THE ALGER
AMERICAN FUND
A POOLED FUNDING VEHICLE FOR:
O VARIABLE ANNUITY CONTRACTS 1 WORLD TRADE CENTER
O VARIABLE LIFE INSURANCE POLICIES SUITE 9333
O QUALIFIED PENSION PLANS NEW YORK, NY 10048
O QUALIFIED RETIREMENT PLANS 1-800-992-3863
PROSPECTUS
MAY 1, 1999
ALGER AMERICAN BALANCED PORTFOLIO
AS WITH ALL MUTUAL FUNDS, THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
DETERMINED IF THE INFORMATION IN THIS PROSPECTUS IS ACCURATE OR COMPLETE, NOR
HAS IT APPROVED OR DISAPPROVED THESE SECURITIES. IT IS A CRIMINAL OFFENSE TO
REPRESENT OTHERWISE.
AN INVESTMENT IN THE PORTFOLIO IS NOT A DEPOSIT OF A BANK AND IS NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR BY ANY OTHER
GOVERNMENT AGENCY.
<PAGE>
THE ALGER
AMERICAN FUND
ALGER AMERICAN BALANCED PORTFOLIO
PROSPECTUS
MAY 1, 1999
TABLE OF CONTENTS
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2 ......... Risk/Return Summary: Investments,
Risks & Performance
3 ......... Fees and Expenses
4 ......... Management & Organization
4 ......... Shareholder Information
Distributor ......................................... 4
Transfer Agent ...................................... 4
Purchasing and Redeeming Fund Shares ................ 5
6 ......... Financial Highlights
Back Cover: How to obtain more information
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THE ALGER AMERICAN FUND-ALGER
AMERICAN BALANCED PORTFOLIO
RISK/RETURN SUMMARY: INVESTMENTS, RISKS &
PERFORMANCE
INVESTMENT GOAL AND APPROACH
THE ALGER AMERICAN BALANCED PORTFOLIO SEEKS CURRENT INCOME AND LONG-TERM CAPITAL
APPRECIATION.
The equity portion of the portfolio invests primarily in equity securities, such
as common or preferred stocks, which are listed on U.S. exchanges or in the
over-the-counter market. The portfolio invests primarily in "growth" stocks. The
portfolio's Manager, Fred Alger Management, Inc., believes that these companies
tend to fall into one of two categories:
|_| High Unit Volume Growth
Vital, creative companies which offer goods or services to a rapidly
expanding marketplace. They include both established and emerging firms,
offering new or improved products, or firms simply fulfilling an increased
demand for an existing line.
|_| Positive Life Cycle Change
Companies experiencing a major change which is expected to produce
advantageous results. These changes may be as varied as new management,
products or technologies; restructuring or reorganization; or merger and
acquisition.
The portfolio focuses on stocks of companies with growth potential and
fixed-income securities, with emphasis on income-producing securities which
appear to have some potential for capital appreciation. Under normal
circumstances, the portfolio invests in common stocks and fixed-income
securities, which include commercial paper and bonds rated within the 4 highest
rating categories by an established rating agency or if not rated, which are
determined by the Fund's Manager to be of comparable quality. Ordinarily, at
least 25% of the portfolio's net assets are invested in fixed-income securities.
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PRINCIPAL RISKS
As with any fund that invests in stocks, your investment will go up or down in
value, and the loss of your investment is a risk of investing. The portfolio's
price per share will fluctuate due to changes in the market prices of its
investments. Also, a portfolio investment may not grow as fast as the rate of
inflation and stocks tend to be more volatile than some other investments you
could make, such as bonds. Furthermore, the returns of a fund concentrating on
"growth" stocks tend to vary more widely over time than those of funds that
focus on "value" stocks; prices of growth stocks tend to be higher in relation
to their companies' earnings and may be more sensitive to market, political and
economic developments than other stocks, making their prices more volatile.
Based on the equity portion of the portfolio's investment style and objective,
an investment in it may be better suited to investors who seek long-term capital
growth and can tolerate fluctuations in their investment's value.
The fixed-income portion of the portfolio is subject to additional risks,
including fixed income securities' sensitivity to interest rate movements and
the potential for a decline in the portfolio's market value in the event of an
issuer's falling credit rating or actual default.
The portfolio's trading in some stocks may be relatively short-term, meaning
that it may buy a security and sell it a short time later to take advantage of
current gains if it is believed that an alternative investment may provide
greater future growth. This activity may create higher transaction costs due to
commissions and other expenses.
2
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PERFORMANCE
The following bar chart shows the changes in the portfolio's performance from
year to year and gives you some indication of the risks of investing in the
portfolio. It assumes reinvestment of dividends and distributions. The Average
Annual Total Return Table beneath it compares the portfolio's performance over
several periods with that of a broad measure of market performance. The annual
returns assume reinvestment of dividends and distributions. Remember that the
portfolio's performance in the past is not necessarily an indication of how it
will perform in the future.
The performance disclosed in these charts does not reflect separate account
charges which, if reflected, would lower returns.
|_| S&P 500 Index(r): An index of large company common stocks considered to be
representative of the U.S. stock market in general.
|_| Lehman Brothers Government/Corporate Bond Index(r): An index designed to
track performance of government and corporate bonds.
ALGER AMERICAN BALANCED PORTFOLIO
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Annual Total Return as of December 31 each year (%)
[The following table represents a bar chart in the original.]
1990 6.53
1991 4.70
1992 9.48
1993 7.79
1994 -4.27
1995 28.62
1996 10.17
1997 19.82
1998 31.51
Best Quarter: 16.94% Q4 1998
Worst Quarter: -5.70% Q1 1994
Average Annual Total Return as of December 31, 1998
Since
Inception
1 Year 5 Years (9/5/89)
- ---------------------------------------------------------------
Alger American
Balanced 31.51% 16.41% 12.05%
S&P 500 Index(r) 28.58% 24.06% 17.44%
Lehman Brothers Gov't/
Corp Bond Index(r) 9.46% 7.30% 8.94%
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FEES AND EXPENSES
Investors incur certain fees and expenses in connection with an investment in
the portfolio. The following table shows the fees and expenses that you may
incur if you buy and hold shares of the portfolio.
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ANNUAL FUND OPERATING
EXPENSES
(expenses that are deducted
from Fund assets)
<TABLE>
<CAPTION>
SHAREHOLDER FEES
(fees paid directly TOTAL ANNUAL FUND
from your investment) Management Fees Distribution Fees Other Expenses OPERATING EXPENSES
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ALGER AMERICAN None .75% None .17% .92%
BALANCED
PORTFOLIO
</TABLE>
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EXAMPLE
The following example, which reflects the shareholder fees and operating
expenses listed above, is intended to help you compare the cost of investing in
the portfolio with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the portfolio for the time
periods indicated. The example also assumes that your investment has a 5% return
each year and that the portfolio's operating expenses remain the same as in the
prior table. The figures shown would be the same whether or not you sold your
shares at the end of each period. Although your actual costs may be higher or
lower, based on these assumptions your costs would be:
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1 Year 3 Years 5 Years 10 Years
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ALGER AMERICAN $94 $293 $509 $1,131
BALANCED PORTFOLIO
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The example above does not reflect charges and deductions which are, or may be,
imposed under variable annuity contracts, variable life insurance policies, or
pension or retirement plans. Such charges and deductions are described in the
prospectus for the contract or policy accompanying this prospectus or in the
Plan documents.
3
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ADDITIONAL INFORMATION ABOUT THE PORTFOLIO'S INVESTMENTS
The portfolio may invest up to 100% of its assets in cash, high grade bonds, or
cash equivalents for temporary defensive reasons if the Manager believes that
adverse market or other conditions warrant. This is to attempt to protect the
portfolio's assets from loss, rather than directly to promote the portfolio's
investment objective. The portfolio may not achieve its objective during such
periods.
Other securities the portfolio may invest in are discussed in the Fund's
Statement of Additional Information (see back cover).
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MANAGEMENT AND ORGANIZATION
MANAGER
Fred Alger Management, Inc.
1 World Trade Center
Suite 9333
New York, NY 10048
The Manager has been an investment adviser since 1964, and manages investments
totaling (at 12/31/98) $6.64 billion in mutual fund assets as well as $3.95
billion in other assets. The Manager is responsible for managing the portfolio's
assets according to its goal and for placing orders with broker-dealers to
purchase and sell securities on behalf of the portfolio. The portfolio has had
the same manager since inception and, for the most recent fiscal year, the
portfolio paid the Manager a fee at the annual rate based on a percentage of
average daily net assets of .75%.
PORTFOLIO MANAGERS
David Alger, Ron Tartaro and Steve Thumm are the individuals responsible for the
day-to-day management of the portfolio's investments. Mr. Alger, a manager of
the portfolio since its inception, has been employed by the Manager as Executive
Vice President and Director of Research since 1971, and as President since 1995.
Mr. Tartaro has been employed by the Manager since 1990, as a senior research
analyst until 1995 and as a Senior Vice President and co-manager since 1995. Mr.
Thumm has been employed by the Manager as a fixed income analyst since 1991.
YEAR 2000
The Fund's Manager and Distributor (Fred Alger & Company, Incorporated) have
advised the Fund that they are implementing a Year 2000 plan to address any
issues arising from computer systems' potentially erroneous reading of dates in
the year 2000. Specifically, they are in the process of confirming that the
Fund's service providers are resolving any Year 2000 issues as the millennium
approaches. While there can be no assurance that there will be no impairment of
services at that time, currently, it is not anticipated that shareholders'
investments in the Fund will be impacted negatively as a result of the Fund's
Year 2000 transition. However, people and resources have been devoted to this
important review.
Year 2000 issues, real or perceived, may also adversely affect stock prices. The
Manager intends to review SEC filings and other Year 2000 readiness information
from companies in which the Fund may invest significantly, as well as readiness
information from other sources. The Manager and the Fund have no reason to
believe that such measures will not be sufficient to avoid a material adverse
effect on the Fund's investments, although there can be no assurance that they
will be.
[GRAPHIC OMITTED]
SHAREHOLDER INFORMATION
DISTRIBUTOR
Fred Alger & Company, Incorporated
30 Montgomery Street
Jersey City, NJ 07302
TRANSFER AGENT
Alger Shareholder Services, Inc.
30 Montgomery Street
Jersey City, NJ 07302
NET ASSET VALUE
The price of one share is its "net asset value", or NAV. The NAV for the
portfolio is calculated as of the close of business (normally 4:00 p.m. Eastern
time) every day the New York Stock Exchange is open. Generally, the Exchange is
closed on weekends and various national holidays. It may close on other days
from time to time.
The Fund generally values the assets of the portfolio on the basis of market
quotations or, where market quotations are not readily available, on the basis
of fair value as determined by the Manager under procedures adopted by the
Fund's Board of Trustees. Short-term money market instruments held by the
portfolio are valued on the basis of amortized cost.
DIVIDENDS AND DISTRIBUTIONS
The Fund declares and pays dividends and distributions by the portfolio
annually. The Fund expects that these annual payments to shareholders will
consist of both capital gains and net investment income.
4
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Participants in variable annuity contracts, variable life insurance policies,
and qualified pension and retirement plans ordinarily will not be subject to
taxation on dividends from net investment income and distributions from net
realized capital gains until they receive a distribution of the dividends from
their plan accounts. Generally, distributions from these investment vehicles are
taxable as ordinary income at the rate applicable to each participant at the
time of distribution. In certain cases, distributions made to a participant
prior to the participant's reaching age 591/2 are subject to a penalty tax
equivalent to 10% of the distributed amount, in addition to the ordinary income
tax payable on such amount.
Because everyone's tax situation is unique, see a tax advisor about federal,
state and local tax consequences of investing in the Fund.
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NAV (NET ASSET VALU) IS COMPUTED BY ADDING
TOGETHER THE VALUE OF THE PORTFOLIO'S INVESTMENTS
PLUS CASH AND OTHER ASSETS, SUBTRACTING ITS LIABILI-
TIES AND THEN DIVIDING THE RESULT BY THE NUMBER OF
ITS OUTSTANDING SHARES.
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PURCHASING AND REDEEMING FUND SHARES
The Fund is an investment vehicle for variable annuity contracts and variable
life insurance policies offered by the separate accounts of life insurance
companies, as well as qualified pension and retirement plans. An individual
cannot invest in the portfolio directly, but may do so only through one of these
sources. The Fund's shares are held in the names of the separate accounts and
plans.
Shares of the Fund can be purchased or redeemed on any day the New York Stock
Exchange is open. They will be processed at the NAV next calculated after the
purchase or redemption request is received in good order by the Transfer Agent.
All orders for purchase of shares are subject to acceptance by the Fund or its
Transfer Agent. The Transfer Agent pays for redemptions within 7 days after it
accepts a redemption request.
The Fund may redeem some shares "in kind", which means that some of the proceeds
will be paid with securities the Fund owns instead of cash.
5
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FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the
portfolio's financial performance for the periods shown. Certain information
reflects financial results for a single portfolio share. The total returns in
the table represent the rate that an investor would have earned or lost on an
investment in the portfolio (assuming reinvestment of all dividends and
distributions). The financial highlights for the years ended December 31, 1990
through 1998 have been audited by Arthur Andersen LLP, the Fund's independent
public accountants. 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. Arthur Andersen LLP's report, along with the Fund's financial
statements, are included in the Annual Report, which is available upon request.
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ALGER AMERICAN BALANCED PORTFOLIO (I)
For a share outstanding throughout the period
<TABLE>
<CAPTION>
Year Ended December 31,
- -------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.76 $ 9.24 $ 13.64 $ 10.80 $ 11.58
-------- -------- -------- -------- --------
Net investment income (loss) 0.19 0.17 0.21(iv) 0.33(iv) 0.20
Net realized and unrealized gain (loss)
on investments 3.02 1.63 1.01 2.73 (0.70)
-------- -------- -------- -------- --------
Total from investment operations 3.21 1.80 1.22 3.06 (0.50)
-------- -------- -------- -------- --------
Dividends from net investment income (0.18) (0.12) (0.73) (0.22) (0.13)
Distributions from net realized gains (0.81) (0.16) (4.89) -- (0.15)
-------- -------- -------- -------- --------
Total Distributions (0.99) (0.28) (5.62) (0.22) (0.28)
-------- -------- -------- -------- --------
Net asset value, end of period $ 12.98 $ 10.76 $ 9.24 $ 13.64 $ 10.80
======== ======== ======== ======== ========
Total Return 31.51% 19.82% 10.17% 28.62% (4.27%)
======== ======== ======== ======== ========
Ratios and Supplemental Data:
Net assets, end of period (000's omitted) $28,208 $16,614 $10,486 $ 3,671 $10,394
======== ======== ======== ======== ========
Ratio of expenses to average net assets 0.92% 1.01% 1.14% 1.00% 1.08%
======== ======== ======== ======== ========
DECREASE REFLECTED IN ABOVE EXPENSE
RATIOS DUE TO EXPENSE REIMBURSEMENTS -- -- -- -- --
======== ======== ======== ======== ========
Ratio of net investment income (loss)
to average net assets 2.09% 2.14% 2.06% 2.49% 2.30%
======== ======== ======== ======== ========
Portfolio Turnover Rate 94.64% 105.01% 68.66% 113.02% 78.80%
======== ======== ======== ======== ========
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
From
September 5, 1989
(commencement
of operations) to
Year Ended December 31, December 31,
- ----------------------------------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989(ii)
----- ----- ----- ----- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.77 $ 10.02 $ 10.01 $ 10.04 $ 10.00
-------- -------- -------- -------- --------
Net investment income (loss) 0.15 0.22 0.45 0.66 0.22
Net realized and unrealized gain (loss)
on investments 0.69 0.72 0.01 (0.03) 0.04
-------- -------- -------- -------- --------
Total from investment operations 0.84 0.94 0.46 0.63 0.26
-------- -------- -------- -------- --------
Dividends from net investment income (0.03) (0.19) (0.45) (0.66) (0.22)
Distributions from net realized gains -- -- -- -- --
-------- -------- -------- -------- --------
Total Distributions (0.03) (0.19) (0.45) (0.66) (0.22)
-------- -------- -------- -------- --------
Net asset value, end of period $ 11.58 $ 10.77 $ 10.02 $ 10.01 $ 10.04
======== ======== ======== ======== ========
Total Return 7.79% 9.48% 4.70% 6.53% 2.65%(iii)
======== ======== ======== ======== ========
Ratios and Supplemental Data:
Net assets, end of period (000's omitted) $ 7,848 $ 4,009 $ 1,487 $ 365 $ 131
======== ======== ======== ======== ========
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 0.19% 0.42% 1.37% 4.81% 5.89%
======== ======== ======== ======== ========
Ratio of net investment income (loss)
to average net assets 2.05% 1.99% 4.22% 6.60% 6.92%
======== ======== ======== ======== ========
Portfolio Turnover Rate 85.46% 15.27% -- 132.55% --
======== ======== ======== ======== ========
</TABLE>
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(i) Prior to October 1, 1992, the Alger American Balanced Portfolio was the
Alger American Fixed Income Portfolio.
(ii) Ratios have been annualized; total return has not been annualized.
(iii) Unaudited.
(iv) Amount was computed based on average shares outstanding during the period.
7
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FOR FUND INFORMATION:
By telephone: 1-800-992-3863
By mail: The Alger American Fund
1 World Trade Center
Suite 9333
New York, NY 10048
STATEMENT OF ADDITIONAL INFORMATION
For more detailed information about the Fund and its policies, please read the
Statement of Additional Information, which is incorporated by reference into (is
legally made a part of) this Prospectus. You can get a free copy of the
Statement of Additional Information by calling the Fund's toll-free number or by
writing to the address above. The Statement of Additional Information is on file
with the Securities and Exchange Commission.
ANNUAL AND SEMI-ANNUAL REPORTS
Additional information about the Fund's investments is available in the Fund's
annual and semi-annual reports to shareholders. In the Fund's annual report you
will find a discussion of the market conditions and investment strategies that
significantly affected the Fund's performance during the period covered by the
report. You can receive free copies of these reports, and make inquiries to the
Fund, by calling the Fund's toll-free number or by writing to the address above.
Another way you can obtain copies is by visiting the SEC's Public Reference Room
or by forwarding your request and a duplicating fee to the SEC's Public
Reference Section, Washington, DC 20549-6009. Information on the operation of
the Public Reference Room is available by calling 1-800-SEC-0330.
DISTRIBUTOR: FRED ALGER & COMPANY, INCORPORATED
THE ALGER AMERICAN FUND
SEC FILE #811-5550
