held by the
Custodian for the account of the Fund (other than Securities maintained in a
Securities Depository or Book-Entry System) shall be physically segregated from
other Securities and non-cash property in the possession of the Custodian and
shall be identified as subject to this Agreement.
(2) Portfolio Custody Accounts. For each Portfolio as to which it is
acting as custodian under this Agreement, the Custodian shall open and maintain
in its trust department a custody account in the name of the Fund coupled with
the name of such Portfolio, subject only to draft or order of the Custodian, in
which the Custodian shall enter and carry all
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<PAGE>
Securities, cash and other assets of such Portfolio which are delivered to it.
(3) Appointment of Agents. (a) Custodian may employ suitable agents for
which Custodian shall be solely responsible, which may include Bear Stearns,
provided, however, that Custodian shall not employ Bear Stearns to hold any of
the Collateral under the Securities Loan Agreement (as such term "Collateral" is
defined therein) or any of the Purchased Securities under the Master Repurchase
Agreement (as such term "Purchased Securities" is defined therein).
(b) In its discretion, Custodian may appoint, and at any time remove, any
domestic bank or trust company, which has been approved by the Board of Trustees
and is qualified to act as a custodian under the 1940 Act, as sub-custodian to
hold Securities and cash of the Fund and to carry out such other provisions of
this Agreement as it may determine, and may also open and maintain one or more
banking accounts with such a bank or trust company (any such accounts to be in
the name of Custodian and subject only to its draft or order), provided,
however, that the appointment of any such agent or opening and maintenance of
any such accounts shall be at Custodian's expense and shall not relieve
Custodian of any of its obligations or liabilities under this Agreement.
(c) Upon receipt of Written Instructions to do so, Custodian shall appoint
as sub-custodian such domestic bank or
- 7 -
<PAGE>
trust company as is named therein, provided that (i) such bank or trust company
is qualified to act as a custodian under the 1940 Act, and (ii) notwithstanding
anything to the contrary in Section 1 of Article IX below or elsewhere in this
Agreement, Custodian shall have no more or less responsibility or liability to
the Fund or any Portfolio for the actions or omissions of any such sub-custodian
than any such sub-custodian has to Custodian.
(4) Delivery of Assets to Custodian. The Fund shall deliver to the
Custodian all of the Fund's Securities, cash and other assets, including (a) all
payments of income, payments of principal and capital distributions received by
the Fund with respect to such Securities, cash or other assets owned by the Fund
at any time during the period of this Agreement, and (b) all cash received by
the Fund for the issuance, at any time during such period, of Shares on account
of any Portfolio. The Custodian shall not be responsible for such Securities,
cash or other assets until actually received by it.
(5) Securities Depositories and Book-Entry Systems. The Custodian may
deposit and/or maintain Securities of the Fund in a Securities Depository or in
a Book-Entry System, subject to the following provisions:
(a) Prior to a deposit of Securities of the Fund in any Securities
Depository or Book-Entry System, the Fund shall deliver to the
Custodian a resolution of
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<PAGE>
the Board of Trustees, certified by an Officer, authorizing and
instructing Custodian (and any sub-custodian appointed pursuant to
Section 3 of this Article III) on an on-going basis to deposit in
such Securities Depository or Book-Entry System all Securities
eligible for deposit therein and to make use of such Securities
Depository or Book-Entry System to the extent possible and practical
in connection with its performance hereunder (or under the
applicable sub-custody agreement in the case of such sub-custodian),
including, without limitation, in connection with settlements of
purchases and sales of Securities, loans of Securities, and
deliveries and returns of collateral consisting of Securities. So
long as such Securities Depository or Book-Entry System shall
continue to be employed for the deposit of Securities of the Fund,
the Fund shall annually re-adopt such resolution and deliver a copy
thereof, certified by an Officer, to the Custodian.
(b) Securities of the Fund kept in a Book-Entry System or Securities
Depository shall be kept in an account ("Depository Account") of the
Custodian in such Book-Entry System or Securities Depository which
includes only assets held by the Custodian as a fiduciary, custodian
or otherwise for customers.
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<PAGE>
(c) The records of the Custodian with respect to Securities of the Fund
maintained in a Book-Entry System or Securities Depository shall, by
book-entry, identify such Securities as belonging to the Fund.
(d) If Securities purchased by the Fund are to be held in a Book-Entry
System or Securities Depository, the Custodian shall pay for such
Securities upon (i) receipt of advice from the Book-Entry System or
Securities Depository that such Securities have been transferred to
the Depository Account, and (ii) the making of an entry on the
records of the Custodian to reflect such payment and transfer for
the account of the Fund. If Securities sold by the Fund are held in
a Book-Entry System or Securities Depository, the Custodian shall
transfer such Securities upon (i) receipt of advice from the
Book-Entry System or Securities Depository that payment for such
Securities has been transferred to the Depository Account, and (ii)
the making of an entry on the records of the Custodian to reflect
such transfer and payment for the account of the Fund.
(e) The Custodian shall provide the Fund with copies of any report
(obtained by the Custodian from a Book-Entry System or Securities
Depository in which
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<PAGE>
Securities of the Fund are kept) on the internal accounting controls
and procedures for safeguarding Securities deposited in such
Book-Entry System or Securities Depository.
(f) At its election, the Fund shall be subrogated to the rights of the
Custodian with respect to any claim against a Book-Entry System or
Securities Depository or any other person for any loss or damage to
the Fund arising from the use of such Book-Entry System or
Securities Depository, if and to the extent that the Fund has not
been made whole for any such loss or damage.
(6) Disbursement of Moneys from Portfolio Custody Accounts. Upon receipt
of Proper Instructions, the Custodian shall disburse moneys from a Portfolio
Custody Account but only in the following cases:
(a) For the purchase of Securities for the Fund but only (i) in the case
of Securities (other than options on Securities, futures contracts
and options on futures contracts), against the delivery to the
Custodian (or any sub-custodian appointed pursuant to Section 3 of
this Article III) of such Securities registered as provided in
Section 9 of this Article III or in proper form for transfer, or if
the purchase of such Securities is effected
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<PAGE>
through a Book-Entry System or Securities Depository, in accordance
with the conditions forth in Section 5 of this Article III; (ii) in
the case of options on Securities, against delivery to the Custodian
(or such sub-custodian) of such receipts as are required by the
customs prevailing among dealers in such options; (iii) in the case
of futures contracts and options on futures contracts, against
delivery to the Custodian (or such sub-custodian) of evidence of
title thereto in favor of the Fund or any nominee referred to in
Section 9 of this Article III; and (iv) in the case of repurchase or
reverse repurchase agreements entered into between the Fund and a
bank which is a member of the Federal Reserve System or between the
Fund and a primary dealer in U.S. Government securities, against
delivery of the purchased Securities either in certificate form or
through an entry crediting the Custodian's account at a Book-Entry
System or Securities Depository with such Securities;
(b) In connection with the conversion, exchange or surrender, as set
forth in Section 7(f) of this Article III, of Securities owned by
the Fund;
(c) For the payment of any dividends or capital gain distributions
declared by the Fund;
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(d) In payment of the redemption price of Shares as provided in Article
V below;
(e) For the payment of any expense or liability incurred by the Fund,
including but not limited to the following payments for the account
of the Fund: interest; taxes; administration, investment management,
investment advisory, accounting, auditing, transfer agent,
custodian, trustee and legal fees; and other operating expenses of
the Fund; in all cases, whether or not such expenses are to be in
whole or in part capitalized or treated as deferred expenses;
(f) For transfer in accordance with the provisions of any agreement
among the Fund, the Custodian and a broker-dealer registered under
the Securities Exchange Act of 1934 (the "1934 Act") and a member of
the NASD, relating to compliance with rules of The Options Clearing
Corporation and of any registered national securities exchange (or
of any similar organization or organizations) regarding escrow or
other arrangements in connection with transactions by the Fund;
(g) For transfer in accordance with the provisions of any agreement
among the Fund, the Custodian, and a futures commission merchant
registered under the
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<PAGE>
Commodity Exchange Act, relating to compliance with the rules of the
Commodity Futures Trading Commission and/or any contract market (or
any similar organization or organizations) regarding account
deposits in connection with transactions by the Fund;
(h) For the funding of any uncertificated time deposit or other
interest-bearing account with any banking institution (including the
Custodian), which deposit or account has a term of one year or less;
and
(i) For any other proper purpose, but only upon receipt, in addition to
Proper Instructions, of a copy of a resolution of the Board of
Trustees, certified by an Officer, specifying the amount and purpose
of such payment, declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom such payment is to
be made.
(7) Delivery of Securities from Portfolio Custody Accounts. Upon receipt
of Proper Instructions, the Custodian shall release and deliver Securities of
the Fund from a Portfolio Custody Account but only in the following cases:
(a) Upon the sale of Securities for the account of the
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Fund but, subject to Section 3 of Article IV below, only against
receipt of payment therefor in cash, by certified or cashiers check
or bank credit;
(b) In the case of a sale effected through a Book-Entry System or
Securities Depository, in accordance with the provisions of Section
5 of this Article III;
(c) To an offeror's depository agent in connection with tender or other
similar offers for Securities of the Fund; provided that, in any
such case, the cash or other consideration is to be delivered to the
Custodian;
(d) To the issuer thereof or its agent (i) for transfer into the name of
the Fund or a Portfolio, the Custodian or any sub-custodian
appointed pursuant to Section 3 of this Article III, or of any
nominee or nominees of any of the foregoing, or (ii) for exchange
for a different number of certificates or other evidence
representing the same aggregate face amount or number of units;
provided that, in any such case, the new Securities are to be
delivered to the Custodian;
(e) To the broker selling Securities, for examination in accordance with
the "street delivery" custom;
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<PAGE>
(f) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or readjustment of
the issuer of such Securities, or pursuant to provisions for
conversion contained in such Securities, or pursuant to any deposit
agreement, including surrender or receipt of underlying Securities
in connection with the issuance or cancellation of depository
receipts; provided that, in any such case, the new Securities and
cash, if any, are to be delivered to the Custodian;
(g) Upon receipt of payment therefor pursuant to any repurchase or
reverse repurchase agreement entered into by the Fund;
(h) In the case of warrants, rights or similar Securities, upon the
exercise thereof, provided that, in any such case, the new
Securities and cash, if any, are to be delivered to the Custodian;
(i) For delivery in connection with any loans of Securities pursuant to
the Securities Loan Agreement, but only against receipt of such
collateral as is required under the Securities Loan Agreement;
(j) For delivery as security in connection with any
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borrowings by the Fund requiring a pledge of assets by the Fund, but
only against receipt by the Custodian of the amounts borrowed;
(k) Pursuant to any authorized plan of liquidation, reorganization,
merger, consolidation or recapitalization of the Fund;
(l) For delivery in accordance with the provisions of any agreement
among the Fund, the Custodian and a broker-dealer registered under
the 1934 Act and a member of the NASD, relating to compliance with
the rules of The Options Clearing Corporation and of any registered
national securities exchange (or of any similar organization or
organizations) regarding escrow or other arrangements in connection
with transactions by the Fund;
(m) For delivery in accordance with the provisions of any agreement
among the Fund, the Custodian, and a futures commission merchant
registered under the Commodity Exchange Act, relating to compliance
with the rules of the Commodity Futures Trading Commission and/or
any contract market (or any similar organization or organizations)
regarding account deposits in connection with transactions by the
Fund; or
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<PAGE>
(n) For any other proper corporate purpose, but only upon receipt, in
addition to Proper Instructions, of a copy of a resolution of the
Board of Trustees, certified by an Officer, specifying the
Securities to be delivered, setting forth the purpose for which such
delivery is to be made, declaring such purpose to be a proper
corporate purpose, and naming the person or persons to whom delivery
of such Securities shall be made.
(8) Actions Not Requiring Proper Instructions. Unless otherwise instructed
by the Fund, the Custodian shall with respect to all Securities held for the
Fund;
(a) Subject to Section 4 of Article IX below, collect on a timely basis
all income and other payments to which the Fund is entitled either
by law or pursuant to custom in the securities business;
(b) Present for payment and, subject to Section 4 of Article IX below,
collect on a timely basis the amount payable upon all Securities
which may mature or be called, redeemed, or retired, or otherwise
become payable;
(c) Endorse for collection, in the name of the Fund or a Portfolio,
checks, drafts and other negotiable instruments;
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<PAGE>
(d) Surrender interim receipts or Securities in temporary form for
Securities in definitive form;
(e) Execute, as custodian, any necessary declarations or certificates of
ownership under the federal income tax laws or the laws or
regulations of any other taxing authority now or hereafter in
effect, and prepare and submit reports to the Internal Revenue
Service ("IRS") and to the Fund at such time, in such manner and
containing such information as is prescribed by the IRS;
(f) Hold for the Fund, either directly or, with respect to Securities
held therein, through a Book-entry System or Securities Depository,
all rights and similar securities issued with respect to Securities
of the Fund; and
(g) In general, attend to all non-discretionary details in connection
with the sale, exchange, substitution, purchase, transfer and other
dealings with Securities and assets of the Fund.
(9) Registration and Transfer of Securities. All Securities held for the
Fund that are issued or issuable only in bearer form shall be held by the
Custodian in that form, provided that any such Securities shall be held in a
Book-entry System if eligible therefor. All other Securities held for the
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Fund may be registered in the name of the Fund or a Portfolio, the Custodian, or
any sub-custodian appointed pursuant to Section 3 of this Article III, or in
the name of any nominee of any of them, or in the name of a Book-Entry System,
Securities Depository or any nominee of either of them. The Fund shall furnish
to the Custodian appropriate instruments to enable the Custodian to hold or
deliver in proper form for transfer, or to register in the name of any of the
nominees hereinabove referred to or in the name of a Book-Entry System or
Securities Depository, any Securities registered in the name of the Fund or a
Portfolio.
(10) Records. (a) The Custodian shall maintain, by Portfolio, complete and
accurate records with respect to Securities, cash or other property held for the
Fund, including (i) journals or other records of original entry containing an
itemized daily record in detail of all receipts and deliveries of Securities and
all receipts and disbursements of cash; (ii) ledgers (or other records)
reflecting (A) Securities in transfer, (B) Securities in physical possession,
(C) monies and Securities borrowed and monies and Securities loaned (together
with a record of the collateral therefor and substitutions of such collateral),
(D) dividends and interest received, and (E) dividends receivable and interest
accrued; and (iii) cancelled checks and bank records related thereto. The
Custodian shall keep such other books and records with respect to Securities,
cash and other property of the Fund which is held hereunder as the Fund may
reasonably request.
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<PAGE>
(b) All such books and records maintained by the Custodian shall (i) be
maintained in a form acceptable to the Fund and in compliance with rules and
regulations of the Securities and Exchange Commission, (ii) be the property of
the Fund and at all times during the regular business hours of the Custodian be
made available upon request for inspection by duly authorized officers,
employees or agents of the Fund and employees or agents of the Securities and
Exchange Commission, and (iii) if required to be maintained by Rule 31a-1 under
the 1940 Act, be preserved for the periods prescribed in Rule 31a-2 under the
1940 Act.
(11) Portfolio Reports by Custodian. The Custodian shall furnish the
Fund with a daily activity statement by Portfolio, including a summary of all
transfers to or from each Portfolio Custody Account, on the day following such
transfers. At least monthly and from time to time, the Custodian shall furnish
the Fund with a detailed statement, by Portfolio, of the Securities and moneys
held for the Fund under this Agreement.
(12) Other Reports by Custodian. The Custodian shall provide the Fund
with such reports, as the Fund may reasonably request from time to time, on the
internal accounting controls and procedures for safeguarding Securities, which
are employed by the Custodian or any sub-custodian appointed pursuant to
Section 3 of this Article III.
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<PAGE>
(13) Proxies and Other Materials. Custodian shall promptly deliver to the
Fund all notices of meetings, proxies and proxy materials, which it receives
regarding Securities held by it hereunder. Before delivering them to the Fund,
Custodian shall cause all proxies relating to such Securities which are not
registered in the name of the Fund, a Portfolio or a nominee of either of them,
to be promptly executed by the registered holder of such Securities, without
indication of the manner in which such proxies are to be voted. Unless otherwise
instructed by the Fund, neither Custodian nor any of its agents shall exercise
any voting rights with respect to Securities held hereunder.
(14) Information on Corporate Actions. Custodian shall promptly transmit
to the Fund all written information publicly distributed by issuers of
Securities being held for the Fund, including Securities on loan under the
Securities Loan Agreement. With respect to tender or exchange offers for such
Securities (including Securities on loan under the Securities Loan Agreement),
Custodian shall promptly transmit to the Fund all written information publicly
distributed by the issuers of the Securities whose tender or exchange is sought
and by the party (or its agents) making the tender or exchange offer. If the
Fund desires to take action with respect to any tender offer, exchange offer or
other similar transaction, the Fund shall notify the Custodian at least one
Business Day prior to the date on which the Custodian is to take such action.
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<PAGE>
ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
(1) Purchase of Securities. Promptly upon each purchase of Securities for
the Fund, Written Instructions shall be delivered to the Custodian, specifying
(a) the Portfolio for which the purchase was made, (b) the name of the issuer or
writer of such Securities, and the title or other description thereof, (c) the
number of shares, principal amount (and accrued interest, if any) or other units
purchased, (d) the date of purchase and settlement, (e) the purchase price per
unit, (f) the total amount payable upon such purchase, and (g) the name of the
person to whom such amount is payable. The Custodian shall upon receipt of such
Securities purchased by the Fund pay out of the moneys held for the account of
such Portfolio the total amount specified in such Written Instructions to the
person named therein. The Custodian shall not be under any obligation to pay out
moneys to cover the cost of a purchase of Securities for the Fund, if in the
relevant Portfolio Custody Account there is insufficient cash available to the
Portfolio for which such purchase was made.
(2) Sale of Securities. Promptly upon each sale of Securities by the Fund,
Written Instructions shall be delivered to the Custodian, specifying (a) the
Portfolio from or by which the sale was made, (b) the name of the issuer or
writer of such Securities, and the title or other description thereof, (c) the
number of shares, principal amount (and accrued interest, if
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any), or other units sold, (d) the date of sale and settlement (e) the sale
price per unit, (f) the total amount payable upon such sale, and (g) the person
to whom such Securities are to be delivered. Upon receipt of the total amount
payable to the Fund as specified in such Written Instructions, the Custodian
shall deliver such Securities to the person specified in such Written
Instructions. Subject to the foregoing, the Custodian may accept payment in such
form as shall be satisfactory to it, and may deliver Securities and arrange for
payment in accordance with the customs prevailing among dealers in Securities.
(3) Delivery of Securities Sold. Notwithstanding Section 2 of this Article
IV or any other provision of this Agreement, the Custodian, when instructed to
deliver Securities against payment, shall be entitled, in accordance with
generally accepted market practice, to deliver such Securities prior to actual
receipt of final payment therefor. In any such case, the Fund shall bear the
risk that final payment for such Securities may not be made or that such
Securities may be returned or otherwise held or disposed of by or through the
person to whom they were delivered, and the Custodian shall have no liability
for any of the foregoing.
(4) Payment for Securities Sold, etc. In its sole discretion and from time
to time, the Custodian may credit the relevant Portfolio Custody Account, prior
to actual receipt of final payment thereof, with (i) proceeds from the sale of
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Securities which it has been instructed to deliver against payment, (ii)
proceeds from the redemption of Securities or other assets of the Fund, and
(iii) income from cash, Securities or other assets of the Fund. Any such credit
shall be conditional upon actual receipt by Custodian of final payment and may
be reversed if final payment is not actually received in full. The Custodian
may, in its sole discretion and from time to time, permit the Fund to use funds
so credited to a Portfolio Custody Account in anticipation of actual receipt of
final payment. Any such funds shall be repayable immediately upon demand made by
the Custodian at any time prior to the actual receipt of all final payments in
anticipation of which funds were credited to the Portfolio Custody Account.
(5) Advances by Custodian for Settlement. The Custodian may, in its sole
discretion and from time to time, advance funds to the Fund to facilitate the
settlement of the Fund's transactions in a Portfolio Custody Account. Any such
advance shall be repayable immediately upon demand made by Custodian.
ARTICLE V
REDEMPTION OF FUND SHARES
(1) Transfer of Funds. From such funds as may be available for the purpose
in the relevant Portfolio Custody Account, and upon receipt of Proper
Instructions specifying that the funds are required to redeem Shares on account
of such
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Portfolio, the Custodian shall wire each amount specified in such Proper
Instructions to or through such bank as the Fund may designate with respect to
such amount in such Proper Instructions.
(2) No Duty Regarding Paying Banks. The Custodian shall not be under any
obligation to effect payment or distribution by any bank designated in Proper
Instructions given pursuant to Section 1 of this Article V of any amount paid by
the Custodian to such bank in accordance with such Proper Instructions.
ARTICLE VI
SEGREGATED ACCOUNTS
Upon receipt of Proper Instructions, the Custodian shall establish and
maintain a segregated account or accounts for and on behalf of the Fund, into
which account or accounts may be transferred cash and/or Securities, including
Securities maintained in a Depository Account,
(a) in accordance with the provisions of any agreement among the Fund,
the Custodian and a broker-dealer registered under the 1934 Act and
a member of the NASD (or any futures commission merchant registered
under the Commodity Exchange Act), relating to compliance with the
rules of The Options Clearing Corporation and of any registered
national
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securities exchange (or the Commodity Futures Trading Commission or
any registered contract market), or of any similar organization or
organizations, regarding escrow or other arrangements in connection
with transactions by the Fund,
(b) for purposes of segregating cash or Securities in connection with
securities options purchased or written by the Fund or in connection
with financial futures contracts (or options thereon) purchased or
sold by the Fund,
(c) which constitute collateral for loans of Securities made by the
Fund,
(d) for purposes of compliance by the Fund with requirements under the
1940 Act for the maintenance of segregated accounts by registered
investment companies in connection with reverse repurchase
agreements and when-issued, delayed delivery and firm commitment
transactions, and
(e) for other proper corporate purposes, but only upon receipt of, in
addition to Proper Instructions, a certified copy of a resolution of
the Board of Trustees, certified by an Officer, setting forth the
purpose or purposes of such segregated account
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and declaring such purposes to be proper corporate purposes.
Each segregated account established under this Article VI shall be
established and maintained for a single Portfolio only. All Proper Instructions
relating to a segregated account shall specify the Portfolio involved.
ARTICLE VII
REPURCHASE TRANSACTIONS
(1) Transactions. From time to time, as agent of the Fund and subject to
such Proper Instructions as may be given by the Fund's investment manager, Fred
Alger Management, Inc., Custodian shall make for the account of the appropriate
Portfolios the transfers of funds and deliveries of Securities which the Fund is
required to make pursuant to the Master Repurchase Agreement and shall receive
for the account of the appropriate Portfolios the transfers of funds and
deliveries of Securities which the seller under the Master Repurchase Agreement
is required to make pursuant thereto. Custodian shall make and receive all such
transfers and deliveries pursuant to, and subject to the terms and conditions
of, the Master Repurchase Agreement.
(2) Collateral; Events of Default. Custodian shall daily mark to market
the Securities purchased by the Fund pursuant to the Master Repurchase Agreement
and shall give to
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seller thereunder any such notice as may be required under Section 4(a) thereof.
Custodian shall promptly notify the Fund of any Event of Default by seller under
the Master Repurchase Agreement (as such term "Event of Default" is defined
therein) of which it has actual knowledge.
(3) Master Repurchase Agreement. Custodian hereby acknowledges its
receipt from the Fund of a copy of the Master Repurchase Agreement. The Fund
shall provide Custodian, prior to the effectiveness thereof, with a copy of any
amendment to the Master Repurchase Agreement.
ARTICLE VIII
SECURITIES LENDING TRANSACTIONS
(1) Transactions. From time to time, as agent of the Fund and subject to
such Proper Instructions as may be given by the Fund's investment manager, Fred
Alger Management, Inc., Custodian shall make for the account of the appropriate
Portfolios the transfers of funds and deliveries of Securities which the Fund is
required to make pursuant to the Securities Loan Agreement and shall receive for
the account of the appropriate Portfolios the transfers of funds and deliveries
of Securities which the borrower under the Securities Loan Agreement is required
to make pursuant thereto. Custodian shall make and receive all such transfers
and deliveries pursuant to, and subject to the terms and conditions of, the
Securities Loan Agreement.
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<PAGE>
(2) Collateral; Events of Default. Custodian shall daily mark to market,
in the manner provided for in the Securities Loan Agreement, all loans of
Securities which may from time to time be outstanding thereunder. Custodian
shall promptly notify the Fund of any Default under the Securities Loan
Agreement (as such term "Default" is defined therein) of which it has actual
knowledge.
(3) Termination of Loans. Upon notification by the Fund of the sale
thereof, Custodian as agent of the Fund shall promptly terminate, as provided in
the Securities Loan Agreement, any loan of Securities which have been sold by
the Fund.
(4) Securities Loan Agreement. Custodian hereby acknowledges its receipt
from the Fund of a copy of the Securities Loan Agreement. The Fund shall provide
the Custodian, prior to the effectiveness thereof, with a copy of any amendment
to the Securities Loan Agreement.
ARTICLE IX
CONCERNING THE CUSTODIAN
(1) Standard of Care. The Custodian shall be held to the exercise of
reasonable care in carrying out its obligations under this Agreement, and shall
be without liability to the Fund for any loss, damages, cost, expense (including
attorneys'
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fees and disbursements), liability or claim which does not arise from willful
misfeasance, bad faith or negligence on the part of the Custodian or reckless
disregard by the Custodian of its obligations under this Agreement. The
Custodian shall be entitled to rely on and may act upon advice of counsel on all
matters, and shall be without liability for any action reasonably taken or
omitted pursuant to such advice. In no event shall Custodian be liable for
special or consequential damages or be liable in any manner whatsoever for any
action taken or omitted in accordance with instructions from the Fund or any
agent of the Fund. Custodian shall not be under any obligation at any time to
ascertain whether the Fund is in compliance with the 1940 Act, the regulations
thereunder, the provisions of its charter documents or by-laws, or its
investment objectives and policies as then in effect.
(2) Actual Collection Required. Custodian shall not be liable for, or
considered to be the custodian of, any cash belonging to the Fund or any money
represented by a check, draft or other instrument for the payment of money,
until the Custodian or its agents actually receive such cash or collect on such
instrument.
(3) No Responsibility for Title, etc. So long as and to the extent that
it is in the exercise of reasonable care, the Custodian shall not be responsible
for the title, validity or genuineness of any property or evidence of title
thereto received or delivered by it pursuant to this Agreement.
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(4) Limitation on Duty to Collect. Custodian shall promptly notify the
Fund whenever any money or property due and payable from or on account of any
Securities held hereunder for the Fund is not timely received by it. Custodian
shall not, however, be required to enforce collection, by legal means or
otherwise, of any such money or other property not paid when due, but shall
receive the proceeds of such collections as may be effected by it or its agents
in the ordinary course of its custody and safekeeping business.
(5) Reliance Upon Documents and Instructions. The Custodian shall be
entitled to rely upon any certificate, notice or other instrument in writing
received by it and reasonably believed by it to be genuine. The Custodian shall
be entitled to rely upon and act in accordance with any Oral Instructions and
any Written Instructions actually received by it pursuant to this Agreement.
(6) Express Duties Only. The Custodian shall have no duties or obligations
whatsoever except such duties and obligations as are specifically set forth in
this Agreement, and no covenant or obligation shall be implied in this Agreement
against the Custodian. Custodian shall have no discretion whatsoever with
respect to the management, disposition or investment of any Portfolio Custody
Account and is not a fiduciary to the Fund or any Portfolio.
(7) Co-operation. The Custodian shall cooperate with
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and supply necessary information, by Portfolio, to the entity or entities
appointed by the Fund to keep the books of account of the Fund and/or to compute
the value of the assets of the Fund.
(8) Disclosure. Custodian is NOT authorized to disclose the name, address
and securities positions of the Fund or any Portfolio to the issuers of such
securities when requested by them to do so.
ARTICLE X
INDEMNIFICATION
(1) Indemnification. The Fund shall indemnify and hold harmless the
Custodian, any sub-custodian or other agent appointed pursuant to Section 3 of
Article III above, and any nominee of the Custodian or of such sub-custodian
from and against any loss, damages, cost, expense (including attorneys' fees and
disbursements), liability (including, without limitation, liability arising
under the Securities Act of 1933, the 1934 Act, the 1940 Act, and any state or
foreign securities and/or banking laws) or claim arising directly or indirectly
(a) from the fact that Securities are registered in the name of any such
nominee, or (b) from any action or inaction by the Custodian or such
sub-custodian or other agent (i) at the request or direction of or in reliance
on the advice of the Fund, or (ii) upon Proper Instructions, or (c) generally,
from the performance of its obligations under this Agreement or, in
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the case of any such sub-custodian, under the agreement approved by the Fund
pursuant to which it is employed by the Custodian, provided that neither the
Custodian nor any such sub-custodian or other agent shall be indemnified and
held harmless from and against any such loss, damage, cost, expense, liability
or claim arising from the Custodian's or such sub-custodian's or other agent's
willful misfeasance, bad faith, negligence or reckless disregard of its
obligations under this Agreement in the case of the Custodian or under such
agreement approved by the Fund in the case of a sub-custodian.
(2) Indemnity to be Provided. If the Fund requests the Custodian to take
any action with respect to Securities, which may, in the opinion of the
Custodian, result in the Custodian or its nominee becoming liable for the
payment of money or incurring liability of some other form, the Custodian shall
not be required to take such action until the Fund shall have provided indemnity
therefor to the Custodian in an amount and form satisfactory to the Custodian.
(3) Security. If the Custodian advances cash or Securities to the Fund for
any purpose, either at the Fund's request or as otherwise contemplated in this
Agreement, or in the event that the Custodian or its nominee incurs, in
connection with its performance under this Agreement, any loss, damage, cost,
expense (including attorneys' fees and disbursements), liability or claim
(except such as may arise from its or its nominee's willful misfeasance, bad
faith or
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<PAGE>
negligence or reckless disregard of its obligations under this Agreement), then,
in any such event, any property at any time held for the account of the Fund
shall be security therefor and the Fund hereby grants to Custodian a lien, right
of set-off and security interest in such property.
ARTICLE XI
FORCE MAJEURE
Neither the Custodian nor the Fund shall be liable for any failure or
delay in performance of its obligations under this Agreement arising out of or
caused, directly or indirectly, by circumstances beyond its reasonable control,
including, without limitation, acts of God; earthquakes; fires; floods; wars;
civil or military disturbances; sabotage; strikes; epidemics; riots; power
failures; computer failure and any such circumstances beyond its reasonable
control as may cause interruption, loss or malfunction of utility,
transportation, computer (hardware or software) or telephone communication
service; accidents; labor disputes; acts of civil or military authority;
governmental actions; or inability to obtain labor, material, equipment or
transportation; provided, however, that the Custodian in the event of a failure
or delay (i) shall not discriminate against the Fund in favor of any other
customer of the Custodian in making computer time and personnel available to
input or process the transactions contemplated by this Agreement and (ii) shall
use its best efforts to ameliorate the effects of any such failure or delay.
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ARTICLE XII
TERMINATION
(1) Termination. Either party hereto may terminate this Agreement by
giving to the other party a notice in writing specifying the date of such
termination, which shall be not less than sixty (60) days after the date of the
giving of such notice. Upon the date set forth in such notice this Agreement
shall terminate, and the Custodian shall, upon receipt of a notice of acceptance
by the successor custodian, on that date (a) deliver directly to the successor
custodian all Securities (other than Securities held in a Book-Entry System or
Securities Depository) and cash then owned by the Fund and held by the Custodian
as custodian, and (b) transfer any Securities held in a Book-Entry System or
Securities Depository to an account of or for the benefit of the Fund, provided
that the Fund shall have paid to the Custodian all fees, expenses and other
amounts to the payment or reimbursement of which it shall then be entitled. The
Fund may at any time immediately terminate this Agreement in the event of the
appointment of a conservator or receiver for the Custodian by regulatory
authorities in the State of New Jersey or upon the happening of a like event at
the direction of an appropriate regulatory agency or court of competent
jurisdiction.
(2) Fund as Custodian. If a successor custodian is not designated by
the Fund, the Fund shall upon the date specified in the notice of termination of
this Agreement and upon (a) the
- 36 -
<PAGE>
delivery by the Custodian to the Fund of all Securities (other than any
Securities held in a Book-Entry System or Securities Depository) and cash then
owned by the Fund, and (b) the transfer of any Securities held in a Book-Entry
System or Securities Depository to an account of or for the Fund, be deemed to
be its own custodian and the Custodian shall be relieved of all obligations
under this Agreement.
ARTICLE XIII
COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to compensation and payment of
out-of-pocket expenses as agreed upon from time to time by the Fund and the
Custodian. The fees and other charges in effect on the date hereof and
applicable to the Fund are set forth in Exhibit B attached hereto.
ARTICLE XIV
NOTICES
Unless otherwise specified herein, all demands, notices, instructions, and
other communications to be given hereunder shall be sent or delivered to the
recipient at the address set forth after its name hereinbelow:
if to the Fund:
[Name of the Portfolio to which the notice or other writing
relates]
75 Maiden Lane
New York, New York 10038
Attention: Gregory S. Duch
Telephone: (212) 806-8800
Facsimile: (212) 269-0420
- 37 -
<PAGE>
if to Custodian:
Custodial Trust Company
28 West State Street
Trenton, New Jersey 08608
Attention: Vice President - Trust Operations
Telephone: (609) 599-5972
Facsimile: (609) 599-1654
or at such other address as either party shall have provided to the other by
notice given in accordance with this Article XIV. Writing shall include
transmissions by or through teletype, facsimile, central processing unit
connection, on-line terminal and magnetic tape.
ARTICLE XV
MISCELLANEOUS
(1) Taxes. Any and all taxes, including any interest and penalties with
respect thereto, which may be levied or assessed under present or future laws
upon or in respect of any Portfolio Custody Account or any income thereof shall
be charged to such Portfolio Custody Account by Custodian and paid therefrom.
(2) Business Days. Nothing contained in this Agreement is intended to
require or shall require the Custodian to perform any function or duties on a
day other than a Business Day.
- 38 -
<PAGE>
(3) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
(4) References to Custodian. The Fund shall not circulate any printed
matter which contains any reference to the Custodian without the prior written
approval of the Custodian, excepting printed matter contained in the prospectus
or statement of additional information for any Portfolio and such other printed
matter as merely identifies the Custodian as custodian for one or more of the
Portfolios designated by the Fund pursuant to Section 1 of Article II above. The
Fund shall submit printed matter requiring approval to the Custodian in draft
form, allowing sufficient time for review by the Custodian and its counsel prior
to any deadline for printing.
(5) No Waiver. No failure by either party hereto to exercise, and no delay
by such party in exercising, any right hereunder shall operate as a waiver
thereof. The exercise by either party hereto of any right hereunder shall not
preclude the exercise of any other right, and the remedies provided herein are
cumulative and not exclusive of any remedies provided at law or in equity.
(6) Amendments. This Agreement cannot be changed orally and no
amendment to this Agreement shall be effective unless evidenced by an instrument
in writing executed by the parties hereto.
- 39 -
<PAGE>
(7) Counterparts. This Agreement may be executed in one or more
counterparts, and by the parties hereto on separate counterparts, each of which
shall be deemed an original but all of which together shall constitute but one
and the same instrument.
(8) Severability. If any provision of this Agreement shall be invalid,
illegal or unenforceable in any respect under any applicable law, the validity,
legality and enforceability of the remaining provisions shall not be affected or
impaired thereby.
(9) Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns; provided, however, that this Agreement shall not be assignable by
either party hereto without the written consent of the other party hereto.
(10) Headings. The headings of sections in this Agreement are for
convenience of reference only and shall not affect the meaning or construction
of any provision of this Agreement.
ARTICLE XVI
LIMITATION ON LIABILITY OF TRUSTEES, ETC.
This Agreement has been executed on behalf of the Fund
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<PAGE>
by the undersigned officer of the Fund in his capacity as an officer of the
Fund. The obligations of this Agreement shall be binding upon the assets and
property of the Fund only and shall not be binding upon any Trustee, officer or
shareholder of the Fund individually.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed and delivered in its name and on its behalf by its representative
thereunto duly authorized, all as of the day and year first above written.
THE ALGER AMERICAN FUND
By /s/ Fred M. Alger
------------------------
Authorized Officer
CUSTODIAL TRUST COMPANY
By /s/ [Illegible]
------------------------
Senior Vice President
- 41 -
<PAGE>
EXHIBIT A
AUTHORIZED PERSONS
Set forth below are the names and specimen signatures of the persons
authorized by Fund to administer each Portfolio Custody Account.
Name Signature
Fred M. Alger III /s/ Fred M. Alger
- --------------------------------- ---------------------------------
David D. Alger /s/ David D. Alger
- --------------------------------- ---------------------------------
Gregory S. Duch /s/ Gregory S. Duch
- --------------------------------- ---------------------------------
Frederick A. Blum /s/ Frederick A. Blum
- --------------------------------- ---------------------------------
Steven R. Thumm /s/ Steven R. Thumm
- --------------------------------- ---------------------------------
- 42 -
EXHIBIT 8(c)
AMENDMENT NO. 1 TO
CUSTODY AGREEMENT
AMENDMENT NO. 1, dated as of July 1, 1991, to Custody Agreement, dated as
of July 22, 1988, between THE ALGER AMERICAN FUND, a Massachusetts business
trust, (the "Fund") and CUSTODIAL TRUST COMPANY, a bank organized under the laws
of the State of New Jersey (the "Custodian").
Fund and Custodian hereby agree as follows:
1. Definition of Securities Loan Agreement. Article I.13 is amended by adding
thereto, after "Bear Stearns", "or Bear, Stearns Securities Corp. ("Bear Stearns
Securities")".
2. Appointment of Agents. Article III.3(a)is amended by deleting it in its
entirety and replacing it with the following:
"Custodian may employ suitable agents, which may include affiliates of
Custodian, such as Bear Stearns Securities and Bear Stearns, provided,
however, that Custodian shall not employ (i) Bear Stearns Securities, Bear
Stearns or any other of its affiliates to hold any collateral pledged to
Customer under the Securities Loan Agreement of even date herewith between
Customer and Bear Stearns Securities or Bear Stearns, as the case may be,
(the "Securities Loan Agreement") or any other securities loan agreement
between them (whether now or hereafter in effect) (ii) or Bear Stearns or
any other of its affiliates to hold any securities purchased by Customer
under the Master Repurchase Agreement of even date herewith between
Customer and Bear Stearns (the "Master Repurchase Agreement") or any other
repurchase agreement between them (whether now or hereafter in effect)."
<PAGE>
3. Effective Date. This Amendment No. 1 shall be effective as of July 1, 1991.
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment
No. 1 to be executed by its representative thereunto duly authorized, all as of
the day and year first above written.
THE ALGER AMERICAN FUND
By /s/ Gregory S. Duch
--------------------
Authorized Officer
CUSTODIAL TRUST COMPANY
By /s/ [SIGNATURE]
--------------------
Authorized Officer
-2-
EXHIBIT 9
TRANSFER AGENCY AGREEMENT
AGREEMENT dated as of July 22, 1988,
between The Alger American Fund (the "Trust"), a Massachusetts business trust,
having its principal office and place of business at 75 Maiden Lane, New York,
New York 10038, and Alger Shareholder Services, Inc. the "Transfer Agent"), a
Delaware corporation with principal offices at 30 Montgomery Street, Jersey
City, New Jersey 07302.
W I T N E S S E T H:
In consideration of the promises and mutual covenants set forth in this
Agreement, the Trust and the Transfer Agent agree as follows:
1. APPOINTMENT OF THE TRANSFER AGENT. The Trust appoints the Transfer Agent
as transfer agent for the shares of beneficial interest (the "Shares") of each
Portfolio of the Trust and as shareholder servicing agent for the Trust. The
Transfer Agent accepts the appointment and agrees to furnish these services in
accordance with the provisions set forth in this Agreement. As used in this
Agreement, "Portfolio" refers to each of the Alger American Money Market
Portfolio, the Alger American Income and Growth Portfolio, the Alger American
Small Capitalization Portfolio, the Alger American Growth Portfolio, or any
other Portfolio that may be created and designated by the Trust in accordance
with the provisions of the Master Trust Agreement of the Trust dated April 6,
1988 (the "Declaration of Trust"). When the Trust creates and designates a new
Portfolio, the Trustees of the Trust shall notify the Transfer Agent in writing
to the effect that the Trust has established a new Portfolio and that it
appoints the Transfer Agent as transfer agent and shareholder servicing agent
for the new Portfolio. The notice must be received by the Transfer Agent within
a reasonable period of time prior to the commencement of operations of the new
Portfolio in order to allow the Transfer Agent, in the ordinary course of its
business, to prepare to perform its duties for the new Portfolio.
2. DELIVERY OF DOCUMENTS. The Trust agrees, on or before the date this
Agreement becomes effective, but in any case, within a reasonable period of time
prior to the commencement of operations of the Trust for the Transfer Agent
prepare to perform its duties under this Agreement, to deliver to the Transfer
Agent the following documents:
(a) A certified copy of the Declaration of Trust, as may be amended from
time to time;
<PAGE>
(b) A certified copy of the By-laws of the Trust, as may be amended from
time to time;
(c) A copy of the resolution of the Board of Trustees authorizing the
execution and delivery of this Agreement;
(d) A specimen of the certificate for Shares of each Portfolio of the Trust
in the form approved by the Trustees, with a certificate of the Secretary of the
Trust as to such approval;
(e) A11 account application forms and other documents relating to
Shareholder accounts;
(f) A certified list of Shareholders of the existing Portfolios with the
name, address and taxpayer identification number of each Shareholder, the number
of Shares of the existing Portfolios held by each, the certificate numbers and
denominations (if any certificates have been issued), lists of any accounts
against which stop transfers have been placed, together with the reasons for
placing the stop transfers, and the number of Shares redeemed by the Portfolios;
(g) A copy of the Distribution Agreement in effect between the Trust and
Fred Alger & Company, Incorporated, the distributor of the Shares of the Trust;
(h) A copy of the Custodian Agreement in effect between the Trust and
Custodial Trust Company, the custodian of the assets of the Trust;
(i) An opinion of counsel for the Trust with respect to the validity of the
Shares and the status of the Shares under the Securities Act of 1933, as amended
(the "1933 Act"); and
(j) A certified list of the authorized officers or any other authorized
person (an "Authorized Person") of the Trust, in the form set forth in Exhibit 1
to this Agreement, authorized to execute any certificate, instruction, notice or
other instrument ("Written Instructions"), or to give oral instructions ("Oral
Instructions") on behalf of the Trust.
3. FURTHER DOCUMENTATION. The Trust agrees to also furnish from time to
time the following documents:
(a) Each vote of the Trustees authorizing the establishment and designation
of any new Portfolio and the original issuance of Shares;
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<PAGE>
(b) Each instrument establishing and designating a new Portfolio of the
Trust;
(c) Each Registration Statement of the Trust filed with the Securities and
Exchange Commission (the "Commission"), and each amendment with respect to the
Registration Statement;
(d) A certified copy of each amendment to the Declaration of Trust and the
By-laws of the Trust;
(e) Certified copies of each vote of the Trustees designating Authorized
Persons to give Written or Oral Instructions to the Transfer Agent;
(f) Certificates as to any change in any officer or Trustee of the Trust;
(g) Such other documents, certificates or opinions reasonably required by
the Transfer Agent as necessary or appropriate for the proper performance of its
duties under this Agreement.
4. REPRESENTATIONS OF THE TRUST.
(a) The Trust represents to the Transfer Agent that all outstanding Shares
are validly issued, fully paid and non-assessable. The Trust further represents
that when Shares are issued by the Trust after the date of this Agreement in
accordance with the terms of the Declaration of Trust and the current prospectus
describing those shares, the Shares shall be validly issued, fully paid and
non-assessable.
(b) In the event that any Portfolio of the Trust shall declare a
distribution payable in Shares, the Trust shall deliver to the Transfer Agent
written notice of such declaration signed on behalf of the Trust by an
authorized officer of the Trust, certifying (i) the number of Shares involved,
(ii) that all appropriate corporate action has been taken, and (iii) that any
amendment to the Declaration of Trust which may be required to be filed has been
filed and is effective. The notice shall be accompanied by an opinion of counsel
to the Trust relating to the legal adequacy and effect of the transaction. The
Transfer Agent shall be entitled to rely upon the notice for all purposes.
5. POWERS AND DUTIES OF THE TRANSFER AGENT. The Transfer Agent shall have
the following powers and duties:
(a) SHAREHOLDER INFORMATION. The Transfer Agent shall maintain a record of
the number of Shares held by each
-3-
<PAGE>
holder of record, which shall include the holder's name or names, address and
taxpayer identification numbers and whether the Shares are held in certificated
or uncertificated form.
(b) SHAREHOLDER SERVICES. The Transfer Agent will investigate all
Shareholder inquiries relating to Shareholder accounts and will answer all
correspondence from Shareholders and others relating to the Transfer Agent's
duties under this Agreement as well as such other correspondence as may from
time to time be mutually agreed upon between the Transfer Agent and the Trust.
The Transfer Agent shall keep records of Shareholder correspondence and replies
thereto, and of the lapse of time between the receipt of the Shareholder
correspondence and the mailing of such replies.
(c) SHARE CERTIFICATES. The Trust shall supply the Transfer Agent with
sufficient blank Share certificates for each Portfolio to meet the Transfer
Agent's requirements for the certificates. The Share certificates shall be
properly executed manually or, if authorized by the Trust, by facsimile. The
Trust agrees that, notwithstanding the death, resignation, or removal of any
officer of the Trust whose signature appears on the Share certificates, the
Transfer Agent may continue to countersign certificates bearing such signature
until otherwise directed by the Trust.
(d) LOST CERTIFICATES. The Transfer Agent shall issue replacement share
certificates in lieu of certificates which have been reported lost, stolen or
destroyed without any further action by the Board of Trustees or any officer of
the Trust, upon receipt by the Transfer Agent of properly executed affidavits
and lost certificate bonds, satisfactory to the Transfer Agent, naming the Trust
and the Transfer Agent as obligees under the bond.
(e) MAILING COMMUNICATIONS OF THE TRUST TO SHAREHOLDERS; PROXY MATERIALS.
The Transfer Agent will address and mail to the Shareholders all reports of the
Trust, dividend and distribution notices and proxy material for meetings of
Shareholders. In connection with meetings of Shareholders, the Transfer Agent
will prepare Shareholder lists, mail and certify as to the mailing of proxy
materials, process and tabulate returned proxy cards, report on proxies voted
prior to meetings, act as inspector of election at meetings and certify Shares
voted at meetings.
(f) PROCESSING OF INVESTMENT CHECKS OR OTHER INSTRUMENTS. Upon receipt of
any check or other instrument drawn or endorsed to the Transfer Agent, or
identified as being for the account of the Trust, or drawn or endorsed to the
-4-
<PAGE>
distributor for the purchase of Shares, the Transfer Agent shall stamp the check
or other instrument with the date of receipt, shall promptly process the same
for collection and, shall record the number of Shares sold, the trade date and
price per Share, and the amount of money to be delivered to the custodian of the
Trust for the sale of the Shares.
(g) ISSUANCE OF SHARES. Upon receipt of notification that the custodian has
received payment for the purchase of Shares, the Transfer Agent shall issue to
and hold in the account of the Shareholder, or if no account is specified in the
notification, in a new account established in the name of the specified
purchaser, the amount of Shares that the purchaser is entitled to receive, as
determined in accordance with applicable Federal law or regulation.
(h) CONFIRMATION. The Transfer Agent shall send to the Shareholder a
confirmation of each purchase which will show the new Share balance, the amount
invested and the price paid for the Shares, or such other form of confirmation
as the Trust and the Transfer Agent may agree upon from time to time.
(i) SUSPENSION OF SALE OF SHARES. The Transfer Agent shall not be required
to issue any Shares of the Trust where it has received Written Instructions
from the Trust or a written notice from any appropriate Federal authority that
the sale of Shares of the Trust has been suspended or discontinued and the
Transfer Agent shall be entitled to rely upon such Written Instructions or
written notification.
(j) TAXES IN CONNECTION WITH ISSUANCE OF SHARES. The Transfer Agent shall
not be responsible for the payment of any original issue or other taxes that may
be required to be paid in connection with the issuance of any Shares.
(k) RETURNED CHECKS. In the event that any check or other order for the
payment of money is returned unpaid for any reason, the Transfer Agent will: (i)
give prompt notice of such return to the Trust or its designee; (ii) place a
stop transfer order against all Shares issued in exchange for such check or
order; and (iii) take such other action as the Transfer Agent may deem
appropriate.
(1) REQUIREMENTS FOR TRANSFER OR REDEMPTION OF SHARES. (i) The Transfer
Agent shall process all requests from Shareholders to transfer or redeem Shares
in accordance with the procedures described in the Trust's prospectus.
-5-
<PAGE>
(ii) The Transfer Agent will transfer or redeem Shares upon receipt of
Written Instructions properly endorsed for transfer or redemption, accompanied
by such documents as the Transfer Agent reasonably may deem necessary to
evidence the authority of the person requesting such transfer or redemption and
the payment of stock transfer taxes, if any.
(iii) The Transfer Agent reserves the right to refuse to transfer or redeem
Shares until it is satisfied that the endorsement on the instructions is valid
and genuine, and for that purpose it will require a guarantee of signature by a
member firm of a national securities exchange, by any national bank or trust
company or by any member bank of the Federal Reserve system. The Trust may
authorize the Transfer Agent to waive the signature guarantee in certain cases
by Written Instructions. The Transfer Agent also reserves the right to refuse to
transfer or redeem Shares until it is satisfied that the requested transfer or
redemption is legally authorized, and it shall incur no liability for the
refusal, in good faith, to make transfers or redemptions that the Transfer Agent
deems improper or unauthorized, or until it is reasonably satisfied that there
is no basis to any claims adverse to such transfer or redemption.
(iv) In the case of redemption of Shares which have been purchased within
15 days of a redemption request, the Trust shall provide the Transfer Agent with
Written Instructions, as set forth in Schedule A to this Agreement, concerning
the time within which such requests may be honored.
(m) NOTICE TO CUSTODIAN AND TRUST. When Shares are redeemed, the Transfer
Agent shall, upon receipt of the instructions and documents in proper form,
deliver to the custodian and the Trust a notification setting forth the number
of Shares of the applicable Portfolio to be redeemed. Such redemptions shall be
reflected on appropriate accounts maintained by the Transfer Agent reflecting
outstanding Shares of the Trust and Shares attributed to individual accounts.
(n) PAYMENT OF REDEMPTION PROCEEDS. The Transfer Agent shall, upon receipt
of the moneys paid to it by the custodian for the redemption of Shares, pay to
the Shareholder, his authorized agent or legal representative, such moneys as
are received from the custodian, all in accordance with the redemption
procedures described in the Trust's prospectus. The Transfer Agent shall not
process or effect any redemptions in accordance with any Shareholder request
upon the
-6-
<PAGE>
receipt by the Transfer Agent of notification of the suspension of the
determination of the net asset value of Shares of the Trust.
(o) NOTICE OF DIVIDENDS OR DISTRIBUTIONS. Upon the declaration of dividends
or distribution by the Board of Trustees of the Trust on behalf of a Portfolio
of the Trust, the Trust shall furnish to the Transfer Agent a copy of the vote
of its Board of Trustees certified by the Secretary of the Trust setting forth
the date of the declaration of the dividend or distribution, the record date as
of which Shareholders entitled to payment shall be determined, the ex-dividend
date, the date of payment, the amount payable per Share, the total amount
payable to the Transfer Agent on the payment date and whether such dividend or
distribution is to be paid in cash at net asset value. On or before the payment
date specified in the vote of the Board of Trustees, if the dividend or
distribution is payable in cash, the Trust will cause the custodian of the Trust
to pay to the Transfer Agent sufficient cash to make payment to the Shareholders
of record entitled to the dividend or distribution.
(p) PAYMENT OF DIVIDENDS BY THE TRANSFER AGENT. The Transfer Agent will, on
the designated payment date, automatically reinvest all dividends in
additional Shares at net asset value (as determined on the payment date) and
mail to each Shareholder at his address of record, or such other address as the
Shareholder may have designated, a statement showing the number of full and
fractional Shares (rounded to three decimal places) then currently owned by the
Shareholder and the net asset value of the Shares credited to the Shareholder's
account in payment of the dividend or distribution.
(q) INSUFFICIENT FUNDS FOR DIVIDEND PAYMENTS. If the Transfer Agent does
not receive sufficient cash from the custodian to make dividend or distribution
payments payable in cash to all Shareholders entitled to the dividend or
distribution, the Transfer Agent will, upon notifying the Trust, withhold
payment to all Shareholders until such time as sufficient cash is provided to
the Transfer Agent.
(r) INFORMATION RETURNS. It is understood that the Transfer Agent shall
file such appropriate information returns concerning the payment of dividends,
return of capital and capital gain distributions with the proper Federal, state
and local authorities as are required by law to be filed and shall be
responsible for the withholding of taxes, if any, due on such dividends or
distributions to Shareholders when the Transfer Agent is required to withhold
taxes under applicable law.
-7-
<PAGE>
(s) RECORD KEEPING AND OTHER INFORMATION. (i) The Transfer Agent shall
create and maintain all necessary records in accordance with all applicable
laws, rules and regulations, including but not limited to records required by
Section 31(a) of the Investment Company Act of 1940, as amended (the "1940
Act"), and those records pertaining to the various functions performed by the
Transfer Agent under this Agreement. All records shall be available for
inspection and use by the Trust during regular business hours. Where applicable,
the records shall be maintained by the Transfer Agent for the periods and in the
places required by Rule 31a-2 under the 1940 Act.
(ii) Upon reasonable notice by the Trust, the Transfer Agent shall make
available during regular business hours the facilities and premises employed by
the Transfer Agent in connection with the performance of its duties under this
Agreement for reasonable visitation by any person authorized by the Trust.
(t) OTHER DUTIES. The Transfer Agent shall perform such other duties and
functions and be compensated by such other duties and functions as may from time
to time be agreed upon in writing between the Trust and the Transfer Agent.
5. RELIANCE BY TRANSFER AGENT; INSTRUCTIONS. (a) The Transfer Agent will be
entitled to rely upon instructions believed to have been executed or orally
communicated by an Authorized Person and will not be held to have any notice of
any change of authority of any person until notified in writing by the Trust.
The Transfer Agent will also be entitled to process Share certificates which it
reasonably believes bear the proper manual or facsimile signatures of officers
of the Trust.
(b) The Transfer Agent may request Written Instructions from any Authorized
Person of the Trust and may seek advice from legal counsel for the Trust or its
own legal counsel, with respect to any matter arising in connection with this
Agreement. The Transfer Agent shall not be liable for any action taken or not
taken or suffered by it in good faith in accordance with Written Instructions or
in accordance with the opinion of counsel to the Trust or counsel to the
Transfer Agent. Written Instructions requested by the Transfer Agent will be
provided by the Trust within a reasonable period of time. The Transfer Agent,
its officers, agents or employees, shall accept Oral or Written Instructions
given to them by any person representing or acting on behalf of the Trust only
if said representative is believed in good faith, by the Transfer Agent, its
officers, agents or employees, to be an Authorized
-8-
<PAGE>
Person. The Transfer Agent shall have no duty or obligation to inquire into, or
be responsible for, the legality of any action taken in reliance upon Written or
Oral instructions provided by or on behalf of the Trust.
(c) Notwithstanding any provision of this Agreement, the Transfer Agent
shall be under no duty or obligation to inquire into, and shall not be liable
for: (i) the legality of the issuance or sale of any Shares or the sufficiency
of the amount to be received for the Shares; (ii) the legality of the redemption
of any Shares or the sufficiency of the amount to be paid for the Shares; (iii)
the legality of the declaration of any dividend or distribution by the Trust or
the legality of the issuance of any Shares in payment of any dividend or
distribution; or (iv) the legality of any recapitalization or readjustment of
the Shares.
6. UNCONTROLLABLE EVENTS. The Transfer Agent will not be liable or
responsible for delays or errors by reason of circumstances beyond its control,
including acts of civil or military authority, national emergencies, labor
difficulties, fire, mechanical breakdown, flood or catastrophe, acts of God,
insurrection, war, riots or failure of transportation, communication or power
supply.
7. STANDARD OF CARE. The Transfer Agent shall exercise its best judgment in
rendering the services provided for in this Agreement and shall not be liable
for any error of judgment or mistake of law or for any loss suffered by the
Trust or its Shareholders in connection with the matters to which this Agreement
relates, except that the Transfer Agent shall be liable for its willful
misfeasance, bad faith or gross negligence in the performance of its duties
under this Agreement or by reason of the reckless disregard of its obligations
and duties under this Agreement.
8. INDEMNIFICATION. The Trust agrees to indemnify and hold harmless the
Transfer Agent and its officers and directors from any and all loss, liability
and expense resulting from the performance of its duties under this Agreement,
unless such loss, liability or expense is the result of the Transfer Agent's own
willful misfeasance, bad faith or gross negligence in the performance of its
duties, or by reason of the reckless disregard of its obligations and duties
under this Agreement.
9. COMPENSATION. (a) The Trust will compensate the Transfer Agent for the
performance of its obligations under this Agreement in accordance with the fees
set forth in the Fee Schedule annexed to this Agreement as Schedule B. The
Transfer
-9-
<PAGE>
Agent will bill the Trust as soon as practicable after the end of each calendar
month, and said billings will be detailed in accordance with the Fee Schedule.
The Trust agrees to pay to the Transfer Agent the amount billed promptly after
the bill is received by the Trust.
(b) The Trust will reimburse the Transfer Agent for out-of-pocket expenses
incurred by the Transfer Agent in the performance of its services under this
Agreement, including without limitation the items specified in the schedule of
Out-of-Pocket Expenses annexed to this Agreement as Schedule C. The schedule of
Out-of-Pocket Expenses may be modified by the Transfer Agent upon not less than
30 days' prior written notice to the Trust. Reimbursement by the Trust for
out-of-pocket expenses incurred by the Transfer Agent in any month shall be made
as soon as practicable after the receipt of an itemized bill from the Transfer
Agent.
(c) Compensation payable to the Transfer Agent for the performance of its
obligations under this Agreement with respect to a new Portfolio of the Trust
will be agreed upon by the parties at the time that the new Portfolio prepares
to commence its operations. The compensation agreed upon shall be reflected in a
Fee Schedule for that Portfolio, dated and signed by an authorized officer of
each party to this Agreement, which Fee Schedule shall be attached to Schedule B
of this Agreement.
(d) Any compensation agreed to by the parties under this Agreement may be
adjusted from time to time by attaching to Schedule B of this Agreement a
revised Fee Schedule, dated and signed by an authorized officer of each party to
this Agreement.
10. AFFILIATION BETWEEN TRUST AND TRANSFER AGENT. It is understood that the
Trustees, officers, employees, agents and Shareholders of the Trust, and the
officers, directors, employees, agents and shareholders of the Trust's
investment manager and distributor, are or may be interested in the Transfer
Agent as directors, officers, employees, agents, shareholders or otherwise, and
that the directors, officers, employees, agents or shareholders of the Transfer
Agent may be interested in the Trust as Trustees, officers, employees, agents,
Shareholders or otherwise, or in the investment manager and distributor as
officers, directors, employees, agents, shareholders or otherwise.
11. TERM AND TERMINATION. (a) This Agreement shall become effective on the
date first set forth above and thereafter shall continue in effect for
successive annual
-10-
<PAGE>
periods, provided such continuance is specifically approved at least annually by
the parties to this Agreement. Either party to this Agreement may terminate this
Agreement, without penalty, on 60 days' written notice to the other party.
(b) In the event the notice of termination is given by the Trust, it shall
be accompanied by a vote of the Board of Trustees, certified by the Secretary of
the Trust, electing to terminate this Agreement and designating a successor
transfer agent or transfer agents. Upon such termination and at the expense of
the Trust, the Transfer Agent will deliver to the designated successor a
certified list of Shareholders of the Trust (including the name, address and
taxpayer identification number), an historical record of the account of each
Shareholder and the status of the account, and all other relevant books,
records, correspondence, and other data established or maintained by the
Transfer Agent under this Agreement in the form reasonably acceptable to the
Trust. The Transfer Agent will cooperate in the transfer of its duties and
responsibilities under this Agreement by providing, among other things,
assistance from the Transfer Agent's personnel in the establishment of books,
records and other data by the designated successor or successors.
12. AMENDMENT. This Agreement may not be amended or modified in any manner
except by a written agreement executed by both parties or in the manner
expressly provided by this Agreement.
13. USE OF THE TRANSFER AGENT'S NAME. The Trust shall not use the name of
the Transfer Agent in any prospectus, statement of additional information,
Shareholders' report, sales literature or other material relating to the Trust
unless the proposed use has previously been approved by the Transfer Agent. The
Transfer Agent shall approve all reasonable uses of its name in connection with
its appointment under this Agreement or as may be required by the Commission.
14. USE OF THE TRUST'S NAME. The Transfer Agent shall not use the name of
the Trust or material relating to the Trust on any documents or forms for other
than internal use unless the proposed use has previously been approved by the
Trust. The Trust shall approve all reasonable uses of its name in connection
with the appointment of the Transfer Agent under this Agreement or as may be
required by the Commission.
19. SECURITY. The Transfer Agent represents and warrants that, to best of
its knowledge, the various procedures (including provisions for 24 hours-a-day
restricted access) and systems, which the Transfer Agent has implemented or will
-11-
<PAGE>
implement to safeguard from loss or damage attributable to fire, theft or any
other cause the Trust's records and other data and the Transfer Agent's records,
data, equipment, facilities and other property used in the performance of its
obligations under this Agreement, are adequate and that it will periodically
review and make such changes in its procedures and systems as in its judgment
are required.
20. NOTICES. Any notice or other instrument authorized or required by this
Agreement to be given in writing to the Trust or the Transfer Agent, shall be
sufficiently given if addressed to that party and received by it at its office
set forth below or at such other place as it may from time to time designate in
writing.
To the Trust:
The Alger American Fund
75 Maiden Lane
New York, New York 10038
Attention:____________________
To the Transfer Agent:
Alger Shareholder Services, Inc.
30 Montgomery Street
Jersey City, New Jersey 07302
Attention:____________________
17. ASSIGNMENT. This Agreement shall not be assignable without the written
consent of the other party.
18. GOVERNING LAW. This Agreement shall be construed in accordance with the
laws of the Commonwealth of Massachusetts.
19. LIABILITY. This Agreement has been executed on behalf of the Trust by
the undersigned officer of the Trust in his capacity as an officer of the Trust.
The obligations of this Agreement shall be binding upon the assets and property
of the Trust only and shall not be binding upon any Trustee officer or
Shareholder of the Trust individually.
-12-
<PAGE>
IN WITNESS WHEREOF, the parties to this Agreement have caused this
Agreement to be executed by their authorized officers as of the day and year
first above written.
THE ALGER AMERICAN FUND
By:/s/ Fred M. Alger
--------------------
Authorized Signature
Attest:/s/ Frederick J. Koczwara
---------------------------
ALGER SHAREHOLDER SERVICES, INC.
By:/s/ Irwin Schwartz
----------------------
Authorized Signature
Attest:/s/ Frederick J. Koczwara
----------------------------
-13-
<PAGE>
Exhibit 1
CERTIFIED LIST OF AUTHORIZED PERSONS
The undersigned, Fred M. Alger III, President and George J. Boggio, Treasurer-
Secretary of The Alger American Fund, a Massachusetts business trust (the
"Trust"), do hereby certify that the following individuals have been duly
authorized by the Board of Trustees of the Trust in accordance with the Master
Trust Agreement dated April 6, 1988 and the By-laws of the Trust, to execute any
certificate, instruction, notice or other instrument, or to give oral
instructions on behalf of the Trust and the signatures set forth opposite their
names are their true and correct signatures.
AUTHORIZED PERSON SIGNATURE
Fred M. Alger III /s/ Fred M. Alger III
- ----------------- ---------------------
David D. Alger /s/ David D. Alger
- ----------------- ---------------------
George J. Boggio /s/ George J. Boggio
- ----------------- ---------------------
Irwin Schwartz /s/ Irwin Schwartz
- ----------------- ---------------------
/s/ Fred M. Alger III
---------------------
Fred M. Alger III President
/s/ George J. Boggio
--------------------
George J. Boggio,
Secretary Treasurer
<PAGE>
Schedule A
WRITTEN INSTRUCTIONS CONCERNING
THE TIMING OF REDEMPTION OF SHARES
PURCHASED WITHIN 15 DAYS OF REDEMPTION REQUEST
It is hereby agreed between the Trust and the Transfer Agent that Shares
purchased by personal check may be redeemed only after they are deemed to have
been collected in accordance with the attached check-aging schedule. The
check-aging schedule, which is based upon a shareholder's address of record,
designates the number of days between the receipt of an investment check by the
Transfer Agent and the date on which funds provided by such checks will be
deemed to have been collected.
<PAGE>
Exhibit 1
CERTIFIED LIST OF AUTHORIZED PERSONS
The undersigned, Fred M. Alger III, President and Nanci K. Staple, Secretary of
The Alger American Fund, a Massachusetts business trust (the "Trust"), do hereby
certify that the following individuals have been duly authorized by the Board of
Trustees of the Trust in accordance with the Master Trust Agreement dated April
6, 1988 and the By-laws of the Trust, to execute any certificate, instruction
notice or other instrument, or to give oral instructions on behalf of the Trust
and the signatures set forth opposite their names are their true and correct
signatures.
AUTHORIZED PERSON SIGNATURE
Fred M. Alger III /s/ Fred M. Alger III
- ----------------- ---------------------
David D. Alger /s/ David D. Alger
- ----------------- ---------------------
Gregory S. Duch /s/ Gregory S. Duch
- ----------------- ---------------------
Frederick A. Blum /s/ Frederick A. Blum
- ----------------- ---------------------
James Barbi /s/ James Barbi
- ----------------- ---------------------
James P. Connelly /s/ James P. Connelly
- ----------------- ---------------------
/s/ Fred M. Alger III
---------------------
Fred M. Alger III,
President
/s/ Nanci K. Staple
---------------------
Nanci K. Staple,
Secretary
EXHIBIT 10(a)
Boston
April 9, 1998
The Trustees of
The Alger American Fund
75 Maiden Lane
New York, New York 10038
Dear Sirs:
You have requested our opinion as to certain matters of Massachusetts law
relating to your trust, The Alger American Fund (formerly "THE ALGER VARIABLE
INSURANCE PRODUCTS FUND"), a trust with transferable shares (the "TRUST"),
established under Massachusetts law pursuant to a Declaration of Trust dated
April 6, 1988 (the "ORIGINAL DECLARATION"), and thereafter from time to time
amended and supplemented (the Original Declaration, as so amended and
supplemented, the "DECLARATION"). We understand that our opinion is desired in
connection with (i) the filing by the Trust with the United States Securities
and Exchange Commission (the "SEC"), pursuant to the Securities Act of 1933, as
amended (the "1933 ACT"), and the Investment Company Act of 1940, as amended
(the "1940 ACT"), of amendments (collectively, the "AMENDMENT") to the Trust's
Registration Statement on Form N1-A (the "REGISTRATION STATEMENT") under the
1933 Act (File No. 33-21722, and the Amendment, Post-Effective Amendment No. 15
thereto) and the 1940 Act (File No. 811-05550, and the Amendment, Amendment No.
17 thereto), and (ii) the conversion of the Registration Statement and the files
relating thereto into the SEC's EDGAR(R) format.
The Trust operates as an investment company of the type known as a "series
fund". Its assets are divided into a total of six separate investment
portfolios, or funds, to wit: the Alger American Balanced Portfolio, the Alger
American Income and 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 (collectively, the
"FUNDS", and each singly, a "FUND"). Each Fund is subject to its own obligations
and has its own investment objectives and shareholders, distinct from those of
the other Funds. Each Fund is treated as a separate open-end investment company,
or mutual fund, for purposes of the 1940 Act. The beneficial interests in the
Trust are represented by shares of beneficial interest, par value $.001 per
share ("SHARES"). The Shares are divided into six separate series (each, a
"SERIES"), one for each Fund, representing the beneficial interests in that
Fund, and the Shares of a Fund provide no beneficial interest in the assets of
any other Fund.
We acted as counsel to the Trust in connection with the execution and
delivery of the Original Declaration, and for purposes of this opinion we have
reviewed the various amendments and supplements to the Original Declaration, the
Bylaws of the Trust, the actions taken by the Trustees of the Trust to organize
the Trust and to authorize the issuance and sale of several Series authorized by
the Declaration, the forms of the several Prospectuses and the Statement of
Additional Information presently included in the Registration Statement,
certificates of public officials and of of-
<PAGE>
The Trustees of
The Alger American Fund
April 9, 1998
ficers of the Trust as to matters of fact, and such other documents and
instruments, certified or otherwise identified to our satisfaction, and such
questions of law and fact, as we have considered necessary or appropriate for
purposes of the opinions expressed herein. We have assumed the genuineness of
the signatures on, and the authenticity of, all documents furnished to us, and
the conformity to the originals of documents submitted to us as certified
copies, which facts we have not independently verified.
Based upon and subject to the foregoing, we hereby advise you that, in our
opinion, under Massachusetts law:
1. The Trust has been duly organized and is validly existing as a trust
with transferable shares of the type commonly called a Massachusetts
business trust, and has all trust right, power and authority under the
Declaration and the laws of Massachusetts, to the extent that such laws
apply, to own its properties and to carry on its business as described
in the Prospectuses.
2. The Trust is authorized to issue an unlimited number of Shares of the
Series representing the beneficial interest in each of the Funds.
3. When Shares of the several Series to which the Registration Statement
relates have been issued in the manner and for consideration determined
as stated in the Prospectuses, such Shares will have been validly and
legally issued, and will be fully paid and nonassessable by the Trust,
or by the Fund which issued them.
With respect to the opinion stated in paragraph 3 above, we wish to point
out that the shareholders of a Massachusetts business trust may under some
circumstances be subject to assessment at the instance of creditors to pay the
obligations of such trust in the event that its assets are insufficient for the
purpose.
This letter expresses our opinions as to the provisions of the Declaration
and the laws of Massachusetts applying to business trusts generally, but does
not extend to the Massachusetts Securities Act, or to federal securities or
other laws.
We hereby consent to the filing of this letter with the SEC as an exhibit
to the Registration Statement, but we do not thereby concede that we come within
the category of persons whose consent is required under Section 7 of the 1933
Act.
Very truly yours,
/s/ Sullivan & Worchester LLP
--------------------------------
SULLIVAN & WORCHESTER LLP
EXHIBIT 11
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated February 2, 1998 on the financial statements of The Alger American Fund
for the year ended December 31, 1997 and to all references to our Firm included
in or made part of the registration statement of The Alger American Fund filed
on Form N-1A (Amendment No. 17), Investment Company Act File No. 811-5550 with
the Securities and Exchange Commission.
/s/ Arthur Andersen LLP
-------------------------
ARTHUR ANDERSEN LLP
New York, New York
April 9, 1998
EXHIBIT 13(a)
PURCHASE AGREEMENT
The Alger American Fund (the "Fund"), an unincorporated business
trust organized under the laws of the Commonwealth of Massachusetts, and Fred
Alger & Company, Incorporated ("Alger Inc."), hereby agree as follows:
1. The Fund hereby offers Alger Inc. and Alger Inc. hereby purchases
19,000 shares of beneficial interest of the Fund, par value $.0O1 per share (the
"Shares"), consisting of 10,000 Shares in the Alger American Money Market
Portfolio, at a price of $1.00 per Share, and 1,000 Shares in the Alger American
Income and Growth Portfolio, 1,000 Shares in the Alger American Small
Capitalization Portfolio and 7,000 Shares in the Alger American Growth
Portfolio, at a price of $10.00 per Share. Alger Inc. hereby acknowledges
receipt of the Shares acquired in the Portfolios and the Fund hereby
acknowledges receipt from Alger Inc. of $100,000 in full payment for the Shares.
2. Alger Inc. represents and warrants to the Fund that the Shares
are being acquired for investment purposes and not for the purpose of
distribution.
3. Alger Inc. agrees that if it redeems the Shares in any Portfolio
before five years after the date of this Agreement, it will pay to the Fund an
amount that is equal to the number resulting from multiplying the Fund's total
unamortized organizational expenses allocable to the Portfolio involved by a
fraction, the numerator of which is equal to the number of Shares of the
Portfolio redeemed and the denominator of which is equal to the aggregate number
of Shares of the Portfolio outstanding at the time of such redemption.
4. The Fund represents that a copy of its Agreement and Declaration
of Trust, dated April 6, 1988, together with all amendments thereto, is on file
in the office of the Secretary of the Commonwealth of Massachusetts.
5. This Agreement has been executed on behalf of the Fund by the
undersigned officer of the Fund in his capacity as an officer of the Fund. The
obligations of this Agreement shall be binding upon the assets and property of
the Fund only and shall not be binding upon any Trustee, officer or shareholder
of the Fund individually.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the 20th day of July, 1988.
THE ALGER AMERICAN FUND
By: /s/ Fred M. Alger
----------------------------
ATTEST:
/s/ Frederick J. Koczwara FRED ALGER & COMPANY, INCORPORATED
- ----------------------------
By: /s/ Irwin Schwartz
-----------------------------------
ATTEST:
/s/ Frederick J. Koczwara
- ----------------------------
-2-
EXHIBIT 13(c)
PURCHASE AGREEMENT
The Alger American Fund (the "Fund"), an unincorporated business trust
organized under the laws of the Commonwealth of Massachusetts, and Fred Alger &
Company, Incorporated ("Alger"), hereby agree as follows:
1. The Fund hereby offers Alger and Alger hereby purchases one (1)
share of beneficial interest of the Fund, par value $.001 per share
(the "Share"), consisting of one (1) Share in the Alger American
MidCap Growth Portfolio, at a price of $10.00 per share. Alger
hereby acknowledges receipt of the Share acquired in the Portfolio
and the Fund hereby acknowledges receipt from Alger of $10.00 in
full payment for the Share.
2. Alger represents and warrants to the Fund that the Share is being
acquired for investment purposes and not for the purpose of
distribution.
3. Alger agrees that if it redeems the Share before five years after
the date of this Agreement, it will pay to the Fund an amount that
is equal to the number resulting from multiplying the Fund's total
unamortized organizational expenses allocable to the Portfolio by a
fraction, the numerator of which is equal to the number of Shares of
the Portfolio redeemed and the denominator of which is equal to the
aggregate number of Shares of the Portfolio outstanding at the time
of such redemption.
4. The Fund represents that a copy of its Agreement and Declaration
of Trust, dated April 6, 1988, together with all amendments thereto,
is on file in the office of the Secretary of the Commonwealth of
Massachusetts.
5. This Agreement has been executed on behalf of the Fund by the
undersigned officer of the Fund in his capacity as an officer of the
Fund. The obligations of this Agreement shall be binding upon the
assets and property of the Fund only and shall not be binding upon
any Trustee, officer or shareholder of the Fund individually.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the 26th day of April, 1993.
THE ALGER AMERICAN FUND
By: /s/ Gregory S. Duch
-------------------------
ATTEST:
/s/ Nanci Staple
- ----------------------------
FRED ALGER MANAGEMENT, INC.
By: /s/ Gregory S. Duch
-------------------------
ATTEST:
/s/ Nanci Staple
- ----------------------------
EXHIBIT 13(d)
PURCHASE AGREEMENT
The Alger American Fund (the "Fund"), an unincorporated business trust
organized under the laws of the Commonwealth of Massachusetts, and Fred Alger &
Company, Incorporated ("Alger"), hereby agree as follows:
1. The Fund hereby offers Alger and Alger hereby purchases one (1)
share of beneficial interest of the Fund, par value $.001 per share
(the "Share"), consisting of one (1) Share in the Alger American
Leveraged AllCap Portfolio, at a price of $10.00 per share. Alger
hereby acknowledges receipt of the Share acquired in the Portfolio
and the Fund hereby acknowledges receipt from Alger of $10.00 in
full payment for the Share.
2. Alger represents and warrants to the Fund that the Share is being
acquired for investment purposes and not for the purpose of
distribution.
3. Alger agrees that if it redeems the Share before five years after
the date of this Agreement, it will pay to the Fund an amount that
is equal to the number resulting from multiplying the Fund's total
unamortized organizational expenses allocable to the Portfolio by a
fraction, the numerator of which is equal to the number of Shares of
the Portfolio redeemed and the denominator of which is equal to the
aggregate number of Shares of the Portfolio outstanding at the time
of such redemption.
4. The Fund represents that a copy of its Agreement and Declaration
of Trust, dated April 6, 1988, together with all amendments thereto,
is on file in the office of the Secretary of the Commonwealth of
Massachusetts.
5. This Agreement has been executed on behalf of the Fund by the
undersigned officer of the Fund in his capacity as an officer of the
Fund. The obligations of this Agreement shall be binding upon the
assets and property of the Fund only and shall not be binding upon
any Trustee, officer or shareholder of the Fund individually.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the 1st day of March 1994.
THE ALGER AMERICAN FUND
By: /s/ Gregory S. Duch
----------------------------
ATTEST:
/s/ Nanci Staple
- -----------------------
FRED ALGER & COMPANY, INCORPORATED
By: /s/ Gregory S. Duch
------------------------------
ATTEST:
/s/ Nanci Staple
- -----------------------
