As filed with the Securities and Exchange Commission
on March 2, 1999
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. l7 __X__
and/or
_____
Registration Statement Under The Investment Company Act of 1940 _____
_____
Amendment No. 19 __X__
(Check appropriate box or boxes)
THE ALGER AMERICAN FUND
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
1 World Trade Center
Suite 9333
New York, New York 10048
- --------------------------------------------------------------------------------
(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.
1 World Trade Center
Suite 9333
New York, NY 10048
- --------------------------------------------------------------------------------
(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, 1999] pursuant to paragraph (b), or
_____
_____ 60 days after filing pursuant to paragraph (a), or
_____
_____ on [date] pursuant to paragraph (a)(2) of Rule 485
----------
<PAGE>
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 SMALL CAPITALIZATION PORTFOLIO
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
ALGER AMERICAN GROWTH PORTFOLIO
ALGER AMERICAN BALANCED PORTFOLIO
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
ALGER AMERICAN INCOME &GROWTH 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 Fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
<PAGE>
THE ALGER
AMERICAN FUND
PROSPECTUS
MAY 1, 1999
TABLE OF CONTENTS
- -----------------------------------------------------------------
2 .......... Risk/Return Summary: Investments,
Risks & Performance
2 .... INVESTMENTS
Alger American Small
Capitalization Portfolio ................... 2
Alger American MidCap
Growth Portfolio ........................... 2
Alger American Growth Portfolio ............... 2
Alger American Balanced Portfolio ............. 2
Alger American Leveraged
AllCap Portfolio ........................... 2
Alger American Income &
Growth Portfolio ........................... 3
3 .... Principal Risks
Alger American Small
Capitalization Portfolio ................... 3
Alger American MidCap
Growth Portfolio ........................... 3
Alger American Growth Portfolio ............... 3
Alger American Balanced Portfolio ............. 3
Alger American Leveraged
AllCap Portfolio ........................... 3
Alger American Income &
Growth Portfolio ........................... 3
4 .... Performance
Alger American Small
Capitalization Portfolio ...................... 4
Alger American Growth Portfolio ............... 4
Alger American MidCap
Growth Portfolio ........................... 5
Alger American Balanced Portfolio ............. 5
Alger American Leveraged
AllCap Portfolio ........................... 5
Alger American Income &
Growth Portfolio ........................... 5
6 .......... Fees and Expenses
7 .......... Management & Organization
7 .......... Shareholder Information
Distributor 7
Transfer Agent 7
Purchasing and Redeeming Fund Shares 8
9 .......... Financial Highlights
Back Cover: How to obtain more information
<PAGE>
[GRAPHIC OMITTED]
RISK/RETURN SUMMARY: INVESTMENTS, RISKS &
PERFORMANCE
INVESTMENTS: THE ALGER AMERICAN FUND
The investment goal and primary approach of each portfolio is discussed
individually below. All of the portfolios (other than the fixed-income portion
of the Balanced Portfolio) invest primarily in equity securities, such as common
or preferred stocks, which are listed on U.S. exchanges or in the
over-the-counter market. They invest primarily in "growth" stocks. The Fund's
Manager, Fred Alger Management, Inc., believes that these companies tend to fall
into one of two categories:
o 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.
o 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 company's market capitalization will dictate in which portfolio(s) it will
be placed. The market capitalization of a company is its price per share
multiplied by its number of outstanding shares.
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
GOAL
THE ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO SEEKS LONG-TERM CAPITAL
APPRECIATION.
APPROACH
It focuses on small, fast-growing companies that offer innovative products,
services or technologies to a rapidly expanding marketplace. Under normal
circumstances, the portfolio invests primarily in the equity securities of small
capitalization companies. A small capitalization company is one that has a
market capitalization within the range of the Russell(R) 2000 Growth Index or
the S&P(R) SmallCap 600 Index.
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
GOAL
THE ALGER AMERICAN MIDCAP GROWTH PORTFOLIO SEEKS LONG-TERM CAPITAL APPRECIATION.
APPROACH
It focuses on midsize companies with promising growth potential. Under normal
circumstances, the portfolio invests primarily in the equity securities of
companies having a market capitalization within the range of companies in the
S&P(R) MidCap 400 Index.
ALGER AMERICAN GROWTH PORTFOLIO
GOAL
The Alger American Growth Portfolio seeks long-term capital appreciation.
APPROACH
It focuses on growing companies that generally have broad product lines,
markets, financial resources and depth of management. Under normal
circumstances, the portfolio invests primarily in the equity securities of large
companies. The portfolio considers a large company to have a market
capitalization of $1 billion or greater.
ALGER AMERICAN BALANCED PORTFOLIO
GOAL
The Alger American Balanced Portfolio seeks current income and long-term capital
appreciation.
APPROACH
It 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.
Alger American Leveraged AllCap Portfolio
GOAL
The Alger American Leveraged AllCap Portfolio seeks long-term capital
appreciation.
APPROACH
Under normal circumstances, the portfolio invests in the equity securities of
companies of any size which demonstrate promising growth potential.
2
<PAGE>
The portfolio can leverage, that is, borrow money, up to one-third of its total
assets to buy additional securities. By borrowing money, the portfolio has the
potential to increase its returns if the increase in the value of the securities
purchased exceeds the cost of borrowing, including interest paid on the money
borrowed.
ALGER AMERICAN INCOME &GROWTH PORTFOLIO
GOAL
The Alger American Income &Growth Portfolio primarily seeks to provide a high
level of dividend income; its secondary goal is to provide capital appreciation.
APPROACH
The portfolio invests in dividend paying equity securities, such as common or
preferred stocks, preferably those which the Manager believes also offer
opportunities for capital appreciation.
[GRAPHIC OMITTED]
PRINCIPAL RISKS
RISKS APPLICABLE TO ALL EQUITY PORTFOLIOS
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. A portfolio's
price per share will fluctuate due to changes in the market prices of its
investments. Also, a Fund 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 portfolios' investment styles and objectives, an investment
in them may be better suited to investors who seek long-term capital growth and
can tolerate fluctuations in their investment's value.
A portfolio's trading in some stocks may be relatively short-term, meaning the
Fund 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.
There may be additional risks applicable to a specific portfolio because of its
investment approach.
RISKS APPLICABLE TO ALGER AMERICAN
SMALL CAPITALIZATION PORTFOLIO
An additional risk of investing in the portfolio is:
o the possibility of greater risk by investing in smaller, less seasoned
companies rather than larger, more established companies owing to such
factors as inexperienced management and limited financial resources
RISKS APPLICABLE TO ALGER AMERICAN
MIDCAP GROWTH PORTFOLIO
An additional risk of investing in the portfolio is:
o the possibility of greater risk by investing in medium-sized companies rather
than larger, more established companies owing to such factors as
inexperienced management and limited financial resources
RISKS APPLICABLE TO ALGER AMERICAN GROWTH PORTFOLIO
The portfolio's primary risks are those summarized above in "Risks Applicable to
All Equity Portfolios."
RISKS APPLICABLE TO ALGER AMERICAN
BALANCED PORTFOLIO
The primary risks arising from the fixed-income portion of the portfolio are:
o fixed income securities' sensitivity to interest rate movements
o 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 primary risks for the equity portion of the portfolio are those summarized
above in "Risks Applicable to All Equity Portfolios."
RISKS APPLICABLE TO ALGER AMERICAN
LEVERAGED ALLCAP PORTFOLIO
An additional risk of investing in the portfolio is:
o the risk that the cost of borrowing money to leverage will exceed the returns
for the securities purchased or that the securities purchased may actually go
down in value; thus, the portfolio's net asset value can decrease more
quickly than if the portfolio had not borrowed
RISKS APPLICABLE TO ALGER AMERICAN
INCOME & GROWTH PORTFOLIO
An additional risk of investing in the portfolio is:
o the possibility that companies may cut or fail to declare dividends due to
market downturns or other reasons
3
<PAGE>
[GRAPHIC OMITTED]
PERFORMANCE
The following bar charts show the changes in each portfolio's performance from
year to year and give you some indication of the risks of investing in the Fund.
They assume reinvestment of dividends and distributions.
The Average Annual Total Return tables compare a portfolio's performance over
several periods with that of an appropriate benchmark index. The annual returns
assume reinvestment of dividends and distributions. Remember that how a
portfolio has performed 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.
Each index used in the tables is a broad index designed to track a particular
market or market segment. No expenses or fees are reflected in the returns for
the indexes, which are unmanaged. All returns for the indexes assume
reinvestment of dividends and interest on the underlying securities that make up
the respective index.
o S&P 500 Index(R): An index of large company common stocks considered to be
representative of the U.S. stock market in general.
o Russell 2000 Growth Index(R): An index of common stocks designed to track
performance of small capitalization companies.
o S&P Midcap 400 Index(R): An index of common stocks designed to track
performance of medium capitalization companies.
o Lehman Brothers Government/Corporate Bond Index(R): An index designed to
track performance of government and corporate bonds.
Since the Balanced Portfolio invests in both equity and fixed income securities,
you should compare its performance to both indexes presented.
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
Annual Total Return as of December 31 each year (%)
[Graph]
64.48 8.71 57.54 3.55 13.28 -4.38 44.31 4.18 11.39 15.53
- ----- ----- ----- ---- ----- ----- ----- ----- ----- -----
89 90 91 92 93 94 95 96 97 98
Best Quarter: 25.73% Q1 1991
Worst Quarter: -20.72% Q3 1990
Average Annual Total Return as of December 31, 1998
Since
Inception
1 Year 5 Years 10 Years (9/21/88)
- -------------------------------------------------------
American Small
Capitalization 15.53% 13.09% 19.85% 18.86%
Russell 2000 Growth
Index(R) 1.23% 10.22% 11.54% 11.22%
ALGER AMERICAN GROWTH PORTFOLIO
Annual Total Return as of December 31 each year (%)
[Graph]
4.14 40.39 12.38 22.47 1.45 36.37 13.35 25.75 48.07
- ---- ------ ----- ----- ---- ----- ----- ----- -----
90 91 92 93 94 95 96 97 98
Best Quarter: 25.93% Q4 1998
Worst Quarter: -16.21% Q3 1990
Average Annual Total Return as of December 31, 1998
Since
Inception
1 Year 5 Years (1/9/89)
- ----------------------------------------------------------
American Growth 48.07% 23.90% 22.03%
S&P 500 Index(R) 28.58% 24.06% 19.05%
4
<PAGE>
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
Annual Total Return as of December 31 each year (%)
[GRAPH]
- -1.54 44.45 11.9 15.01 30.30
- ----- ----- ---- ----- -----
94 95 96 97 98
Best Quarter: 27.07% Q4 1998
Worst Quarter: -14.91% Q3 1998
Average Annual Total Return as of December 31, 1998
Since
Inception
1 Year 5 Years (5/3/93)
- ------------------------------------------------------
American MidCap 30.30% 18.98% 23.50%
S&P Midcap 400 Index 19.11% 18.84% 18.99%
ALGER AMERICAN BALANCED PORTFOLIO
Annual Total Return as of December 31 each year (%)
[Graph]
6.53 4.7 9.48 7.79 -4.27 28.62 10.17 19.82 31.51
- ---- --- ----- ---- ------ ----- ----- ----- -----
90 91 92 93 94 95 96 97 98
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)
- ---------------------------------------------------------
American Balanced 31.51% 16.41% 12.05%
S&P 500 Index 28.58% 24.06% 17.44%
Lehman Brothers Gov't/Corp
Bond Index(R) 9.46% 7.30% 8.94%
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
Annual Total Return as of December 31 each year (%)
[Graph]
12.04 19.68 57.83
- ----- ----- -----
96 97 98
Best Quarter: 31.95% Q4 1998
Worst Quarter: -5.70% Q4 1997
Average Annual Total Return as of December 31, 1998
Since
Inception
1 Year (1/25/95)
- --------------------------------------------------
American Leveraged
AllCap 57.83% 39.34%
S&P 500 Index(R) 28.58% 30.43%
ALGER AMERICAN INCOME & GROWTH PORTFOLIO
Annual Total Return as of December 31 each year (%)
[Graph]
7.40 0.28 23.51 8.64 10.34 -8.28 35.13 19.68 36.29 32.39
- --- ---- ----- ---- ----- ----- ----- ----- ----- -----
89 90 91 92 93 94 95 96 97 98
Best Quarter: 21.37% Q4 1998
Worst Quarter: -13.94% Q3 1990
Average Annual Total Return as of December 31, 1998
Since
Inception
1 Year 5 Years 10 Years (11/15/88)
- -----------------------------------------------------------
American
Income & Growth 32.39% 21.76% 15.62% 15.51%
S&P 500 Index(R) 28.58% 24.06% 19.21% 19.06%
5
<PAGE>
[GRAPHIC OMITTED]
FEES AND EXPENSES
Investors incur certain fees and expenses in connection with an investment in
the Fund. The following table shows the fees and expenses that you may incur if
you buy and hold shares of the portfolios.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING
EXPENSES
(expenses that are deducted
from Fund assets)
Shareholder Fees
(fees paid directly from TOTAL ANNUAL FUND
your investment) Management Fees Distribution Fees Other Expenses OPERATING EXPENSES
=========================================================================================================================
<S> <C> <C> <C> <C> <C>
Alger American Small None .85% None .04% .89%
Capitalization
Portfolio
- --------------------------------------------------------------------------------------------------------------------------
Alger American None .80% None .04% .84%
MidCap Growth
Portfolio
- --------------------------------------------------------------------------------------------------------------------------
Alger American None .75% None .04% .79%
Growth
Portfolio
- --------------------------------------------------------------------------------------------------------------------------
Alger American None .75% None .17% .92%
Balanced Portfolio
- --------------------------------------------------------------------------------------------------------------------------
Alger American None .85% None .11%* .96%
Leveraged AllCap
Portfolio
- --------------------------------------------------------------------------------------------------------------------------
Alger American None .635% None .075% .70%
Income & Growth
Portfolio
</TABLE>
*INCLUDE IN OTHER EXPENSES IS 0.03% OF INTEREST EXPENSE.
EXAMPLE
The following example, which reflects the shareholder fees and operating
expenses listed in the preceding table, is intended to help you compare the cost
of investing in the Fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the Fund for the time periods
indicated. The example also assumes that your investment has a 5% return each
year and that the Fund'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:
1 Year 3 Years 5 Years 10 Years
================================================================================
ALGER AMERICAN SMALL $91 $284 $493 $1,096
CAPITALIZATION
PORTFOLIO
- --------------------------------------------------------------------------------
ALGER AMERICAN $86 $268 $466 $1,037
MIDCAP GROWTH
PORTFOLIO
- --------------------------------------------------------------------------------
ALGER AMERICAN $81 $252 $439 $978
GROWTH
PORTFOLIO
- --------------------------------------------------------------------------------
ALGER AMERICAN $94 $293 $509 $1,131
BALANCED
PORTFOLIO
- --------------------------------------------------------------------------------
ALGER AMERICAN $98 $306 $531 $1,178
LEVERAGED ALLCAP
PORTFOLIO
- --------------------------------------------------------------------------------
ALGER AMERICAN $72 $224 $390 $871
INCOME &GROWTH
PORTFOLIO
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.
ADDITIONAL INFORMATION ABOUT
THE FUND'S INVESTMENTS
Each 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 a temporary unacceptable risk of loss, rather than
directly to promote the portfolio's investment objective. The portfolio may not
achieve its objective during such periods.
Other securities the portfolios may invest in are discussed in the Fund's
Statement of Additional Information (see back cover).
6
<PAGE>
[GRAPHIC OMITTED]
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 each
portfolio's assets according to its goal and for placing orders with
broker-dealers to purchase and sell securities on behalf of the portfolios. The
Fund has had the same manager since inception and, for the most recent fiscal
year, the portfolios paid the Manager fees at these annual rates based on a
percentage of average daily net assets: Small Capitalization and Leveraged
AllCap Portfolios--.85%; MidCap Growth Portfolio--.80%; Growth and Balanced
Portfolios--.75%; Income & Growth Portfolio--.625%.
PORTFOLIO MANAGERS
David Alger, Seilai Khoo, Ron Tartaro and Steven Thumm are the individuals
responsible for the day-to-day management of the portfolios' investments. Mr.
Alger, a manager of all of the portfolios since their inception, has been
employed by the Manager as Executive Vice President and Director of Research
since 1971, and as President since 1995. Ms. Khoo, a co-manager of the Small
Capitalization and Leveraged AllCap Portfolios, has been employed by the Manager
since 1989, as a senior research analyst until 1995 and as a Senior Vice
President and co-manager since 1995. Mr. Tartaro, a co-manager of the MidCap
Growth, Growth, Income & Growth and Balanced Portfolios, 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. Steven Thumm serves as co-manager of
the Balanced Portfolio. He 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 each
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 each 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
portfolios are valued on the basis of amortized cost.
DIVIDENDS AND DISTRIBUTIONS
The Fund declares and pays dividends and distributions by the portfolios
annually. The Fund expects that these annual payments to shareholders will
consist of both capital gains and net investment income.
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 59-1/2 are subject to a penalty tax equivalent
to 10% of the distributed amount, in addition to the ordinary income tax payable
on such amount.
7
<PAGE>
Because everyone's tax situation is unique, see a tax advisor about federal,
state and local tax consequences of investing in the Fund.
NAV (NET ASSET VALUE) IS COMPUTED BY ADDING TOGETHER THE VALUE OF THE
PORTFOLIO'S INVESTMENTS PLUS CASH AND OTHER ASSETS, SUBTRACTING ITS LIABILITIES
AND THEN DIVIDING THE RESULT BY THE NUMBER OF ITS OUTSTANDING SHARES.
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 a 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.
8
<PAGE>
[GRAPHIC OMITTED]
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand each
portfolio's financial performance for the periods shown. Certain information
reflects financial results for a single Fund share. The total returns in the
table represent the rate that an investor would have earned or lost on an
investment in the Fund (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.
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
For a share outstanding throughout the period
<TABLE>
<CAPTION>
From
May 3, 1993
(commencement
of operations) to
Year Ended December 31, December 31,
- -------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993(i)
----- ----- ----- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 24.18 $ 21.35 $ 19.44 $ 13.46 $ 13.72 $ 10.00
-------- -------- -------- -------- ------- -------
Net investment income (loss) 0.00(ii) (0.04) 0.03 (0.03) 0.00(ii) (0.02)
Net realized and unrealized gain (loss)
on investments 6.95 3.20 2.29 6.01 (0.21) 3.88
-------- -------- -------- -------- ------- -------
Total from investment operations 6.95 3.16 2.32 5.98 (0.21) 3.86
-------- -------- -------- -------- ------- -------
Dividends from net investment income -- (0.01) -- -- -- --
Distributions from net realized gains (2.26) (0.32) (0.41) -- (0.05) (0.14)
-------- -------- -------- -------- ------- -------
Total Distributions (2.26) (0.33) (0.41) -- (0.05) (0.14)
-------- -------- -------- -------- ------- -------
Net asset value, end of period $ 28.87 $ 24.18 $ 21.35 $ 19.44 $ 13.46 $ 13.72
======== ======== ======== ======== ======= =======
Total Return 30.30% 15.01% 11.90% 44.45% (1.54%) 38.67%
======== ======== ======== ======== ======= =======
Ratios and Supplemental Data:
Net assets, end of period
(000's omitted) $689,571 $444,967 $394,847 $185,349 $62,178 $21,301
======== ======== ======== ======== ======= =======
Ratio of expenses to average net assets 0.84% 0.84% 0.84% 0.90% 0.97% 1.50%(iii)
======== ======== ======== ======== ======= =======
Ratio of net investment income (loss)
to average net assets 0.00% (0.15%) 0.08% (0.25%) 0.03% (0.58%)
======== ======== ======== ======== ======= =======
Portfolio Turnover Rate 152.21% 151.98% 90.97% 104.74% 83.96% 67.22%
======== ======== ======== ======== ======= =======
</TABLE>
(i) Ratios have been annualized; total return has not been annualized.
(ii) Amount was computed based on average shares outstanding durin the period.
(iii) Amounts have been reduced by 0.33% due to expense reimbursements.
9
<PAGE>
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR
<TABLE>
<CAPTION>
Year Ended December 31,
- ---------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 43.75 $ 40.91 $ 39.41 $ 27.31 $ 30.88
---------- -------- ---------- -------- --------
Net investment income (loss) (0.02) (0.05)(i) (0.04)(i) (0.09) (0.03)(i)
Net realized and unrealized gain (loss)
on investments 6.30 4.45 1.70 12.19 (1.45)
---------- -------- ---------- -------- --------
Total from investment operations 6.28 4.40 1.66 12.10 (1.48)
---------- -------- ---------- -------- --------
Dividends from net investment income -- -- -- -- --
Distributions from net realized gains (6.06) (1.56) (0.16) -- (2.09)
---------- -------- ---------- -------- --------
Total distributions (6.06) (1.56) (0.16) -- (2.09)
---------- -------- ---------- -------- --------
Net asset value, end of year $ 43.97 $ 43.75 $ 40.91 $ 39.41 $ 27.31
========== ======== ========== ======== ========
Total Return 15.53% 11.39% 4.18% 44.31% (4.38%)
========== ======== ========== ======== ========
Ratios and Supplemental Data:
Net assets, end of year
(000's omitted) 1,216,584 $997,586 $1,469,518 $984,212 $397,037
========== ======== ========== ======== ========
Ratio of expenses to average net assets 0.89% 0.89% 0.88% 0.92% 0.96%
========== ======== ========== ======== ========
Ratio of net investment income (loss)
to average net assets (0.20%) (0.12%) (0.09%) (0.48%) (0.10%)
========== ======== ========== ======== ========
Portfolio Turnover Rate 142.90% 104.43% 110.04% 80.66% 117.61%
========== ======== ========== ======== ========
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
- ---------------------------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 27.26 $ 26.79 $ 17.02 $ 15.79 $ 9.60
-------- -------- -------- -------- --------
Net investment income (loss) (0.05) (0.06) (0.03) 0.02 0.04
Net realized and unrealized gain (loss)
on investments 3.67 0.91 9.82 1.35 6.15
-------- -------- -------- -------- --------
Total from investment operations 3.62 0.85 9.79 1.37 6.19
-------- -------- -------- -------- --------
Dividends from net investment income -- -- (0.02) (0.01) --
Distributions from net realized gains -- (0.38) -- (0.13) --
-------- -------- -------- -------- --------
Total distributions -- (0.38) (0.02) (0.14) --
-------- -------- -------- -------- --------
Net asset value, end of year $ 30.88 $ 27.26 $ 26.79 $ 17.02 $ 15.79
======== ======== ======== ======== ========
Total Return 13.28% 3.55% 57.54% 8.71% 64.48%(ii)
======== ======== ======== ======== ========
Ratios and Supplemental Data:
Net assets, end of year (000's omitted) $238,850 $135,718 $ 56,798 $ 7,149 $ 569
======== ======== ======== ======== ========
Ratio of expenses to average net assets 1.03% 0.98% 1.06% 1.50%(iii) 1.50%(iii)
======== ======== ======== ======== ========
Ratio of net investment income (loss)
to average net assets (0.35%) (0.37%) (0.12%) 0.50% 1.11%
======== ======== ======== ======== ========
Portfolio Turnover Rate 148.07% 108.06% 125.90% 132.46% 133.61%
======== ======== ======== ======== ========
</TABLE>
(i) Amount was computed based on average shares outstanding during the year
(ii) Unaudited
(iii) Amounts have been reduced by 0.33% and 9.15% for the years ended December
31, 1990 and 1989, respectively, due to expense reimbursements.
11
<PAGE>
ALGER AMERICAN GROWTH PORTFOLIO
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 $ 42.76 $ 34.33 $ 31.16 $ 23.13 $ 24.67
---------- ---------- -------- -------- --------
Net investment income (loss) 0.09 0.13 0.12 0.02 0.07
Net realized and unrealized gain (loss)
on investments 18.32 8.66 4.00 8.33 0.15
---------- ---------- -------- -------- --------
Total from investment operations 18.41 8.79 4.12 8.35 0.22
---------- ---------- -------- -------- --------
Dividends from net investment income (0.13) (0.13) (0.02) (0.07) (0.03)
Distributions from net realized gains (7.82) (0.23) (0.93) (0.25) (1.73)
---------- ---------- -------- -------- --------
Total Distributions (7.95) (0.36) (0.95) (0.32) (1.76)
---------- ---------- -------- -------- --------
Net asset value, end of period $ 53.22 $ 42.76 $ 34.33 $ 31.16 $ 23.13
========== ========== ======== ======== ========
Total Return 48.07% 25.75% 13.35% 36.37% 1.45%
========== ========== ======== ======== ========
Ratios and Supplemental Data:
Net assets, end of period
(000's omitted) $1,905,719 $1,072,529 $991,028 $502,974 $150,390
========== ========== ======== ======== ========
RATIO OF EXPENSES TO AVERAGE NET ASSETS 0.79% 0.79% 0.79% 0.85% 0.86%
========== ========== ======== ======== ========
Ratio of net investment income (loss)
to average net assets 0.25% 0.27% 0.50% 0.18% 0.48%
========== ========== ======== ======== ========
Portfolio Turnover Rate 127.38% 129.50% 82.86% 118.33% 111.76%
========== ========== ======== ======== ========
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
From
January 9, 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 $ 20.17 $ 18.00 $ 12.86 $ 12.41 $ 10.00
-------- -------- -------- -------- --------
Net investment income (loss) 0.03 0.03 0.08(i) 0.07 0.09
Net realized and unrealized gain (loss)
on investments 4.50 2.19 5.11 0.44 2.32
-------- -------- -------- -------- --------
Total from investment operations 4.53 2.22 5.19 0.51 2.41
-------- -------- -------- -------- --------
Dividends from net investment income (0.03) (0.03) (0.05) (0.06) --
Distributions from net realized gains -- (0.02) -- -- --
-------- -------- -------- -------- --------
Total Distributions (0.03) (0.05) (0.05) (0.06) --
-------- -------- -------- -------- --------
Net asset value, end of period $ 24.67 $ 20.17 $ 18.00 $ 12.86 $ 12.41
======== ======== ======== ======== ========
Total Return 22.47% 12.38% 40.39% 4.14% 24.10%(iii)
======== ======== ======== ======== ========
Ratios and Supplemental Data:
Net assets, end of period
000's omitted) $ 74,878 $ 30,316 $ 10,094 $ 1,228 $ 171
======== ======== ======== ======== ========
Ratio of expenses to average net assets 0.97% 0.99% 1.29% 1.50%(iv) 1.50%(iv)
======== ======== ======== ======== ========
Ratio of net investment income (loss)
to average net assets 0.25% 0.33% 0.52% 1.69% 1.30%
======== ======== ======== ======== ========
Portfolio Turnover Rate 112.64% 63.91% 58.95% 86.77% 79.59%
======== ======== ======== ======== ========
</TABLE>
(i) Amount was computed based on average shares outstanding during the period.
(ii) Ratios have been annualized; total return has not been annualized
(iii) Unaudited
(iv) Amounts have been reduced by 2.31% and 7.32% for the years ended December
31, 1990 and 1989, respectively, due to expense reimbursements.
13
<PAGE>
ALGER AMERICAN INCOME & GROWTH PORTFOLIO
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR
<TABLE>
<CAPTION>
Year Ended December 31,
- -------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 10.99 $ 8.42 $ 17.79 $ 13.30 $ 15.31
-------- -------- -------- -------- --------
Net investment income 0.03 0.03 0.09(ii) 0.11(ii) 0.17
Net realized and unrealized gain (loss)
on investments 3.30 2.94 1.87 4.54 (1.47)
-------- -------- -------- -------- --------
Total from investment operations 3.33 2.97 1.96 4.65 (1.30)
-------- -------- -------- -------- --------
Dividends from net investment income (0.04) (0.04) (0.33) (0.16) (0.15)
Distributions from net realized gains (1.16) (0.36) (11.00) -- (0.56)
-------- -------- -------- -------- --------
Total Distributions (1.20) (0.40) (11.33) (0.16) (0.71)
-------- -------- -------- -------- --------
Net asset value, end of year $ 13.12 $ 10.99 $ 8.42 $ 17.79 $ 13.30
======== ======== ======== ======== ========
Total Return 32.39% 36.29% 19.68% 35.13% (8.28%)
======== ======== ======== ======== ========
Ratios and Supplemental Data:
Net assets, end of period
(000's omitted) $ 77,926 $ 47,399 $ 20,910 $ 8,639 $ 29,135
======== ======== ======== ======== ========
Ratio of expenses to average net assets 0.70% 0.74% 0.81% 0.75% 0.75%
======== ======== ======== ======== ========
Decrease reflected in above expense
ratios due to expense reimbursements -- -- -- -- --
======== ======== ======== ======== ========
Ratio of net investment income to
average net assets 0.31% 0.56% 0.94% 0.61% 1.22%
======== ======== ======== ======== ========
Portfolio Turnover Rate 131.67% 150.09% 121.60% 164.05% 177.97%
======== ======== ======== ======== ========
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
- ---------------------------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 13.93 $ 13.08 $ 10.67 $ 10.74 $ 10.00
-------- -------- -------- -------- --------
Net investment income 0.07 0.08 0.09 0.11 0.18
Net realized and unrealized gain (loss)
on investments 1.37 1.02 2.41 (0.08) 0.56
-------- -------- -------- -------- --------
Total from investment operations 1.44 1.10 2.50 0.03 0.74
-------- -------- -------- -------- --------
Dividends from net investment income (0.06) (0.12) (0.09) (0.10) --
Distributions from net realized gains -- (0.13) -- -- --
-------- -------- -------- -------- --------
Total Distributions (0.06) (0.25) (0.09) (0.10) --
-------- -------- -------- -------- --------
Net asset value, end of year $ 15.31 $ 13.93 $ 13.08 $ 10.67 $ 10.74
======== ======== ======== ======== ========
Total Return 10.34% 8.64% 23.51% 0.28% 7.40%(i)
======== ======== ======== ======== ========
Ratios and Supplemental Data:
Net assets, end of period
(000's omitted) $ 31,895 $ 8,671 $ 2,663 $ 436 $ 98
======== ======== ======== ======== ========
Ratio of expenses to average net assets 0.97% 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%
======== ======== ======== ======== ========
Ratio of net investment income to
average net assets 1.51% 1.62% 2.54% 3.61% 7.36%
======== ======== ======== ======== ========
Portfolio Turnover Rate 105.80% 100.62% 61.11% 56.90% --
======== ======== ======== ======== ========
</TABLE>
(i) Unaudited.
(ii) Amount was computed based on average shares outstanding during the period.
15
<PAGE>
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>
16
<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>
(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.
17
<PAGE>
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
From
January 25, 1995
(commencement
of operations) to
Year Ended December 31, December 31,
- --------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995(i)
----- ----- ----- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 23.17 $ 19.36 $ 17.43 $ 10.00
--------- --------- --------- --------
Net investment income (loss) (0.05) (0.03) (0.03)(ii) (0.03)
Net realized and unrealized gain on investments 12.99 3.84 2.14 7.46
--------- --------- --------- --------
Total from investment operations 12.94 3.81 2.11 7.43
Distributions from net realized gains (1.21) -- (0.18) --
--------- --------- --------- --------
Net asset value, end of period $ 34.90 $ 23.17 $ 19.36 $ 17.43
========= ========= ========= ========
Total Return 57.83% 19.68% 12.04% 74.30%
========= ========= ========= ========
Ratios and Supplemental Data:
Net assets, end of period (000's omitted) $ 101,710 $ 53,488 $ 34,925 $ 5,497
========= ========= ========= ========
Ratio of expenses excluding interest
to average net assets 0.93% 0.96% 1.06% 1.50%
========= ========= ========= ========
Ratio of expenses including interest
to average net assets 0.96% 1.00% 1.09% 1.56%(iii)
========= ========= ========= ========
Ratio of net investment income (loss)
to average net assets (0.27%) (0.17%) (0.15%) (0.71%)
========= ========= ========= ========
Portfolio Turnover Rate 143.59% 164.27% 102.10% 178.23%
========= ========= ========= ========
Amount of debt outstanding at end of period -- -- -- --
========= ========= ========= ========
Average amount of debt outstanding during the period $ 246,101 $ 201,644 $ 76,079 $ 8,122
========= ========= ========= ========
Average daily number of shares outstanding
during the period 2,480,478 2,135,458 1,107,187 75,460
========= ========= ========= ========
Average amount of debt per share during the period $ 0.10 $ 0.09 $ 0.07 $ 0.11
========= ========= ========= ========
</TABLE>
(i) Ratios have been annualized; total return has not been annualized.
(ii) Amount was computed based on average shares outstanding during the year.
(iii) Amount has been reduced by 2.36% due to expense reimbursements.
18
<PAGE>
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]
<PAGE>
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 SMALL CAPITALIZATION PORTFOLIO
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
ALGER AMERICAN GROWTH PORTFOLIO
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
ALGER AMERICAN INCOME &GROWTH 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 Fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
<PAGE>
THE ALGER
AMERICAN FUND
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
ALGER AMERICAN GROWTH PORTFOLIO
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
ALGER AMERICAN INCOME &GROWTH PORTFOLIO
PROSPECTUS
MAY 1, 1999
TABLE OF CONTENTS
- -------------------------------------------------------------------
2 ........... Risk/Return Summary: Investments,
Risks & Performance
2 ..... Investments
Alger American Small
Capitalization Portfolio .................... 2
Alger American MidCap
Growth Portfolio ............................ 2
Alger American Growth Portfolio ............... 2
Alger American Leveraged
AllCap Portfolio ............................ 2
Alger American Income &
Growth Portfolio ............................ 2
3 ..... Principal Risks
Alger American Small
Capitalization Portfolio .................... 3
Alger American MidCap
Growth Portfolio ............................ 3
Alger American Growth Portfolio ............... 3
Alger American Leveraged
AllCap Portfolio ............................ 3
Alger American Income &
Growth Portfolio ............................ 3
3 ..... Performance
Alger American Small
Capitalization Portfolio .................... 4
Alger American MidCap
Growth Portfolio ............................ 4
Alger American Growth Portfolio ............... 4
Alger American Leveraged
AllCap Portfolio ............................ 4
Alger American Income &
Growth Portfolio ............................ 5
5 ........... FEES AND EXPENSES
6 ........... Management & Organization
7 ........... Shareholder Information
Distributor ................................... 7
Transfer Agent ................................ 7
Purchasing and Redeeming Fund Shares .......... 7
8 ........... Financial Highlights
Back Cover: How to obtain more information
<PAGE>
[GRAPHIC OMITTED]
RISK/RETURN SUMMARY: INVESTMENTS, RISKS & PERFORMANCE
INVESTMENTS: THE ALGER AMERICAN FUND
The investment goal and primary approach of each portfolio is discussed
individually below. All of the portfolios invest primarily in equity securities,
such as common or preferred stocks, which are listed on U.S. exchanges or in the
over-the-counter market. They invest primarily in "growth" stocks. The Fund's
Manager, Fred Alger Management, Inc., believes that these companies tend to fall
into one of two categories:
o 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.
o 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 company's market capitalization will dictate in which portfolio(s) it will
be placed. The market capitalization of a company is its price per share
multiplied by its number of outstanding shares.
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
GOAL
THE ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO SEEKS LONG-TERM CAPITAL
APPRECIATION.
APPROACH
It focuses on small, fast-growing companies that offer innovative products,
services or technologies to a rapidly expanding marketplace. Under normal
circumstances, the portfolio invests primarily in the equity securities of small
capitalization companies. A small capitalization company is one that has a
market capitalization within the range of the Russell(R) 2000 Growth Index or
the S&P(R) SmallCap 600 Index
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
GOAL
THE ALGER AMERICAN MIDCAP GROWTH PORTFOLIO SEEKS LONG-TERM CAPITAL APPRECIATION.
APPROACH
It focuses on midsize companies with promising growth potential. Under normal
circumstances, the portfolio invests primarily in the equity securities of
companies having a market capitalization within the range of companies in the
S&P(R) MidCap 400 Index.
ALGER AMERICAN GROWTH PORTFOLIO
GOAL
THE ALGER AMERICAN GROWTH PORTFOLIO SEEKS LONG-TERM CAPITAL APPRECIATION.
APPROACH
It focuses on growing companies that generally have broad product lines,
markets, financial resources and depth of management. Under normal
circumstances, the portfolio invests primarily in the equity securities of large
companies. The portfolio considers a large company to have a market
capitalization of $1 billion or greater.
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
GOAL
THE ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO SEEKS LONG-TERM CAPITAL
APPRECIATION.
APPROACH
Under normal circumstances, the portfolio invests in the equity securities of
companies of any size which demonstrate promising growth potential.
The portfolio can leverage, that is, borrow money, up to 1/3 of its total assets
to buy additional securities. By borrowing money, the portfolio has the
potential to increase its returns if the increase in the value of the securities
purchased exceeds the cost of borrowing, including interest paid on the money
borrowed.
ALGER AMERICAN INCOME &GROWTH PORTFOLIO
GOAL
THE ALGER AMERICAN INCOME &GROWTH PORTFOLIO PRIMARILY SEEKS TO PROVIDE A HIGH
LEVEL OF DIVIDEND INCOME; ITS SECONDARY GOAL IS TO PROVIDE CAPITAL APPRECIATION.
APPROACH
The portfolio invests in dividend paying equity securities, such as common or
preferred stocks, preferably those which the Manager believes also offer
opportunities for capital appreciation.
2
<PAGE>
[GRAPHIC OMITTED]
PRINCIPAL RISKS
RISKS APPLICABLE TO ALL PORTFOLIOS
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. A portfolio's
price per share will fluctuate due to changes in the market prices of its
investments. Also, a Fund investment may not grow as fast as the rate of
inflation and stocks tend to be more volatile than some other investmentsyou
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 portfolios' investment styles and objectives, an investment in them
may be better suited to investors who seek long-term capital growth and can
tolerate fluctuations in their investment's value.
A portfolio's trading in some stocks may be relatively short-term, meaning the
Fund 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.
There may be additional risks applicable to a specific portfolio because of its
investment approach.
RISKS APPLICABLE TO ALGER AMERICAN
SMALL CAPITALIZATION PORTFOLIO
An additional risk of investing in the portfolio is:
o the possibility of greater risk by investing in smaller, less seasoned
companies rather than larger, more established companies owing to such
factors as inexperienced management and limited financial resources
RISKS APPLICABLE TO ALGER AMERICAN
MIDCAP GROWTH PORTFOLIO
An additional risk of investing in the portfolio is:
o the possibility of greater risk by investing in medium-sized companies rather
than larger, more established companies owing to such factors as
inexperienced management and limited financial resources
RISKS APPLICABLE TO ALGER AMERICAN GROWTH PORTFOLIO
The portfolio's primary risks are those summarized above in "Risks Applicable to
All Portfolios."
RISKS APPLICABLE TO ALGER AMERICAN
LEVERAGED ALLCAP PORTFOLIO
An additional risk of investing in the portfolio is:
o the risk that the cost of borrowing money to leverage will exceed the returns
for the securities purchased or that the securities purchased may actually go
down in value; thus, the portfolio's net asset value can decrease more
quickly than if the portfolio had not borrowed
RISKS APPLICABLE TO ALGER AMERICAN
INCOME & GROWTH PORTFOLIO
An additional risk of investing in the portfolio is:
o the possibility that companies may cut or fail to declare dividends due to
market downturns or other reasons
[GRAPHIC OMITTED]
PERFORMANCE
The following bar charts show the changes in each portfolio's performance from
year to year and give you some indication of the risks of investing in the Fund.
They assume reinvestment of dividends and distributions.
The Average Annual Total Return tables compare a portfolio's performance over
several periods with that of an appropriate benchmark index. The annual returns
assume reinvestment of dividends and distributions. Remember that how a
portfolio has performed 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.
Each index used in the tables is a broad index designed to track a particular
market or market segment. No expenses or fees are reflected in the returns for
the indexes, which are unmanaged. All returns for the indexes assume
reinvestment of dividends and interest of the underlying securities that make up
the respective index.
o S&P 500 Index(R): An index of large company common stocks considered to be
representative of the U.S. stock market in general.
o Russell 2000 Growth Index(R): An index of common stocks designed to track
performance of small capitalization companies.
o S&P Midcap 400 Index(R): An index of common stocks designed to track
performance of medium capitalization companies.
3
<PAGE>
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
Annual Total Return as of December 31 each year (%)
[Graph]
64.48 8.71 57.54 3.55 13.28 -4.38 44.31 4.18 11.39 15.53
- ----- ----- ----- ---- ----- ----- ----- ----- ----- -----
89 90 91 92 93 94 95 96 97 98
Best Quarter: 25.73% Q1 1991
Worst Quarter: -20.72% Q3 1990
Average Annual Total Return as of December 31, 1998
Since
Inception
1 Year 5 Years 10 Years (9/21/88)
- -------------------------------------------------------
American Small
Capitalization 15.53% 13.09% 19.85% 18.86%
Russell 2000 Growth
Index(R) 1.23% 10.22% 11.54% 11.22%
ALGER AMERICAN GROWTH PORTFOLIO
Annual Total Return as of December 31 each year (%)
[Graph]
4.14 40.39 12.38 22.47 1.45 36.37 13.35 25.75 48.07
- ---- ------ ----- ----- ---- ----- ----- ----- -----
90 91 92 93 94 95 96 97 98
Best Quarter: 25.93% Q4 1998
Worst Quarter: -16.21% Q3 1990
Average Annual Total Return as of December 31, 1998
Since
Inception
1 Year 5 Years (1/9/89)
- ----------------------------------------------------------
American Growth 48.07% 23.90% 22.03%
S&P 500 Index(R) 28.58% 24.06% 19.05%
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
Annual Total Return as of December 31 each year (%)
- -1.54 44.45 11.9 15.01 30.30
- ----- ----- ---- ----- -----
94 95 96 97 98
Best Quarter: 27.07% Q4 1998
Worst Quarter: -14.91% Q3 1998
Average Annual Total Return as of December 31, 1998
Since
Inception
1 Year 5 Years (5/3/93)
- ------------------------------------------------------
American MidCap 30.30% 18.98% 23.50%
S&P Midcap 400 Index 19.11% 18.84% 18.99%
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
Annual Total Return as of December 31 each year (%)
[Graph]
12.04 19.68 57.83
- ----- ----- -----
96 97 98
Best Quarter: 31.95% Q4 1998
Worst Quarter: -5.70% Q4 1997
Average Annual Total Return as of December 31, 1998
Since
Inception
1 Year (1/25/95)
- --------------------------------------------------
American Leveraged
AllCap 57.83% 39.34%
S&P 500 Index(R) 28.58% 30.43%
4
<PAGE>
ALGER AMERICAN INCOME & GROWTH PORTFOLIO
Annual Total Return as of December 31 each year (%)
[Graph]
7.40 0.28 23.51 8.64 10.34 -8.28 35.13 19.68 36.29 32.39
- --- ---- ----- ---- ----- ----- ----- ----- ----- -----
89 90 91 92 93 94 95 96 97 98
Best Quarter: 21.37% Q4 1998
Worst Quarter: -13.94% Q3 1990
Average Annual Total Return as of December 31, 1998
Since
Inception
1 Year 5 Years 10 Years (11/15/88)
- -----------------------------------------------------------
American
Income & Growth 32.39% 21.76% 15.62% 15.51%
S&P 500 Index(R) 28.58% 24.06% 19.21% 19.06%
[GRAPHIC OMITTED]
FEES AND EXPENSES
Investors incur certain fees and expenses in connection with an investment in
the Fund. The following table shows the fees and expenses that you may incur if
you buy and hold shares of the portfolios.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING
EXPENSES
(expenses that are deducted
from Fund assets)
SHAREHOLDER FEES
(fees paid directly from TOTAL ANNUAL FUND
your investment) Management Fees Distribution Fees Other Expenses OPERATING EXPENSES
=========================================================================================================================
<S> <C> <C> <C> <C> <C>
Alger American Small None .85% None .04% .89%
Capitalization
Portfolio
- --------------------------------------------------------------------------------------------------------------------------
Alger American None .80% None .04% .84%
MidCap Growth
Portfolio
- --------------------------------------------------------------------------------------------------------------------------
Alger American None .75% None .04% .79%
Growth
Portfolio
- --------------------------------------------------------------------------------------------------------------------------
Alger American None .85% None .11%* .96%
Leveraged AllCap
Portfolio
- --------------------------------------------------------------------------------------------------------------------------
Alger American None .635% None .075% .70%
Income & Growth
Portfolio
</TABLE>
*INCLUDED IN OTHER EXPENSES IS 0.03% OF INTEREST EXPENSE.
5
<PAGE>
EXAMPLE
The following example, which reflects the shareholder fees and operating
expenses listed in the preceding table, is intended to help you compare the cost
of investing in the Fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the Fund for the time periods
indicated. The example also assumes that your investment has a 5% return each
year and that the Fund'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:
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Alger American Small $91 $284 $493 $1,096
Capitalization
Portfolio
Alger American $86 $268 $466 $1,037
MidCap Growth
Portfolio
Alger American $81 $252 $439 $978
Growth
Portfolio
Alger American $98 $306 $531 $1,178
Leveraged AllCap
Portfolio
Alger American $72 $224 $390 $871
Income &Growth
Portfolio
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.
ADDITIONAL INFORMATION ABOUT THE FUND'S INVESTMENTS
Each 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 a temporary unacceptable risk of loss, rather than
directly to promote the portfolio's investment objective. The portfolio may not
achieve its objective during such periods.
Other securities the portfolios may invest in are discussed in the Fund's
Statement of Additional Information (see back cover).
[GRAPHIC OMITTED]
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 each
portfolio's assets according to its goal and for placing orders with
broker-dealers to purchase and sell securities on behalf of the portfolios. The
Fund has had the same manager since inception and, for the most recent fiscal
year, the portfolios paid the Manager fees at these annual rates based on a
percentage of average daily net assets: Small Capitalization and Leveraged
AllCap Portfolios -- .85%; MidCap Growth Portfolio--.80%; Growth Portfolio--
.75%; Income & Growth Portfolio-- .625%.
PORTFOLIO MANAGERS
David Alger, Seilai Khoo and Ron Tartaro are the individuals responsible for the
day-to-day management of the portfolios' investments. Mr. Alger, a manager of
all of the portfolios since their inception, has been employed by the Manager as
Executive Vice President and Director of Research since 1971, and as President
since 1995. Ms. Khoo, a co-manager of the Small Capitalization and Leveraged
AllCap Portfolios, has been employed by the Manager since 1989, as a senior
research analyst until 1995 and as a Senior Vice President and co-manager since
1995. Mr. Tartaro, a co-manager of the MidCap Growth, Income & Growth and Growth
Portfolios, 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.
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.
6
<PAGE>
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 each
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 each 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
portfolios are valued on the basis of amortized cost.
DIVIDENDS AND
DISTRIBUTIONS
The Fund declares and pays dividends and distributions by the portfolios
annually. The Fund expects that these annual payments to shareholders will
consist of both capital gains and net investment income.
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 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 59-1/2 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.
NAV (NET ASSET VALUE) IS COMPUTED BY ADDING TOGETHER THE VALUE OF THE
PORTFOLIO'S INVESTMENTS PLUS CASH AND OTHER ASSETS, SUBTRACTING ITS LIABILITIES
AND THEN DIVIDING THE RESULT BY THE NUMBER OF ITS OUTSTANDING SHARES.
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 a 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.
7
<PAGE>
[GRAPHIC OMITTED]
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand each
portfolio's financial performance for the periods shown. Certain information
reflects financial results for a single Fund share. The total returns in the
table represent the rate that an investor would have earned or lost on an
investment in the Fund (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.
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR
<TABLE>
<CAPTION>
Year Ended December 31,
- ---------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 43.75 $ 40.91 $ 39.41 $ 27.31 $ 30.88
---------- -------- ---------- -------- --------
Net investment income (loss) (0.02) (0.05)(i) (0.04)(i) (0.09) (0.03)(i)
Net realized and unrealized gain (loss)
on investments 6.30 4.45 1.70 12.19 (1.45)
---------- -------- ---------- -------- --------
Total from investment operations 6.28 4.40 1.66 12.10 (1.48)
---------- -------- ---------- -------- --------
Dividends from net investment income -- -- -- -- --
Distributions from net realized gains (6.06) (1.56) (0.16) -- (2.09)
---------- -------- ---------- -------- --------
Total distributions (6.06) (1.56) (0.16) -- (2.09)
---------- -------- ---------- -------- --------
Net asset value, end of year $ 43.97 $ 43.75 $ 40.91 $ 39.41 $ 27.31
========== ======== ========== ======== ========
Total Return 15.53% 11.39% 4.18% 44.31% (4.38%)
========== ======== ========== ======== ========
Ratios and Supplemental Data:
Net assets, end of year
(000's omitted) 1,216,584 $997,586 $1,469,518 $984,212 $397,037
========== ======== ========== ======== ========
Ratio of expenses to average net assets 0.89% 0.89% 0.88% 0.92% 0.96%
========== ======== ========== ======== ========
Ratio of net investment income (loss)
to average net assets (0.20%) (0.12%) (0.09%) (0.48%) (0.10%)
========== ======== ========== ======== ========
Portfolio Turnover Rate 142.90% 104.43% 110.04% 80.66% 117.61%
========== ======== ========== ======== ========
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
- ---------------------------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 27.26 $ 26.79 $ 17.02 $ 15.79 $ 9.60
-------- -------- -------- -------- --------
Net investment income (loss) (0.05) (0.06) (0.03) 0.02 0.04
Net realized and unrealized gain (loss)
on investments 3.67 0.91 9.82 1.35 6.15
-------- -------- -------- -------- --------
Total from investment operations 3.62 0.85 9.79 1.37 6.19
-------- -------- -------- -------- --------
Dividends from net investment income -- -- (0.02) (0.01) --
Distributions from net realized gains -- (0.38) -- (0.13) --
-------- -------- -------- -------- --------
Total distributions -- (0.38) (0.02) (0.14) --
-------- -------- -------- -------- --------
Net asset value, end of year $ 30.88 $ 27.26 $ 26.79 $ 17.02 $ 15.79
======== ======== ======== ======== ========
Total Return 13.28% 3.55% 57.54% 8.71% 64.48%(ii)
======== ======== ======== ======== ========
Ratios and Supplemental Data:
Net assets, end of year (000's omitted) $238,850 $135,718 $ 56,798 $ 7,149 $ 569
======== ======== ======== ======== ========
Ratio of expenses to average net assets 1.03% 0.98% 1.06% 1.50%(iii) 1.50%(iii)
======== ======== ======== ======== ========
Ratio of net investment income (loss)
to average net assets (0.35%) (0.37%) (0.12%) 0.50% 1.11%
======== ======== ======== ======== ========
Portfolio Turnover Rate 148.07% 108.06% 125.90% 132.46% 133.61%
======== ======== ======== ======== ========
</TABLE>
(i) Amount was computed based on average shares outstanding during the year
(ii) Unaudited
(iii) Amounts have been reduced by 0.33% and 9.15% for the years ended December
31, 1990 and 1989, respectively, due to expense reimbursements.
9
<PAGE>
ALGER AMERICAN GROWTH PORTFOLIO
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 $ 42.76 $ 34.33 $ 31.16 $ 23.13 $ 24.67
---------- ---------- -------- -------- --------
Net investment income (loss) 0.09 0.13 0.12 0.02 0.07
Net realized and unrealized gain (loss)
on investments 18.32 8.66 4.00 8.33 0.15
---------- ---------- -------- -------- --------
Total from investment operations 18.41 8.79 4.12 8.35 0.22
---------- ---------- -------- -------- --------
Dividends from net investment income (0.13) (0.13) (0.02) (0.07) (0.03)
Distributions from net realized gains (7.82) (0.23) (0.93) (0.25) (1.73)
---------- ---------- -------- -------- --------
Total Distributions (7.95) (0.36) (0.95) (0.32) (1.76)
---------- ---------- -------- -------- --------
Net asset value, end of period $ 53.22 $ 42.76 $ 34.33 $ 31.16 $ 23.13
========== ========== ======== ======== ========
Total Return 48.07% 25.75% 13.35% 36.37% 1.45%
========== ========== ======== ======== ========
Ratios and Supplemental Data:
Net assets, end of period
(000's omitted) $1,905,719 $1,072,529 $991,028 $502,974 $150,390
========== ========== ======== ======== ========
RATIO OF EXPENSES TO AVERAGE NET ASSETS 0.79% 0.79% 0.79% 0.85% 0.86%
========== ========== ======== ======== ========
Ratio of net investment income (loss)
to average net assets 0.25% 0.27% 0.50% 0.18% 0.48%
========== ========== ======== ======== ========
Portfolio Turnover Rate 127.38% 129.50% 82.86% 118.33% 111.76%
========== ========== ======== ======== ========
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
From
January 9, 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 $ 20.17 $ 18.00 $ 12.86 $ 12.41 $ 10.00
-------- -------- -------- -------- --------
Net investment income (loss) 0.03 0.03 0.08(i) 0.07 0.09
Net realized and unrealized gain (loss)
on investments 4.50 2.19 5.11 0.44 2.32
-------- -------- -------- -------- --------
Total from investment operations 4.53 2.22 5.19 0.51 2.41
-------- -------- -------- -------- --------
Dividends from net investment income (0.03) (0.03) (0.05) (0.06) --
Distributions from net realized gains -- (0.02) -- -- --
-------- -------- -------- -------- --------
Total Distributions (0.03) (0.05) (0.05) (0.06) --
-------- -------- -------- -------- --------
Net asset value, end of period $ 24.67 $ 20.17 $ 18.00 $ 12.86 $ 12.41
======== ======== ======== ======== ========
Total Return 22.47% 12.38% 40.39% 4.14% 24.10%(iii)
======== ======== ======== ======== ========
Ratios and Supplemental Data:
Net assets, end of period
000's omitted) $ 74,878 $ 30,316 $ 10,094 $ 1,228 $ 171
======== ======== ======== ======== ========
Ratio of expenses to average net assets 0.97% 0.99% 1.29% 1.50%(iv) 1.50%(iv)
======== ======== ======== ======== ========
Ratio of net investment income (loss)
to average net assets 0.25% 0.33% 0.52% 1.69% 1.30%
======== ======== ======== ======== ========
Portfolio Turnover Rate 112.64% 63.91% 58.95% 86.77% 79.59%
======== ======== ======== ======== ========
</TABLE>
(i) Amount was computed based on average shares outstanding during the period.
(ii) Ratios have been annualized; total return has not been annualized
(iii) Unaudited
(iv) Amounts have been reduced by 2.31% and 7.32% for the years ended December
31, 1990 and 1989, respectively, due to expense reimbursements.
11
<PAGE>
ALGER AMERICAN INCOME & GROWTH PORTFOLIO
For a share outstanding throughout the year
<TABLE>
<CAPTION>
Year Ended December 31,
- -------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 10.99 $ 8.42 $ 17.79 $ 13.30 $ 15.31
-------- -------- -------- -------- --------
Net investment income 0.03 0.03 0.09(ii) 0.11(ii) 0.17
Net realized and unrealized gain (loss)
on investments 3.30 2.94 1.87 4.54 (1.47)
-------- -------- -------- -------- --------
Total from investment operations 3.33 2.97 1.96 4.65 (1.30)
-------- -------- -------- -------- --------
Dividends from net investment income (0.04) (0.04) (0.33) (0.16) (0.15)
Distributions from net realized gains (1.16) (0.36) (11.00) -- (0.56)
-------- -------- -------- -------- --------
Total Distributions (1.20) (0.40) (11.33) (0.16) (0.71)
-------- -------- -------- -------- --------
Net asset value, end of year $ 13.12 $ 10.99 $ 8.42 $ 17.79 $ 13.30
======== ======== ======== ======== ========
Total Return 32.39% 36.29% 19.68% 35.13% (8.28%)
======== ======== ======== ======== ========
Ratios and Supplemental Data:
Net assets, end of period
(000's omitted) $ 77,926 $ 47,399 $ 20,910 $ 8,639 $ 29,135
======== ======== ======== ======== ========
Ratio of expenses to average net assets 0.70% 0.74% 0.81% 0.75% 0.75%
======== ======== ======== ======== ========
Decrease reflected in above expense
ratios due to expense reimbursements -- -- -- -- --
======== ======== ======== ======== ========
Ratio of net investment income to
average net assets 0.31% 0.56% 0.94% 0.61% 1.22%
======== ======== ======== ======== ========
Portfolio Turnover Rate 131.67% 150.09% 121.60% 164.05% 177.97%
======== ======== ======== ======== ========
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
- ---------------------------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 13.93 $ 13.08 $ 10.67 $ 10.74 $ 10.00
-------- -------- -------- -------- --------
Net investment income 0.07 0.08 0.09 0.11 0.18
Net realized and unrealized gain (loss)
on investments 1.37 1.02 2.41 (0.08) 0.56
-------- -------- -------- -------- --------
Total from investment operations 1.44 1.10 2.50 0.03 0.74
-------- -------- -------- -------- --------
Dividends from net investment income (0.06) (0.12) (0.09) (0.10) --
Distributions from net realized gains -- (0.13) -- -- --
-------- -------- -------- -------- --------
Total Distributions (0.06) (0.25) (0.09) (0.10) --
-------- -------- -------- -------- --------
Net asset value, end of year $ 15.31 $ 13.93 $ 13.08 $ 10.67 $ 10.74
======== ======== ======== ======== ========
Total Return 10.34% 8.64% 23.51% 0.28% 7.40%(i)
======== ======== ======== ======== ========
Ratios and Supplemental Data:
Net assets, end of period
(000's omitted) $ 31,895 $ 8,671 $ 2,663 $ 436 $ 98
======== ======== ======== ======== ========
Ratio of expenses to average net assets 0.97% 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%
======== ======== ======== ======== ========
Ratio of net investment income to
average net assets 1.51% 1.62% 2.54% 3.61% 7.36%
======== ======== ======== ======== ========
Portfolio Turnover Rate 105.80% 100.62% 61.11% 56.90% --
======== ======== ======== ======== ========
</TABLE>
(i) Unaudited.
(ii) Amount was computed based on average shares outstanding during the period.
13
<PAGE>
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
From
January 25, 1995
(commencement
of operations) to
Year Ended December 31, December 31,
- --------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995(i)
----- ----- ----- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 23.17 $ 19.36 $ 17.43 $ 10.00
--------- --------- --------- --------
Net investment income (loss) (0.05) (0.03) (0.03)(ii) (0.03)
Net realized and unrealized gain on investments 12.99 3.84 2.14 7.46
--------- --------- --------- --------
Total from investment operations 12.94 3.81 2.11 7.43
Distributions from net realized gains (1.21) -- (0.18) --
--------- --------- --------- --------
Net asset value, end of period $ 34.90 $ 23.17 $ 19.36 $17.43
========= ========= ========= ========
Total Return 57.83% 19.68% 12.04% 74.30%
========= ========= ========= ========
Ratios and Supplemental Data:
Net assets, end of period (000's omitted) $ 101,710 $ 53,488 $ 34,925 $ 5,497
========= ========= ========= ========
Ratio of expenses excluding interest
to average net assets 0.93% 0.96% 1.06% 1.50%
========= ========= ========= ========
Ratio of expenses including interest
to average net assets 0.96% 1.00% 1.09% 1.56%(iii)
========= ========= ========= ========
Ratio of net investment income (loss)
to average net assets (0.27%) (0.17%) (0.15%) (0.71%)
========= ========= ========= ========
Portfolio Turnover Rate 143.59% 164.27% 102.10% 178.23%
========= ========= ========= ========
Amount of debt outstanding at end of period -- -- -- --
========= ========= ========= ========
Average amount of debt outstanding during the period $ 246,101 $ 201,644 $ 76,079 $ 8,122
========= ========= ========= ========
Average daily number of shares outstanding
during the period 2,480,478 2,135,458 1,107,187 75,460
========= ========= ========= ========
Average amount of debt per share during the period $ 0.10 $ 0.09 $ 0.07 $ 0.11
========= ========= ========= ========
</TABLE>
(i) Ratios have been annualized; total return has not been annualized.
(ii) Amount was computed based on average shares outstanding during the year.
(iii) Amount has been reduced by 2.36% due to expense reimbursements.
14
<PAGE>
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
From
May 3, 1993
(commencement
of operations) to
Year Ended December 31, December 31,
- -------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993(i)
----- ----- ----- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 24.18 $ 21.35 $ 19.44 $ 13.46 $ 13.72 $ 10.00
-------- -------- -------- -------- ------- -------
Net investment income (loss) 0.00(ii) (0.04) 0.03 (0.03) 0.00(ii) (0.02)
Net realized and unrealized gain (loss)
on investments 6.95 3.20 2.29 6.01 (0.21) 3.88
-------- -------- -------- -------- ------- -------
Total from investment operations 6.95 3.16 2.32 5.98 (0.21) 3.86
-------- -------- -------- -------- ------- -------
Dividends from net investment income -- (0.01) -- -- -- --
Distributions from net realized gains (2.26) (0.32) (0.41) -- (0.05) (0.14)
-------- -------- -------- -------- ------- -------
Total Distributions (2.26) (0.33) (0.41) -- (0.05) (0.14)
-------- -------- -------- -------- ------- -------
Net asset value, end of period $ 28.87 $ 24.18 $ 21.35 $ 19.44 $ 13.46 $ 13.72
======== ======== ======== ======== ======= =======
Total Return 30.30% 15.01% 11.90% 44.45% (1.54%) 38.67%
======== ======== ======== ======== ======= =======
Ratios and Supplemental Data:
Net assets, end of period
(000's omitted) $689,571 $444,967 $394,847 $185,349 $62,178 $21,301
======== ======== ======== ======== ======= =======
Ratio of expenses to average net assets 0.84% 0.84% 0.84% 0.90% 0.97% 1.50%(iii)
======== ======== ======== ======== ======= =======
Ratio of net investment income (loss)
to average net assets 0.00% (0.15%) 0.08% (0.25%) 0.03% (0.58%)
======== ======== ======== ======== ======= =======
Portfolio Turnover Rate 152.21% 151.98% 90.97% 104.74% 83.96% 67.22%
======== ======== ======== ======== ======= =======
</TABLE>
(i) Ratios have been annualized; total return has not been annualized.
(ii) Amount was computed based on average shares outstanding durin the period.
(iii) Amounts have been reduced by 0.33% due to expense reimbursements.
<PAGE>
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]
<PAGE>
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 SMALL CAPITALIZATION PORTFOLIO
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
ALGER AMERICAN GROWTH PORTFOLIO
ALGER AMERICAN LEVERAGED ALLCAP 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 Fund 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 SMALL CAPITALIZATION PORTFOLIO
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
ALGER AMERICAN GROWTH PORTFOLIO
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
PROSPECTUS
MAY 1, 1999
TABLE OF CONTENTS
2 ........... Risk/Return Summary: Investments,
Risks & Performance
2 ..... Investments
Alger American Small
Capitalization Portfolio 2
Alger American MidCap
Growth Portfolio 2
Alger American Growth Portfolio 2
Alger American Leveraged
AllCap Portfolio 2
3 ..... Principal Risks
Alger American Small
Capitalization Portfolio 3
Alger American MidCap
Growth Portfolio 3
Alger American Growth Portfolio 3
Alger American Leveraged
AllCap Portfolio 3
3 ..... Performance
Alger American Small
Capitalization Portfolio 4
Alger American MidCap
Growth Portfolio 4
Alger American Growth Portfolio 4
Alger American Leveraged
AllCap Portfolio 4
5 ..... Fees and Expenses
5 ..... Management & Organization
6 ..... Shareholder Information
Distributor 6
Transfer Agent 6
Purchasing and Redeeming
Fund Shares 7
8 .... Financial Highlights
Back Cover: How to obtain more information
<PAGE>
[GRAPHIC OMITTED]
RISK/RETURN SUMMARY: INVESTMENTS, RISKS & PERFORMANCE
INVESTMENTS: THE ALGER AMERICAN FUND
The investment goal and primary approach of each portfolio is discussed
individually below. All of the portfolios invest primarily in equity securities,
such as common or preferred stocks, which are listed on U.S. exchanges or in the
over-the-counter market. They invest primarily in "growth" stocks. The Fund's
Manager, Fred Alger Management, Inc., believes that these companies tend to fall
into one of two categories:
o 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.
o 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 company's market capitalization will dictate in which portfolio(s) it will
be placed. The market capitalization of a company is its price per share
multiplied by its number of outstanding shares.
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
GOAL
The Alger American Small Capitalization Portfolio seeks long-term capital
appreciation.
APPROACH
It focuses on small, fast-growing companies that offer innovative products,
services or technologies to a rapidly expanding marketplace. Under normal
circumstances, the portfolio invests primarily in the equity securities of small
capitalization companies. A small capitalization company is one that has a
market capitalization within the range of the Russell(R) 2000 Growth Index or
the S&P(R) SmallCap 600 Index.
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
GOAL
THE ALGER AMERICAN MIDCAP GROWTH PORTFOLIO SEEKS LONG-TERM CAPITAL APPRECIATION.
APPROACH
It focuses on midsize companies with promising growth potential. Under normal
circumstances, the portfolio invests primarily in the equity securities of
companies having a market capitalization within the range of companies in the
S&P(R) MidCap 400 Index.
ALGER AMERICAN GROWTH PORTFOLIO
GOAL
THE ALGER AMERICAN GROWTH PORTFOLIO SEEKS LONG-TERM CAPITAL APPRECIATION.
APPROACH
It focuses on growing companies that generally have broad product lines,
markets, financial resources and depth of management. Under normal
circumstances, the portfolio invests primarily in the equity securities of large
companies. The portfolio considers a large company to have a market
capitalization of $1 billion or greater.
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
GOAL
The Alger American Leveraged AllCap Portfolio seeks long-term capital
appreciation.
APPROACH
Under normal circumstances, the portfolio invests in the equity securities of
companies of any size which demonstrate promising growth potential.
The portfolio can leverage, that is, borrow money, up to one-third of its total
assets to buy additional securities. By borrowing money, the portfolio has the
potential to increase its returns if the increase in the value of the securities
purchased exceeds the cost of borrowing, including interest paid on the money
borrowed.
2
<PAGE>
[GRAPHIC OMITTED]
PRINCIPAL RISKS
RISKS APPLICABLE TO ALL PORTFOLIOS
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. A portfolio's
price per share will fluctuate due to changes in the market prices of its
investments. Also, a Fund 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 portfolios' investment styles and objectives, an investment in them
may be better suited to investors who seek long-term capital growth and can
tolerate fluctuations in their investment's value.
A portfolio's trading in some stocks may be relatively short-term, meaning the
Fund 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.
There may be additional risks applicable to a specific portfolio because of its
investment approach.
RISKS APPLICABLE TO ALGER AMERICAN
SMALL CAPITALIZATION PORTFOLIO
An additional risk of investing in the portfolio is:
o the possibility of greater risk by investing in smaller, less seasoned
companies rather than larger, more established companies owing to such
factors as inexperienced management and limited financial resources
RISKS APPLICABLE TO ALGER AMERICAN
MIDCAP GROWTH PORTFOLIO
An additional risk of investing in the portfolio is:
o the possibility of greater risk by investing in medium-sized companies rather
than larger, more established companies owing to such factors as
inexperienced management and limited financial resources
RISKS APPLICABLE TO ALGER AMERICAN GROWTH PORTFOLIO
The portfolio's primary risks are those summarized above in "Risks Applicable to
All Portfolios".
RISKS APPLICABLE TO ALGER AMERICAN
LEVERAGED ALLCAP PORTFOLIO
An additional risk of investing in the portfolio is:
o the risk that the cost of borrowing money to leverage will exceed the returns
for the securities purchased or that the securities purchased may actually go
down in value; thus, the portfolio's net asset value can decrease more
quickly than if the portfolio had not borrowed
[GRAPHIC OMITTED]
PERFORMANCE
The following bar charts show the changes in each portfolio's performance from
year to year and give you some indication of the risks of investing in the Fund.
They assume reinvestment on dividends and distributions.
The Average Annual Total Return tables compare a portfolio's performance over
several periods with that of an appropriate benchmark index. The annual returns
assume reinvestment of dividends and distributions. Remember that how a
portfolio has performed 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.
Each index used in the tables is a broad index designed to track a particular
market or market segment. No expenses or fees are reflected in the returns for
the indexes, which are unmanaged. All returns for the indexes assume
reinvestment of dividends and interest on the underlying securities that make up
the respective index.
o S&P 500 Index(R): An index of large company common stocks considered to be
representative of the U.S. stock market in general.
o Russell 2000 Growth Index(R): An index of common stocks designed to track
performance of small capitalization companies.
o S&P Midcap 400 Index(R): An index of common stocks designed to track
performance of medium capitalization companies.
3
<PAGE>
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
Annual Total Return as of December 31 each year (%)
64.48 8.71 57.54 3.55 13.28 -4.38 44.31 4.18 11.39 15.53
- ----- ----- ----- ---- ----- ----- ----- ----- ----- -----
89 90 91 92 93 94 95 96 97 98
Best Quarter: 25.73% Q1 1991
Worst Quarter: -20.72% Q3 1990
Average Annual Total Return as of December 31, 1998
Since
Inception
1 Year 5 Years 10 Years (9/21/88)
- ------------------------------------------------------
American Small
Capitalization 15.53% 13.09% 19.85% 18.86%
Russell 2000
Growth Index 1.23% 10.22% 11.54% 11.22%
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
Annual Total Return as of December 31 each year (%)
- -1.54 44.45 11.9 15.01 30.30
- ----- ----- ---- ----- -----
94 95 96 97 98
Best Quarter: 27.07% Q4 1998
Worst Quarter: -14.91% Q3 1998
Average Annual Total Return as of December 31, 1998
Since
Inception
1 Year 5 Years (5/3/93)
- ------------------------------------------------------
American MidCap 30.30% 18.98% 23.50%
S&P Midcap 400 Index 19.11% 18.84% 18.99%
ALGER AMERICAN GROWTH PORTFOLIO
Annual Total Return as of December 31 each year (%)
4.14 40.39 12.38 22.47 1.45 36.37 13.35 25.75 48.07
- ---- ------ ----- ----- ---- ----- ----- ----- -----
90 91 92 93 94 95 96 97 98
Best Quarter: 25.93% Q4 1998
Worst Quarter: -16.21% Q3 1990
Average Annual Total Return as of December 31, 1998
Since
Inception
1 Year 5 Years (1/9/89)
- ------------------------------------------------------
American Growth 48.07% 23.90% 22.03%
S&P 500 Index 28.58% 24.06% 19.05%
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
Annual Total Return as of December 31 each year (%)
12.04 19.68 57.83
- ----- ----- -----
96 97 98
Best Quarter: 31.95% Q4 1998
Worst Quarter: -5.70% Q4 1997
Average Annual Total Return as of December 31, 1998
Since
Inception
1 Year (1/25/95)
- -------------------------------------------------
American Leveraged
AllCap 57.83% 39.34%
S&P 500 Index 28.58% 30.43%
4
<PAGE>
[GRAPHIC OMITTED]
FEES AND EXPENSES
Investors incur certain fees and expenses in connection with an investment in
the Fund. The following table shows the fees and expenses that you may incur if
you buy and hold shares of the portfolios.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING
EXPENSES
(expenses that are deducted
from Fund assets)
SHAREHOLDER FEES
(fees paid directly from TOTAL ANNUAL FUND
your investment) Management Fees Distribution Fees Other Expenses OPERATING EXPENSES
=========================================================================================================================
<S> <C> <C> <C> <C> <C>
Alger American Small None .85% None .04% .89%
Capitalization
Portfolio
- --------------------------------------------------------------------------------------------------------------------------
Alger American None .80% None .04% .84%
MidCap Growth
Portfolio
- --------------------------------------------------------------------------------------------------------------------------
Alger American None .75% None .04% .79%
Growth
Portfolio
- --------------------------------------------------------------------------------------------------------------------------
Alger American None .85% None .11%* .96%
Leveraged AllCap
Portfolio
</TABLE>
*INCLUDED IN OTHER EXPENSES IS 0.03% OF INTEREST EXPENSE.
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 Fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the Fund for the time periods
indicated. The example also assumes that your investment has a 5% return each
year and that the Fund'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:
1 Years 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Alger American Small $91 $284 $493 $1,096
Capitalization
Portfolio
- --------------------------------------------------------------------------------
Alger American $86 $268 $466 $1,037
MidCap Growth
Portfolio
- --------------------------------------------------------------------------------
Alger American $81 $252 $439 $ 978
Growth
Portfolio
- --------------------------------------------------------------------------------
Alger American $98 $306 $531 $1,178
Leveraged AllCap
Portfolio
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.
ADDITIONAL INFORMATION ABOUT THE FUND'S INVESTMENTS
Each 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 a temporary unacceptable risk of loss, rather than
directly to promote the portfolio's investment objective. The portfolio may not
achieve its objective during such periods.
Other securities the portfolios may invest in are discussed in the Fund's
Statement of Additional Information (see back cover).
[GRAPHIC OMITTED]
MANAGEMENT AND ORGANIZATION
MANAGER
Fred Alger Management, Inc.
1 World Trade Center
Suite 9333
New York, NY 10048
5
<PAGE>
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 each
portfolio's assets according to its goal and for placing orders with
broker-dealers to purchase and sell securities on behalf of the portfolios. The
Fund has had the same manager since inception and, for the most recent fiscal
year, the portfolios paid the Manager fees at these annual rates based on a
percentage of average daily net assets: Small Capitalization and Leveraged
AllCap Portfolios--.85%; MidCap Growth Portfolio--.80%; Growth Portfolio--.75%.
PORTFOLIO MANAGERS
David Alger, Seilai Khoo and Ron Tartaro are the individuals responsible for the
day-to-day management of the portfolios' investments. Mr. Alger, a manager of
all of the portfolios since their inception, has been employed by the Manager as
Executive Vice President and Director of Research since 1971, and as President
since 1995. Ms. Khoo, a co-manager of the Small Capitalization and Leveraged
AllCap Portfolios, has been employed by the Manager since 1989, as a senior
research analyst until 1995 and as a Senior Vice President and co-manager since
1995. Mr. Tartaro, a co-manager of the MidCap Growth and Growth Portfolios, 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.
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 each
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 each 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
portfolios are valued on the basis of amortized cost.
DIVIDENDS AND DISTRIBUTIONS
The Fund declares and pays dividends and distributions by the portfolios
annually. The Fund expects that these annual payments to shareholders will
consist of both capital gains and net investment income.
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 59-1/2 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.
NAV (NET ASSET VALUE) IS COMPUTED BY ADDING TOGETHER THE VALUE OF THE
PORTFOLIO'S INVESTMENTS PLUS CASH AND OTHER ASSETS, SUBTRACTING ITS LIABILITIES
AND THEN DIVIDING THE RESULT BY THE NUMBER OF ITS OUTSTANDING SHARES.
6
<PAGE>
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 a 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.
7
<PAGE>
[GRAPHIC OMITTED]
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand each
portfolio's financial performance for the periods shown. Certain information
reflects financial results for a single Fund share. The total returns in the
table represent the rate that an investor would have earned or lost on an
investment in the Fund (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.
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR
<TABLE>
<CAPTION>
Year Ended December 31,
- ---------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 43.75 $ 40.91 $ 39.41 $ 27.31 $ 30.88
---------- -------- ---------- -------- --------
Net investment income (loss) (0.02) (0.05)(i) (0.04)(i) (0.09) (0.03)(i)
Net realized and unrealized gain (loss)
on investments 6.30 4.45 1.70 12.19 (1.45)
---------- -------- ---------- -------- --------
Total from investment operations 6.28 4.40 1.66 12.10 (1.48)
---------- -------- ---------- -------- --------
Dividends from net investment income -- -- -- -- --
Distributions from net realized gains (6.06) (1.56) (0.16) -- (2.09)
---------- -------- ---------- -------- --------
Total distributions (6.06) (1.56) (0.16) -- (2.09)
---------- -------- ---------- -------- --------
Net asset value, end of year $ 43.97 $ 43.75 $ 40.91 $ 39.41 $ 27.31
========== ======== ========== ======== ========
Total Return 15.53% 11.39% 4.18% 44.31% (4.38%)
========== ======== ========== ======== ========
Ratios and Supplemental Data:
Net assets, end of year
(000's omitted) 1,216,584 $997,586 $1,469,518 $984,212 $397,037
========== ======== ========== ======== ========
Ratio of expenses to average net assets 0.89% 0.89% 0.88% 0.92% 0.96%
========== ======== ========== ======== ========
Ratio of net investment income (loss)
to average net assets (0.20%) (0.12%) (0.09%) (0.48%) (0.10%)
========== ======== ========== ======== ========
Portfolio Turnover Rate 142.90% 104.43% 110.04% 80.66% 117.61%
========== ======== ========== ======== ========
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
- ---------------------------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 27.26 $ 26.79 $ 17.02 $ 15.79 $ 9.60
-------- -------- -------- -------- --------
Net investment income (loss) (0.05) (0.06) (0.03) 0.02 0.04
Net realized and unrealized gain (loss)
on investments 3.67 0.91 9.82 1.35 6.15
-------- -------- -------- -------- --------
Total from investment operations 3.62 0.85 9.79 1.37 6.19
-------- -------- -------- -------- --------
Dividends from net investment income -- -- (0.02) (0.01) --
Distributions from net realized gains -- (0.38) -- (0.13) --
-------- -------- -------- -------- --------
Total distributions -- (0.38) (0.02) (0.14) --
-------- -------- -------- -------- --------
Net asset value, end of year $ 30.88 $ 27.26 $ 26.79 $ 17.02 $ 15.79
======== ======== ======== ======== ========
Total Return 13.28% 3.55% 57.54% 8.71% 64.48%(ii)
======== ======== ======== ======== ========
Ratios and Supplemental Data:
Net assets, end of year (000's omitted) $238,850 $135,718 $ 56,798 $ 7,149 $ 569
======== ======== ======== ======== ========
Ratio of expenses to average net assets 1.03% 0.98% 1.06% 1.50%(iii) 1.50%(iii)
======== ======== ======== ======== ========
Ratio of net investment income (loss)
to average net assets (0.35%) (0.37%) (0.12%) 0.50% 1.11%
======== ======== ======== ======== ========
Portfolio Turnover Rate 148.07% 108.06% 125.90% 132.46% 133.61%
======== ======== ======== ======== ========
</TABLE>
(i) Amount was computed based on average shares outstanding during the year
(ii) Unaudited
(iii) Amounts have been reduced by 0.33% and 9.15% for the years ended December
31, 1990 and 1989, respectively, due to expense reimbursements.
9
<PAGE>
ALGER AMERICAN GROWTH PORTFOLIO
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 $ 42.76 $ 34.33 $ 31.16 $ 23.13 $ 24.67
---------- ---------- -------- -------- --------
Net investment income (loss) 0.09 0.13 0.12 0.02 0.07
Net realized and unrealized gain (loss)
on investments 18.32 8.66 4.00 8.33 0.15
---------- ---------- -------- -------- --------
Total from investment operations 18.41 8.79 4.12 8.35 0.22
---------- ---------- -------- -------- --------
Dividends from net investment income (0.13) (0.13) (0.02) (0.07) (0.03)
Distributions from net realized gains (7.82) (0.23) (0.93) (0.25) (1.73)
---------- ---------- -------- -------- --------
Total Distributions (7.95) (0.36) (0.95) (0.32) (1.76)
---------- ---------- -------- -------- --------
Net asset value, end of period $ 53.22 $ 42.76 $ 34.33 $ 31.16 $ 23.13
========== ========== ======== ======== ========
Total Return 48.07% 25.75% 13.35% 36.37% 1.45%
========== ========== ======== ======== ========
Ratios and Supplemental Data:
Net assets, end of period
(000's omitted) $1,905,719 $1,072,529 $991,028 $502,974 $150,390
========== ========== ======== ======== ========
RATIO OF EXPENSES TO AVERAGE NET ASSETS 0.79% 0.79% 0.79% 0.85% 0.86%
========== ========== ======== ======== ========
Ratio of net investment income (loss)
to average net assets 0.25% 0.27% 0.50% 0.18% 0.48%
========== ========== ======== ======== ========
Portfolio Turnover Rate 127.38% 129.50% 82.86% 118.33% 111.76%
========== ========== ======== ======== ========
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
From
January 9, 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 $ 20.17 $ 18.00 $ 12.86 $ 12.41 $ 10.00
-------- -------- -------- -------- --------
Net investment income (loss) 0.03 0.03 0.08(i) 0.07 0.09
Net realized and unrealized gain (loss)
on investments 4.50 2.19 5.11 0.44 2.32
-------- -------- -------- -------- --------
Total from investment operations 4.53 2.22 5.19 0.51 2.41
-------- -------- -------- -------- --------
Dividends from net investment income (0.03) (0.03) (0.05) (0.06) --
Distributions from net realized gains -- (0.02) -- -- --
-------- -------- -------- -------- --------
Total Distributions (0.03) (0.05) (0.05) (0.06) --
-------- -------- -------- -------- --------
Net asset value, end of period $ 24.67 $ 20.17 $ 18.00 $ 12.86 $ 12.41
======== ======== ======== ======== ========
Total Return 22.47% 12.38% 40.39% 4.14% 24.10%(iii)
======== ======== ======== ======== ========
Ratios and Supplemental Data:
Net assets, end of period
000's omitted) $ 74,878 $ 30,316 $ 10,094 $ 1,228 $ 171
======== ======== ======== ======== ========
Ratio of expenses to average net assets 0.97% 0.99% 1.29% 1.50%(iv) 1.50%(iv)
======== ======== ======== ======== ========
Ratio of net investment income (loss)
to average net assets 0.25% 0.33% 0.52% 1.69% 1.30%
======== ======== ======== ======== ========
Portfolio Turnover Rate 112.64% 63.91% 58.95% 86.77% 79.59%
======== ======== ======== ======== ========
</TABLE>
(i) Amount was computed based on average shares outstanding during the period.
(ii) Ratios have been annualized; total return has not been annualized
(iii) Unaudited
(iv) Amounts have been reduced by 2.31% and 7.32% for the years ended December
31, 1990 and 1989, respectively, due to expense reimbursements.
11
<PAGE>
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
From
January 25, 1995
(commencement
of operations) to
Year Ended December 31, December 31,
- --------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995(i)
----- ----- ----- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 23.17 $ 19.36 $ 17.43 $ 10.00
--------- --------- --------- --------
Net investment income (loss) (0.05) (0.03) (0.03)(ii) (0.03)
Net realized and unrealized gain on investments 12.99 3.84 2.14 7.46
--------- --------- --------- --------
Total from investment operations 12.94 3.81 2.11 7.43
Distributions from net realized gains (1.21) -- (0.18) --
--------- --------- --------- --------
Net asset value, end of period $ 34.90 $ 23.17 $ 19.36 $ 17.43
========= ========= ========= ========
Total Return 57.83% 19.68% 12.04% 74.30%
========= ========= ========= ========
Ratios and Supplemental Data:
Net assets, end of period (000's omitted) $ 101,710 $ 53,488 $ 34,925 $ 5,497
========= ========= ========= ========
Ratio of expenses excluding interest
to average net assets 0.93% 0.96% 1.06% 1.50%
========= ========= ========= ========
Ratio of expenses including interest
to average net assets 0.96% 1.00% 1.09% 1.56%(iii)
========= ========= ========= ========
Ratio of net investment income (loss)
to average net assets (0.27%) (0.17%) (0.15%) (0.71%)
========= ========= ========= ========
Portfolio Turnover Rate 143.59% 164.27% 102.10% 178.23%
========= ========= ========= ========
Amount of debt outstanding at end of period -- -- -- --
========= ========= ========= ========
Average amount of debt outstanding during the period $ 246,101 $ 201,644 $ 76,079 $ 8,122
========= ========= ========= ========
Average daily number of shares outstanding
during the period 2,480,478 2,135,458 1,107,187 75,460
========= ========= ========= ========
Average amount of debt per share during the period $ 0.10 $ 0.09 $ 0.07 $ 0.11
========= ========= ========= ========
</TABLE>
(i) Ratios have been annualized; total return has not been annualized.
(ii) Amount was computed based on average shares outstanding durin the year.
(iii) Amount has been reduced by 2.36% due to expense reimbursements.
12
<PAGE>
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
From
May 3, 1993
(commencement
of operations) to
Year Ended December 31, December 31,
- -------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993(i)
----- ----- ----- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 24.18 $ 21.35 $ 19.44 $ 13.46 $ 13.72 $ 10.00
-------- -------- -------- -------- ------- -------
Net investment income (loss) 0.00(ii) (0.04) 0.03 (0.03) 0.00(ii) (0.02)
Net realized and unrealized gain (loss)
on investments 6.95 3.20 2.29 6.01 (0.21) 3.88
-------- -------- -------- -------- ------- -------
Total from investment operations 6.95 3.16 2.32 5.98 (0.21) 3.86
-------- -------- -------- -------- ------- -------
Dividends from net investment income -- (0.01) -- -- -- --
Distributions from net realized gains (2.26) (0.32) (0.41) -- (0.05) (0.14)
-------- -------- -------- -------- ------- -------
Total Distributions (2.26) (0.33) (0.41) -- (0.05) (0.14)
-------- -------- -------- -------- ------- -------
Net asset value, end of period $ 28.87 $ 24.18 $ 21.35 $ 19.44 $ 13.46 $ 13.72
======== ======== ======== ======== ======= =======
Total Return 30.30% 15.01% 11.90% 44.45% (1.54%) 38.67%
======== ======== ======== ======== ======= =======
Ratios and Supplemental Data:
Net assets, end of period
(000's omitted) $689,571 $444,967 $394,847 $185,349 $62,178 $21,301
======== ======== ======== ======== ======= =======
Ratio of expenses to average net assets 0.84% 0.84% 0.84% 0.90% 0.97% 1.50%(iii)
======== ======== ======== ======== ======= =======
Ratio of net investment income (loss)
to average net assets 0.00% (0.15%) 0.08% (0.25%) 0.03% (0.58%)
======== ======== ======== ======== ======= =======
Portfolio Turnover Rate 152.21% 151.98% 90.97% 104.74% 83.96% 67.22%
======== ======== ======== ======== ======= =======
</TABLE>
(i) Ratios have been annualized; total return has not been annualized.
(ii) Amount was computed based on average shares outstanding durin the period.
(iii) Amounts have been reduced by 0.33% due to expense reimbursements.
13
<PAGE>
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 to 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
<PAGE>
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 SMALL CAPITALIZATION PORTFOLIO
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
ALGER AMERICAN GROWTH PORTFOLIO
ALGER AMERICAN INCOME &GROWTH 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 Fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
<PAGE>
THE ALGER
AMERICAN FUND
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
ALGER AMERICAN GROWTH PORTFOLIO
ALGER AMERICAN INCOME &GROWTH PORTFOLIO
PROSPECTUS
MAY 1, 1999
TABLE OF CONTENTS
- -------------------------------------------
3 ........... Risk/Return Summary: Investments,
Risks & Performance
3 ..... Investments
Alger American Small
Capitalization Portfolio .................... 3
Alger American MidCap
Growth Portfolio ............................ 3
Alger American Growth Portfolio ................ 3
Alger American Income &
Growth Portfolio ............................ 3
3 ..... Principal Risks
Alger American Small
Capitalization Portfolio .................... 4
Alger American MidCap
Growth Portfolio ............................ 4
Alger American Growth Portfolio ................ 4
Alger American Income &
Growth Portfolio ............................ 4
4 ..... Performance
Alger American Small
Capitalization Portfolio .................... 5
Alger American MidCap
Growth Portfolio ............................ 5
Alger American Growth Portfolio ................ 5
Alger American Income &
Growth Portfolio ............................ 5
6 ........... Fees and Expenses
6 ........... Management & Organization
7 ........... Shareholder Information
Distributor .................................... 7
Transfer Agent ................................. 7
Purchasing and Redeeming Fund Shares ........... 7
8 ........... Financial Highlights
Back Cover: How to obtain more information
<PAGE>
This page intentionally left blank.
2
<PAGE>
[GRAPHIC OMITTED]
RISK/RETURN SUMMARY: INVESTMENTS, RISKS & PERFORMANCE
INVESTMENTS: THE ALGER AMERICAN FUND
The investment goal and primary approach of each portfolio is discussed
individually below. All of the portfolios invest primarily in equity securities,
such as common or preferred stocks, which are listed on U.S. exchanges or in the
over-the-counter market. They invest primarily in "growth" stocks. The Fund's
Manager, Fred Alger Management, Inc., believes that these companies tend to fall
into one of two categories:
o 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.
o 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 company's market capitalization will dictate in which portfolio(s) it will
be placed. The market capitalization of a company is its price per share
multiplied by its number of outstanding shares.
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
GOAL
THE ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO SEEKS LONG-TERM CAPITAL
APPRECIATION.
APPROACH
It focuses on small, fast-growing companies that offer innovative products,
services or technologies to a rapidly expanding marketplace. Under normal
circumstances, the portfolio invests primarily in the equity securities of small
capitalization companies. A small capitalization company is one that has a
market capitalization within the range of the Russell(R) 2000 Growth Index or
the S&P(R) SmallCap 600 Index
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
GOAL
THE ALGER AMERICAN MIDCAP GROWTH PORTFOLIO SEEKS LONG-TERM CAPITAL APPRECIATION.
APPROACH
It focuses on midsize companies with promising growth potential. Under normal
circumstances, the portfolio invests primarily in the equity securities of
companies having a market capitalization within the range of companies in the
S&P(R) MidCap 400 Index.
ALGER AMERICAN GROWTH PORTFOLIO
GOAL
THE ALGER AMERICAN GROWTH PORTFOLIO SEEKS LONG-TERM CAPITAL APPRECIATION.
APPROACH
It focuses on growing companies that generally have broad product lines,
markets, financial resources and depth of management. Under normal
circumstances, the portfolio invests primarily in the equity securities of large
companies. The portfolio considers a large company to have a market
capitalization of $1 billion or greater.
ALGER AMERICAN INCOME &GROWTH PORTFOLIO
GOAL
THE ALGER AMERICAN INCOME &GROWTH PORTFOLIO PRIMARILY SEEKS TO PROVIDE A HIGH
LEVEL OF DIVIDEND INCOME; ITS SECONDARY GOAL IS TO PROVIDE CAPITAL APPRECIATION.
APPROACH
The portfolio invests in dividend paying equity securities, such as common or
preferred stocks, preferably those which the Manager believes also offer
opportunities for capital appreciation.
[GRAPHIC OMITTED]
PRINCIPAL RISKS
RISKS APPLICABLE TO ALL PORTFOLIOS
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. A portfolio's
price per share will fluctuate due to changes in the market prices of its
investments. Also, a Fund investment may
3
<PAGE>
not grow as fast as the rate of inflation and stocks tend to be more volatile
than some other investmentsyou 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 portfolios' investment styles
and objectives, an investment in them may be better suited to investors who seek
long-term capital growth and can tolerate fluctuations in their investment's
value.
A portfolio's trading in some stocks may be relatively short-term, meaning the
Fund 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.
There may be additional risks applicable to a specific portfolio because of its
investment approach.
RISKS APPLICABLE TO ALGER AMERICAN
SMALL CAPITALIZATION PORTFOLIO
An additional risk of investing in the portfolio is:
o the possibility of greater risk by investing in smaller, less seasoned
companies rather than larger, more established companies owing to such factors
as inexperienced management and limited financial resources
RISKS APPLICABLE TO ALGER AMERICAN
MIDCAP GROWTH PORTFOLIO
An additional risk of investing in the portfolio is:
o the possibility of greater risk by investing in medium-sized companies rather
than larger, more established companies owing to such factors as inexperienced
management and limited financial resources
RISKS APPLICABLE TO ALGER AMERICAN GROWTH PORTFOLIO
The portfolio's primary risks are those summarized above in "Risks Applicable to
All Portfolios."
RISKS APPLICABLE TO ALGER AMERICAN
INCOME &GROWTH PORTFOLIO
An additional risk of investing in the portfolio is:
o the possibility that companies may cut or fail to declare dividends due to
market downturns or other reasons
[GRAPHIC OMITTED]
PERFORMANCE
The following bar charts show the changes in each portfolio's performance from
year to year and give you some indication of the risks of investing in the Fund.
They assume reinvestment on dividends and distributions.
The Average Annual Total Return tables compare a portfolio's performance over
several periods with that of an appropriate benchmark index. The annual returns
assume reinvestment of dividends and distributions. Remember that how a
portfolio has performed 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.
Each index used in the tables is a broad index designed to track a particular
market or market segment. No expenses or fees are reflected in the returns for
the indexes, which are unmanaged. All returns for the indexes assume
reinvestment of dividends and interest on the underlying securities that make up
the respective index.
o S&P 500 Index(R): An index of large company common stocks considered to be
representative of the U.S. stock market in general.
o Russell 2000 Growth Index(R): An index of common stocks designed to track
performance of small capitalization companies.
o S&P Midcap 400 Index(R): An index of common stocks designed to track
performance of medium capitalization companies.
4
<PAGE>
[Chart]
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
Annual Total Return as of December 31 each year (%)
[Graph]
64.48 8.71 57.54 3.55 13.28 -4.38 44.31 4.18 11.39 15.53
- ----- ----- ----- ---- ----- ----- ----- ----- ----- -----
89 90 91 92 93 94 95 96 97 98
Best Quarter: 25.73% Q1 1991
Worst Quarter: -20.72% Q3 1990
Average Annual Total Return as of December 31, 1998
Since
Inception
1 Year 5 Years 10 Years (9/21/88)
- -------------------------------------------------------
American Small
Capitalization 15.53% 13.09% 19.85% 18.86%
Russell 2000 Growth
Index(R) 1.23% 10.22% 11.54% 11.22%
ALGER AMERICAN GROWTH PORTFOLIO
Annual Total Return as of December 31 each year (%)
[Graph]
4.14 40.39 12.38 22.47 1.45 36.37 13.35 25.75 48.07
- ---- ------ ----- ----- ---- ----- ----- ----- -----
90 91 92 93 94 95 96 97 98
Best Quarter: 25.93% Q4 1998
Worst Quarter: -16.21% Q3 1990
Average Annual Total Return as of December 31, 1998
Since
Inception
1 Year 5 Years (1/9/89)
- ----------------------------------------------------------
American Growth 48.07% 23.90% 22.03%
S&P 500 Index(R) 28.58% 24.06% 19.05%
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
Annual Total Return as of December 31 each year (%)
- -1.54 44.45 11.9 15.01 30.3
- ----- ----- ---- ----- ----
94 95 96 97 98
Best Quarter: 27.07% Q4 1998
Worst Quarter: -14.91% Q3 1998
Average Annual Total Return as of December 31, 1998
Since
Inception
1 Year 5 Years (5/3/93)
- ------------------------------------------------------
American MidCap 30.30% 18.98% 23.50%
S&P Midcap 400 Index 19.11% 18.84% 18.99%
ALGER AMERICAN INCOME & GROWTH PORTFOLIO
Annual Total Return as of December 31 each year (%)
[Graph]
7.40 0.28 23.51 8.64 10.34 -8.28 35.13 19.68 36.29 32.39
- --- ---- ----- ---- ----- ----- ----- ----- ----- -----
89 90 91 92 93 94 95 96 97 98
Best Quarter: 21.37% Q4 1998
Worst Quarter: -13.94% Q3 1990
Average Annual Total Return as of December 31, 1998
Since
Inception
1 Year 5 Years 10 Years (11/15/88)
- -----------------------------------------------------------
American
Income & Growth 32.39% 21.76% 15.62% 15.51%
S&P 500 Index(R) 28.58% 24.06% 19.21% 19.06%
5
<PAGE>
[GRAPHIC]
FEES AND EXPENSES
Investors incur certain fees and expenses in connection with an investment in
the Fund. The following table shows the fees and expenses that you may incur if
you buy and hold shares of the portfolios.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING
EXPENSES
(expenses that are deducted
from Fund assets)
SHAREHOLDER FEES
(fees paid directly from TOTAL ANNUAL FUND
your investment) Management Fees Distribution Fees Other Expenses OPERATING EXPENSES
=========================================================================================================================
<S> <C> <C> <C> <C> <C>
Alger American Small None .85% None .04% .89%
Capitalization
Portfolio
- --------------------------------------------------------------------------------------------------------------------------
Alger American None .80% None .04% .84%
MidCap Growth
Portfolio
- --------------------------------------------------------------------------------------------------------------------------
Alger American None .75% None .04% .79%
Growth
Portfolio
- --------------------------------------------------------------------------------------------------------------------------
Alger American None .635% None .075% .70%
Income & Growth
Portfolio
</TABLE>
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 Fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the Fund for the time periods
indicated. The example also assumes that your investment has a 5% return each
year and that the Fund'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:
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
ALGER AMERICAN SMALL $91 $284 $493 $1,096
CAPITALIZATION
PORTFOLIO
ALGER AMERICAN $86 $268 $466 $1,037
MIDCAP GROWTH
PORTFOLIO
ALGER AMERICAN $81 $252 $439 $978
GROWTH
PORTFOLIO
ALGER AMERICAN $72 $224 $390 $871
INCOME &GROWTH
PORTFOLIO
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.
ADDITIONAL INFORMATION ABOUT THE FUND'S INVESTMENTS
Each 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 a temporary unacceptable risk of loss, rather than
directly to promote the portfolio's investment objective. The portfolio may not
achieve its objectives during such periods.
Other securities the portfolios may invest in are discussed in the Fund's
Statement of Additional Information (see back cover).
[GRAPHIC OMITTED]
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 each
portfolio's assets according to its goal and for placing orders with
broker-dealers
6
<PAGE>
to purchase and sell securities on behalf of the portfolio. The Fund has had the
same manager since inception and, for the most recent fiscal year, the
portfolios paid the Manager fees at these annual rates based on a percentage of
average daily net assets: Small Capitalization Portfolio--.85%; MidCap Growth
Portfolio--.80%; Growth Portfolio--.75%; Income & Growth Portfolio--.625%.
PORTFOLIO MANAGERS
David Alger, Seilai Khoo and Ron Tartaro are the individuals responsible for the
day-to-day management of the portfolios' investments. Mr. Alger, a manager of
all of the portfolios since their inception, has been employed by the Manager as
Executive Vice President and Director of Research since 1971, and as President
since 1995. Ms. Khoo, a co-manager of the Small Capitalization Portfolio, has
been employed by the Manager since 1989, as a senior research analyst until 1995
and as a Senior Vice President and co-manager since 1995. Mr. Tartaro, a
co-manager of the MidCap Growth, Income & Growth and Growth Portfolios, 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.
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 each
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 each 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
portfolios are valued on the basis of amortized cost.
DIVIDENDS AND DISTRIBUTIONS
The Fund declares and pays dividends and distributions by the portfolios
annually. The Fund expects that these annual payments to shareholders will
consist of both capital gains and net investment income.
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 59-1/2 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.
NAV (NET ASSET VALUE) IS COMPUTED BY ADDING TOGETHER THE VALUE OF THE
PORTFOLIO'S INVESTMENTS PLUS CASH AND OTHER ASSETS, SUBTRACTING ITS LIABILITIES
AND THEN DIVIDING THE RESULT BY THE NUMBER OF ITS OUTSTANDING SHARES.
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 a 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.
7
<PAGE>
[GRAPHIC]
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand each
portfolio's financial performance for the periods shown. Certain information
reflects financial results for a single Fund share. The total returns in the
table represent the rate that an investor would have earned or lost on an
investment in the Fund (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.
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR
<TABLE>
<CAPTION>
Year Ended December 31,
- ---------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 43.75 $ 40.91 $ 39.41 $ 27.31 $ 30.88
---------- -------- ---------- -------- --------
Net investment income (loss) (0.02) (0.05)(i) (0.04)(i) (0.09) (0.03)(i)
Net realized and unrealized gain (loss)
on investments 6.30 4.45 1.70 12.19 (1.45)
---------- -------- ---------- -------- --------
Total from investment operations 6.28 4.40 1.66 12.10 (1.48)
---------- -------- ---------- -------- --------
Dividends from net investment income -- -- -- -- --
Distributions from net realized gains (6.06) (1.56) (0.16) -- (2.09)
---------- -------- ---------- -------- --------
Total distributions (6.06) (1.56) (0.16) -- (2.09)
---------- -------- ---------- -------- --------
Net asset value, end of year $ 43.97 $ 43.75 $ 40.91 $ 39.41 $ 27.31
========== ======== ========== ======== ========
Total Return 15.53% 11.39% 4.18% 44.31% (4.38%)
========== ======== ========== ======== ========
Ratios and Supplemental Data:
Net assets, end of year
(000's omitted) 1,216,584 $997,586 $1,469,518 $984,212 $397,037
========== ======== ========== ======== ========
Ratio of expenses to average net assets 0.89% 0.89% 0.88% 0.92% 0.96%
========== ======== ========== ======== ========
Ratio of net investment income (loss)
to average net assets (0.20%) (0.12%) (0.09%) (0.48%) (0.10%)
========== ======== ========== ======== ========
Portfolio Turnover Rate 142.90% 104.43% 110.04% 80.66% 117.61%
========== ======== ========== ======== ========
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
- ---------------------------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 27.26 $ 26.79 $ 17.02 $ 15.79 $ 9.60
-------- -------- -------- -------- --------
Net investment income (loss) (0.05) (0.06) (0.03) 0.02 0.04
Net realized and unrealized gain (loss)
on investments 3.67 0.91 9.82 1.35 6.15
-------- -------- -------- -------- --------
Total from investment operations 3.62 0.85 9.79 1.37 6.19
-------- -------- -------- -------- --------
Dividends from net investment income -- -- (0.02) (0.01) --
Distributions from net realized gains -- (0.38) -- (0.13) --
-------- -------- -------- -------- --------
Total distributions -- (0.38) (0.02) (0.14) --
-------- -------- -------- -------- --------
Net asset value, end of year $ 30.88 $ 27.26 $ 26.79 $ 17.02 $ 15.79
======== ======== ======== ======== ========
Total Return 13.28% 3.55% 57.54% 8.71% 64.48%(ii)
======== ======== ======== ======== ========
Ratios and Supplemental Data:
Net assets, end of year (000's omitted) $238,850 $135,718 $ 56,798 $ 7,149 $ 569
======== ======== ======== ======== ========
Ratio of expenses to average net assets 1.03% 0.98% 1.06% 1.50%(iii) 1.50%(iii)
======== ======== ======== ======== ========
Ratio of net investment income (loss)
to average net assets (0.35%) (0.37%) (0.12%) 0.50% 1.11%
======== ======== ======== ======== ========
Portfolio Turnover Rate 148.07% 108.06% 125.90% 132.46% 133.61%
======== ======== ======== ======== ========
</TABLE>
(i) Amount was computed based on average shares outstanding during the year
(ii) Unaudited
(iii) Amounts have been reduced by 0.33% and 9.15% for the years ended December
31, 1990 and 1989, respectively, due to expense reimbursements.
9
<PAGE>
ALGER AMERICAN GROWTH PORTFOLIO
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 $ 42.76 $ 34.33 $ 31.16 $ 23.13 $ 24.67
---------- ---------- -------- -------- --------
Net investment income (loss) 0.09 0.13 0.12 0.02 0.07
Net realized and unrealized gain (loss)
on investments 18.32 8.66 4.00 8.33 0.15
---------- ---------- -------- -------- --------
Total from investment operations 18.41 8.79 4.12 8.35 0.22
---------- ---------- -------- -------- --------
Dividends from net investment income (0.13) (0.13) (0.02) (0.07) (0.03)
Distributions from net realized gains (7.82) (0.23) (0.93) (0.25) (1.73)
---------- ---------- -------- -------- --------
Total Distributions (7.95) (0.36) (0.95) (0.32) (1.76)
---------- ---------- -------- -------- --------
Net asset value, end of period $ 53.22 $ 42.76 $ 34.33 $ 31.16 $ 23.13
========== ========== ======== ======== ========
Total Return 48.07% 25.75% 13.35% 36.37% 1.45%
========== ========== ======== ======== ========
Ratios and Supplemental Data:
Net assets, end of period
(000's omitted) $1,905,719 $1,072,529 $991,028 $502,974 $150,390
========== ========== ======== ======== ========
RATIO OF EXPENSES TO AVERAGE NET ASSETS 0.79% 0.79% 0.79% 0.85% 0.86%
========== ========== ======== ======== ========
Ratio of net investment income (loss)
to average net assets 0.25% 0.27% 0.50% 0.18% 0.48%
========== ========== ======== ======== ========
Portfolio Turnover Rate 127.38% 129.50% 82.86% 118.33% 111.76%
========== ========== ======== ======== ========
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
From
January 9, 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 $ 20.17 $ 18.00 $ 12.86 $ 12.41 $ 10.00
-------- -------- -------- -------- --------
Net investment income (loss) 0.03 0.03 0.08(i) 0.07 0.09
Net realized and unrealized gain (loss)
on investments 4.50 2.19 5.11 0.44 2.32
-------- -------- -------- -------- --------
Total from investment operations 4.53 2.22 5.19 0.51 2.41
-------- -------- -------- -------- --------
Dividends from net investment income (0.03) (0.03) (0.05) (0.06) --
Distributions from net realized gains -- (0.02) -- -- --
-------- -------- -------- -------- --------
Total Distributions (0.03) (0.05) (0.05) (0.06) --
-------- -------- -------- -------- --------
Net asset value, end of period $ 24.67 $ 20.17 $ 18.00 $ 12.86 $ 12.41
======== ======== ======== ======== ========
Total Return 22.47% 12.38% 40.39% 4.14% 24.10%(iii)
======== ======== ======== ======== ========
Ratios and Supplemental Data:
Net assets, end of period
000's omitted) $ 74,878 $ 30,316 $ 10,094 $ 1,228 $ 171
======== ======== ======== ======== ========
Ratio of expenses to average net assets 0.97% 0.99% 1.29% 1.50%(iv) 1.50%(iv)
======== ======== ======== ======== ========
Ratio of net investment income (loss)
to average net assets 0.25% 0.33% 0.52% 1.69% 1.30%
======== ======== ======== ======== ========
Portfolio Turnover Rate 112.64% 63.91% 58.95% 86.77% 79.59%
======== ======== ======== ======== ========
</TABLE>
(i) Amount was computed based on average shares outstanding during the period.
(ii) Ratios have been annualized; total return has not been annualized
(iii) Unaudited
(iv) Amounts have been reduced by 2.31% and 7.32% for the years ended December
31, 1990 and 1989, respectively, due to expense reimbursements.
11
<PAGE>
ALGER AMERICAN INCOME & GROWTH PORTFOLIO
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR
<TABLE>
<CAPTION>
Year Ended December 31,
- -------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 10.99 $ 8.42 $ 17.79 $ 13.30 $ 15.31
-------- -------- -------- -------- --------
Net investment income 0.03 0.03 0.09(ii) 0.11(ii) 0.17
Net realized and unrealized gain (loss)
on investments 3.30 2.94 1.87 4.54 (1.47)
-------- -------- -------- -------- --------
Total from investment operations 3.33 2.97 1.96 4.65 (1.30)
-------- -------- -------- -------- --------
Dividends from net investment income (0.04) (0.04) (0.33) (0.16) (0.15)
Distributions from net realized gains (1.16) (0.36) (11.00) -- (0.56)
-------- -------- -------- -------- --------
Total Distributions (1.20) (0.40) (11.33) (0.16) (0.71)
-------- -------- -------- -------- --------
Net asset value, end of year $ 13.12 $ 10.99 $ 8.42 $ 17.79 $ 13.30
======== ======== ======== ======== ========
Total Return 32.39% 36.29% 19.68% 35.13% (8.28%)
======== ======== ======== ======== ========
Ratios and Supplemental Data:
Net assets, end of period
(000's omitted) $ 77,926 $ 47,399 $ 20,910 $ 8,639 $ 29,135
======== ======== ======== ======== ========
Ratio of expenses to average net assets 0.70% 0.74% 0.81% 0.75% 0.75%
======== ======== ======== ======== ========
Decrease reflected in above expense
ratios due to expense reimbursements -- -- -- -- --
======== ======== ======== ======== ========
Ratio of net investment income to
average net assets 0.31% 0.56% 0.94% 0.61% 1.22%
======== ======== ======== ======== ========
Portfolio Turnover Rate 131.67% 150.09% 121.60% 164.05% 177.97%
======== ======== ======== ======== ========
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
- ---------------------------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 13.93 $ 13.08 $ 10.67 $ 10.74 $ 10.00
-------- -------- -------- -------- --------
Net investment income 0.07 0.08 0.09 0.11 0.18
Net realized and unrealized gain (loss)
on investments 1.37 1.02 2.41 (0.08) 0.56
-------- -------- -------- -------- --------
Total from investment operations 1.44 1.10 2.50 0.03 0.74
-------- -------- -------- -------- --------
Dividends from net investment income (0.06) (0.12) (0.09) (0.10) --
Distributions from net realized gains -- (0.13) -- -- --
-------- -------- -------- -------- --------
Total Distributions (0.06) (0.25) (0.09) (0.10) --
-------- -------- -------- -------- --------
Net asset value, end of year $ 15.31 $ 13.93 $ 13.08 $ 10.67 $ 10.74
======== ======== ======== ======== ========
Total Return 10.34% 8.64% 23.51% 0.28% 7.40%(i)
======== ======== ======== ======== ========
Ratios and Supplemental Data:
Net assets, end of period
(000's omitted) $ 31,895 $ 8,671 $ 2,663 $ 436 $ 98
======== ======== ======== ======== ========
Ratio of expenses to average net assets 0.97% 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%
======== ======== ======== ======== ========
Ratio of net investment income to
average net assets 1.51% 1.62% 2.54% 3.61% 7.36%
======== ======== ======== ======== ========
Portfolio Turnover Rate 105.80% 100.62% 61.11% 56.90% --
======== ======== ======== ======== ========
</TABLE>
(i) Unaudited.
(ii) Amount was computed based on average shares outstanding during the period.
13
<PAGE>
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
From
May 3, 1993
(commencement
of operations) to
Year Ended December 31, December 31,
- -------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993(i)
----- ----- ----- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 24.18 $ 21.35 $ 19.44 $ 13.46 $ 13.72 $ 10.00
-------- -------- -------- -------- ------- -------
Net investment income (loss) 0.00(ii) (0.04) 0.03 (0.03) 0.00(ii) (0.02)
Net realized and unrealized gain (loss)
on investments 6.95 3.20 2.29 6.01 (0.21) 3.88
-------- -------- -------- -------- ------- -------
Total from investment operations 6.95 3.16 2.32 5.98 (0.21) 3.86
-------- -------- -------- -------- ------- -------
Dividends from net investment income -- (0.01) -- -- -- --
Distributions from net realized gains (2.26) (0.32) (0.41) -- (0.05) (0.14)
-------- -------- -------- -------- ------- -------
Total Distributions (2.26) (0.33) (0.41) -- (0.05) (0.14)
-------- -------- -------- -------- ------- -------
Net asset value, end of period $ 28.87 $ 24.18 $ 21.35 $ 19.44 $ 13.46 $ 13.72
======== ======== ======== ======== ======= =======
Total Return 30.30% 15.01% 11.90% 44.45% (1.54%) 38.67%
======== ======== ======== ======== ======= =======
Ratios and Supplemental Data:
Net assets, end of period
(000's omitted) $689,571 $444,967 $394,847 $185,349 $62,178 $21,301
======== ======== ======== ======== ======= =======
Ratio of expenses to average net assets 0.84% 0.84% 0.84% 0.90% 0.97% 1.50%(iii)
======== ======== ======== ======== ======= =======
Ratio of net investment income (loss)
to average net assets 0.00% (0.15%) 0.08% (0.25%) 0.03% (0.58%)
======== ======== ======== ======== ======= =======
Portfolio Turnover Rate 152.21% 151.98% 90.97% 104.74% 83.96% 67.22%
======== ======== ======== ======== ======= =======
</TABLE>
(i) Ratios have been annualized; total return has not been annualized.
(ii) Amount was computed based on average shares outstanding durin the period.
(iii) Amounts have been reduced by 0.33% due to expense reimbursements.
14
<PAGE>
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
<PAGE>
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 SMALL CAPITALIZATION PORTFOLIO
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
ALGER AMERICAN GROWTH 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 Fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
<PAGE>
THE ALGER
AMERICAN FUND
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
ALGER AMERICAN GROWTH PORTFOLIO
PROSPECTUS
MAY 1, 1999
TABLE OF CONTENTS
- ----------------------------------------------------------------
3.........Risk/Return Summary: Investments, Risks & Performance
3.......Investments
Alger American Small
Capitalization Portfolio ........................ 3
Alger American MidCap
Growth Portfolio ................................ 3
Alger American Growth Portfolio..................... 3
3.......Principal Risks
Alger American Small
Capitalization Portfolio ........................ 4
Alger American MidCap
Growth Portfolio ................................ 4
Alger American Growth Portfolio... ................. 4
4.......Performance
Alger American Small
Capitalization Portfolio ........................ 4
Alger American MidCap
Growth Portfolio ................................ 5
Alger American Growth Portfolio... ................. 5
5.........Fees and Expenses
6.........Management & Organization
7.........Shareholder Information
Distributor......................................... 7
Transfer Agent...................................... 7
Purchasing and Redeeming Fund Shares ............... 7
8.........Financial Highlights
Back Cover: How to obtain more information
<PAGE>
[Intentionally left blank]
2
<PAGE>
[GRAPHIC OMITTED]
RISK/RETURN SUMMARY: INVESTMENTS, RISKS & PERFORMANCE
INVESTMENTS: THE ALGER AMERICAN FUND
The investment goal and primary approach of each portfolio is discussed
individually below. All of the portfolios invest primarily in equity securities,
such as common or preferred stocks, which are listed on U.S. exchanges or in the
over-the-counter market. They invest primarily in "growth" stocks. The Fund's
Manager, Fred Alger Management, Inc., believes that these companies tend to fall
into one of two categories:
o 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.
o 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 company's market capitalization will dictate in which portfolio(s) it will
be placed. The market capitalization of a company is its price per share
multiplied by its number of outstanding shares.
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
GOAL
THE ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO SEEKS LONG-TERM CAPITAL
APPRECIATION.
APPROACH
It focuses on small, fast-growing companies that offer innovative products,
services or technologies to a rapidly expanding marketplace. Under normal
circumstances, the portfolio invests primarily in the equity securities of small
capitalization companies. A small capitalization company is one that has a
market capitalization within the range of the Russell(R) 2000 Growth Index or
the S&P(R) SmallCap 600 Index
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
GOAL
THE ALGER AMERICAN MIDCAP GROWTH PORTFOLIO SEEKS LONG-TERM CAPITAL APPRECIATION.
APPROACH
It focuses on midsize companies with promising growth potential. Under normal
circumstances, the portfolio invests primarily in the equity securities of
companies having a market capitalization within the range of companies in the
S&P(R) MidCap 400 Index.
ALGER AMERICAN GROWTH PORTFOLIO
GOAL
THE ALGER AMERICAN GROWTH PORTFOLIO SEEKS LONG-TERM CAPITAL APPRECIATION.
APPROACH
It focuses on growing companies that generally have broad product lines,
markets, financial resources and depth of management. Under normal
circumstances, the portfolio invests primarily in the equity securities of large
companies. The portfolio considers a large company to have a market
capitalization of $1 billion or greater.
[GRAPHIC OMITTED]
PRINCIPAL RISKS
RISKS APPLICABLE TO ALL PORTFOLIOS
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. A portfolio's
price per share will fluctuate due to changes in the market prices of its
investments. Also, a Fund 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 portfolios' investment styles and objectives, an investment in them
may be better suited to investors who seek long-term capital growth and can
tolerate fluctuations in their investment's value.
3
<PAGE>
A portfolio's trading in some stocks may be relatively short-term, meaning the
Fund 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.
There may be additional risks applicable to a specific portfolio because of its
investment approach.
RISKS APPLICABLE TO ALGER AMERICAN
SMALL CAPITALIZATION PORTFOLIO
An additional risk of investing in the portfolio is:
o the possibility of greater risk by investing in smaller, less seasoned
companies rather than larger, more established companies owing to such
factors as inexperienced management and limited financial resources
RISKS APPLICABLE TO ALGER AMERICAN
MIDCAP GROWTH PORTFOLIO
An additional risk of investing in the portfolio is:
o the possibility of greater risk by investing in medium-sized companies rather
than larger, more established companies owing to such factors as
inexperienced management and limited financial resources
RISKS APPLICABLE TO ALGER AMERICAN GROWTH
PORTFOLIO
The portfolio's primary risks are those summarized above in "Risks Applicable
to All Portfolios."
[GRAPHIC OMITTED]
PERFORMANCE
The following bar charts show the changes in each portfolio's performance from
year to year and give you some indication of the risks of investing in the Fund.
They assume reinvestment of dividends and distributions.
The Average Annual Total Return tables compare a portfolio's performance over
several periods with that of an appropriate benchmark index. The annual returns
assume reinvestment of dividends and distributions. Remember that how a
portfolio has performed in the past is not necessarily an indication of how it
will perform in the future.
The performance disclosed in these charts do not reflect separate account
charges which, if reflected, would lower returns.
Each index used in the tables is a broad index designed to track a particular
market or market segment. No expenses or fees are reflected in the returns for
the indexes, which are unmanaged. All returns for the indexes assume
reinvestment of dividends and interest on the underlying securities that make up
the respective index.
o S&P 500 Index(R): An index of large company common stocks considered to be
representative of the U.S. stock market in general.
o Russell 2000 Growth Index(R): An index of common stocks designed to track
performance of small capitalization companies.
o S&P Midcap 400 Index(R): An index of common stocks designed to track
performance of medium capitalization companies.
[Chart]
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
Annual Total Return as of December 31 each year (%)
[Graph]
64.48 8.71 57.54 3.55 13.28 -4.38 44.31 4.18 11.39 15.53
- ----- ----- ----- ---- ----- ----- ----- ----- ----- -----
89 90 91 92 93 94 95 96 97 98
Best Quarter: 25.73% Q1 1991
Worst Quarter: -20.72% Q3 1990
Average Annual Total Return as of December 31, 1998
Since
Inception
1 Year 5 Years 10 Years (9/21/88)
- -------------------------------------------------------
American Small
Capitalization 15.53% 13.09% 19.85% 18.86%
Russell 2000 Growth
Index(R) 1.23% 10.22% 11.54% 11.22%
4
<PAGE>
ALGER AMERICAN GROWTH PORTFOLIO
Annual Total Return as of December 31 each year (%)
[Graph]
4.14 40.39 12.38 22.47 1.45 36.37 13.35 25.75 48.07
- ---- ------ ----- ----- ---- ----- ----- ----- -----
90 91 92 93 94 95 96 97 98
Best Quarter: 25.93% Q4 1998
Worst Quarter: -16.21% Q3 1990
Average Annual Total Return as of December 31, 1998
Since
Inception
1 Year 5 Years (1/9/89)
- ----------------------------------------------------------
American Growth 48.07% 23.90% 22.03%
S&P 500 Index(R) 28.58% 24.06% 19.05%
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
Annual Total Return as of December 31 each year (%)
- -1.54 44.45 11.9 15.01 30.3
- ----- ----- ---- ----- ----
94 95 96 97 98
Best Quarter: 27.07% Q4 1998
Worst Quarter: -14.91% Q3 1998
Average Annual Total Return as of December 31, 1998
Since
Inception
1 Year 5 Years (5/3/93)
- ------------------------------------------------------
American MidCap 30.30% 18.98% 23.50%
S&P Midcap 400 Index 19.11% 18.84% 18.99%
[GRAPHIC OMITTED]
FEES AND EXPENSES
Investors incur certain fees and expenses in connection with an investment in
the Fund. The following table shows the fees and expenses that you may incur if
you buy and hold shares of the portfolios.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING
EXPENSES
(expenses that are deducted
from Fund assets)
Shareholder Fees
(fees paid directly from TOTAL ANNUAL FUND
your investment) Management Fees Distribution Fees Other Expenses OPERATING EXPENSES
=========================================================================================================================
<S> <C> <C> <C> <C> <C>
Alger American Small None .85% None .04% .89%
Capitalization
Portfolio
- --------------------------------------------------------------------------------------------------------------------------
Alger American None .80% None .04% .84%
MidCap Growth
Portfolio
- --------------------------------------------------------------------------------------------------------------------------
Alger American None .75% None .04% .79%
Growth
Portfolio
</TABLE>
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 Fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the Fund for the time periods
indicated. The example also assumes that your investment has a 5% return each
year and that the Fund'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:
5
<PAGE>
1 Year 3 Years 5 Years 10 Years
================================================================================
ALGER AMERICAN SMALL $91 $284 $493 $1,096
CAPITALIZATION
PORTFOLIO
- --------------------------------------------------------------------------------
ALGER AMERICAN $86 $268 $466 $1,037
MIDCAP GROWTH
PORTFOLIO
- --------------------------------------------------------------------------------
ALGER AMERICAN $81 $252 $439 $978
GROWTH
PORTFOLIO
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.
ADDITIONAL INFORMATION ABOUT
THE FUND'S INVESTMENTS
Each 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 a temporary unacceptable risk of loss, rather than
directly to promote the portfolio's investment objective. The portfolio may not
achieve its objective during such periods.
Other securities the portfolios may invest in are discussed in the Fund's
Statement of Additional Information (see back cover).
[GRAPHIC OMITTED]
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 each
portfolio's assets according to its goal and for placing orders with
broker-dealers to purchase and sell securities on behalf of the portfolios. The
Fund has had the same manager since inception and, for the most recent fiscal
year, the portfolios paid the Manager fees at these annual rates based on a
percentage of average daily net assets: Small Capitalization Portfolio--.85%;
MidCap Growth Portfolio--.80%; Growth Portfolio--.75%.
PORTFOLIO MANAGERS
David Alger, Seilai Khoo and Ron Tartaro are the individuals responsible for the
day-to-day management of the portfolios' investments. Mr. Alger, a manager of
all of the portfolios since their inception has been employed by the Manager as
Executive Vice President and Director of Research since 1971, and as President
since 1995. Ms. Khoo, a co-manager of the Small Capitalization Portfolio, has
been employed by the Manager since 1989, as a senior research analyst until 1995
and as a Senior Vice President and co-manager since 1995. Mr. Tartaro, a
co-manager of the MidCap Growth and Growth Portfolios, 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.
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.
6
<PAGE>
[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 each
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 each 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
portfolios are valued on the basis of amortized cost.
DIVIDENDS AND DISTRIBUTIONS
The Fund declares and pays dividends and distributions by the portfolios
annually. The Fund expects that these annual payments to shareholders will
consist of both capital gains and net investment income.
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 59-1/2 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.
NAV(NET ASSET VALUE) IS COMPUTED BY ADDING TOGETHER THE VALUE OF THE PORTFOLIO'S
INVESTMENTS PLUS CASH AND OTHER ASSETS, SUBTRACTING ITS LIABILITIES AND THEN
DIVIDING THE RESULT BY THE NUMBER OF ITS OUTSTANDING SHARES.
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 a 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.
7
<PAGE>
[GRAPHIC OMITTED]
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand each
portfolio's financial performance for the periods shown. Certain information
reflects financial results for a single Fund share. The total returns in the
table represent the rate that an investor would have earned or lost on an
investment in the Fund (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.
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR
<TABLE>
<CAPTION>
Year Ended December 31,
- ---------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 43.75 $ 40.91 $ 39.41 $ 27.31 $ 30.88
---------- -------- ---------- -------- --------
Net investment income (loss) (0.02) (0.05)(i) (0.04)(i) (0.09) (0.03)(i)
Net realized and unrealized gain (loss)
on investments 6.30 4.45 1.70 12.19 (1.45)
---------- -------- ---------- -------- --------
Total from investment operations 6.28 4.40 1.66 12.10 (1.48)
---------- -------- ---------- -------- --------
Dividends from net investment income -- -- -- -- --
Distributions from net realized gains (6.06) (1.56) (0.16) -- (2.09)
---------- -------- ---------- -------- --------
Total distributions (6.06) (1.56) (0.16) -- (2.09)
---------- -------- ---------- -------- --------
Net asset value, end of year $ 43.97 $ 43.75 $ 40.91 $ 39.41 $ 27.31
========== ======== ========== ======== ========
Total Return 15.53% 11.39% 4.18% 44.31% (4.38%)
========== ======== ========== ======== ========
Ratios and Supplemental Data:
Net assets, end of year
(000's omitted) 1,216,584 $997,586 $1,469,518 $984,212 $397,037
========== ======== ========== ======== ========
Ratio of expenses to average net assets 0.89% 0.89% 0.88% 0.92% 0.96%
========== ======== ========== ======== ========
Ratio of net investment income (loss)
to average net assets (0.20%) (0.12%) (0.09%) (0.48%) (0.10%)
========== ======== ========== ======== ========
Portfolio Turnover Rate 142.90% 104.43% 110.04% 80.66% 117.61%
========== ======== ========== ======== ========
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
- ---------------------------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 27.26 $ 26.79 $ 17.02 $ 15.79 $ 9.60
-------- -------- -------- -------- --------
Net investment income (loss) (0.05) (0.06) (0.03) 0.02 0.04
Net realized and unrealized gain (loss)
on investments 3.67 0.91 9.82 1.35 6.15
-------- -------- -------- -------- --------
Total from investment operations 3.62 0.85 9.79 1.37 6.19
-------- -------- -------- -------- --------
Dividends from net investment income -- -- (0.02) (0.01) --
Distributions from net realized gains -- (0.38) -- (0.13) --
-------- -------- -------- -------- --------
Total distributions -- (0.38) (0.02) (0.14) --
-------- -------- -------- -------- --------
Net asset value, end of year $ 30.88 $ 27.26 $ 26.79 $ 17.02 $ 15.79
======== ======== ======== ======== ========
Total Return 13.28% 3.55% 57.54% 8.71% 64.48%(ii)
======== ======== ======== ======== ========
Ratios and Supplemental Data:
Net assets, end of year (000's omitted) $238,850 $135,718 $ 56,798 $ 7,149 $ 569
======== ======== ======== ======== ========
Ratio of expenses to average net assets 1.03% 0.98% 1.06% 1.50%(iii) 1.50%(iii)
======== ======== ======== ======== ========
Ratio of net investment income (loss)
to average net assets (0.35%) (0.37%) (0.12%) 0.50% 1.11%
======== ======== ======== ======== ========
Portfolio Turnover Rate 148.07% 108.06% 125.90% 132.46% 133.61%
======== ======== ======== ======== ========
</TABLE>
(i) Amount was computed based on average shares outstanding during the year
(ii) Unaudited
(iii) Amounts have been reduced by 0.33% and 9.15% for the years ended December
31, 1990 and 1989, respectively, due to expense reimbursements.
9
<PAGE>
ALGER AMERICAN GROWTH PORTFOLIO
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 $ 42.76 $ 34.33 $ 31.16 $ 23.13 $ 24.67
---------- ---------- -------- -------- --------
Net investment income (loss) 0.09 0.13 0.12 0.02 0.07
Net realized and unrealized gain (loss)
on investments 18.32 8.66 4.00 8.33 0.15
---------- ---------- -------- -------- --------
Total from investment operations 18.41 8.79 4.12 8.35 0.22
---------- ---------- -------- -------- --------
Dividends from net investment income (0.13) (0.13) (0.02) (0.07) (0.03)
Distributions from net realized gains (7.82) (0.23) (0.93) (0.25) (1.73)
---------- ---------- -------- -------- --------
Total Distributions (7.95) (0.36) (0.95) (0.32) (1.76)
---------- ---------- -------- -------- --------
Net asset value, end of period $ 53.22 $ 42.76 $ 34.33 $ 31.16 $ 23.13
========== ========== ======== ======== ========
Total Return 48.07% 25.75% 13.35% 36.37% 1.45%
========== ========== ======== ======== ========
Ratios and Supplemental Data:
Net assets, end of period
(000's omitted) $1,905,719 $1,072,529 $991,028 $502,974 $150,390
========== ========== ======== ======== ========
RATIO OF EXPENSES TO AVERAGE NET ASSETS 0.79% 0.79% 0.79% 0.85% 0.86%
========== ========== ======== ======== ========
Ratio of net investment income (loss)
to average net assets 0.25% 0.27% 0.50% 0.18% 0.48%
========== ========== ======== ======== ========
Portfolio Turnover Rate 127.38% 129.50% 82.86% 118.33% 111.76%
========== ========== ======== ======== ========
</TABLE>
1O
<PAGE>
<TABLE>
<CAPTION>
From
January 9, 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 $ 20.17 $ 18.00 $ 12.86 $ 12.41 $ 10.00
-------- -------- -------- -------- --------
Net investment income (loss) 0.03 0.03 0.08(i) 0.07 0.09
Net realized and unrealized gain (loss)
on investments 4.50 2.19 5.11 0.44 2.32
-------- -------- -------- -------- --------
Total from investment operations 4.53 2.22 5.19 0.51 2.41
-------- -------- -------- -------- --------
Dividends from net investment income (0.03) (0.03) (0.05) (0.06) --
Distributions from net realized gains -- (0.02) -- -- --
-------- -------- -------- -------- --------
Total Distributions (0.03) (0.05) (0.05) (0.06) --
-------- -------- -------- -------- --------
Net asset value, end of period $ 24.67 $ 20.17 $ 18.00 $ 12.86 $ 12.41
======== ======== ======== ======== ========
Total Return 22.47% 12.38% 40.39% 4.14% 24.10%(iii)
======== ======== ======== ======== ========
Ratios and Supplemental Data:
Net assets, end of period
000's omitted) $ 74,878 $ 30,316 $ 10,094 $ 1,228 $ 171
======== ======== ======== ======== ========
Ratio of expenses to average net assets 0.97% 0.99% 1.29% 1.50%(iv) 1.50%(iv)
======== ======== ======== ======== ========
Ratio of net investment income (loss)
to average net assets 0.25% 0.33% 0.52% 1.69% 1.30%
======== ======== ======== ======== ========
Portfolio Turnover Rate 112.64% 63.91% 58.95% 86.77% 79.59%
======== ======== ======== ======== ========
</TABLE>
(i) Amount was computed based on average shares outstanding during the period.
(ii) Ratios have been annualized; total return has not been annualized
(iii) Unaudited
(iv) Amounts have been reduced by 2.31% and 7.32% for the years ended December
31, 1990 and 1989, respectively, due to expense reimbursements.
11
<PAGE>
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
From
May 3, 1993
(commencement
of operations) to
Year Ended December 31, December 31,
- ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993(i)
----- ----- ----- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 24.18 $ 21.35 $ 19.44 $ 13.46 $ 13.72 $ 10.00
-------- -------- -------- -------- ------- -------
Net investment income (loss) 0.00(ii) (0.04) 0.03 (0.03) 0.00(ii) (0.02)
Net realized and unrealized gain (loss)
on investments 6.95 3.20 2.29 6.01 (0.21) 3.88
-------- -------- -------- -------- ------- -------
Total from investment operations 6.95 3.16 2.32 5.98 (0.21) 3.86
-------- -------- -------- -------- ------- -------
Dividends from net investment income -- (0.01) -- -- -- --
Distributions from net realized gains (2.26) (0.32) (0.41) -- (0.05) (0.14)
-------- -------- -------- -------- ------- -------
Total Distributions (2.26) (0.33) (0.41) -- (0.05) (0.14)
-------- -------- -------- -------- ------- -------
Net asset value, end of period $ 28.87 $ 24.18 $ 21.35 $ 19.44 $ 13.46 $ 13.72
======== ======== ======== ======== ======= =======
Total Return 30.30% 15.01% 11.90% 44.45% (1.54%) 38.67%
======== ======== ======== ======== ======= =======
Ratios and Supplemental Data:
Net assets, end of period (000's omitted) $689,571 $444,967 $394,847 $185,349 $62,178 $21,301
======== ======== ======== ======== ======= =======
Ratio of expenses to average net assets 0.84% 0.84% 0.84% 0.90% 0.97% 1.50%(iii)
======== ======== ======== ======== ======= =======
Ratio of net investment income (loss)
to average net assets 0.00% (0.15%) 0.08% (0.25%) 0.03% (0.58%)
======== ======== ======== ======== ======= =======
Portfolio Turnover Rate 152.21% 151.98% 90.97% 104.74% 83.96% 67.22%
======== ======== ======== ======== ======= =======
(i) Ratios have been annualized; total return has not been annualized.
(ii) Amount was computed based on average shares outstanding during the period.
(iii) Amount has been reduced by 0.03% due to expense reimbursements.
</TABLE>
12
<PAGE>
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 to 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
<PAGE>
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 SMALL CAPITALIZATION PORTFOLIO
ALGER AMERICAN GROWTH PORTFOLIO
ALGER AMERICAN INCOME & GROWTH 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 Fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
<PAGE>
THE ALGER
AMERICAN FUND
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
ALGER AMERICAN GROWTH PORTFOLIO
ALGER AMERICAN INCOME & GROWTH PORTFOLIO
PROSPECTUS
MAY 1, 1999
TABLE OF CONTENTS
- ----------------------------------------------------
2 ........... Risk/Return Summary: Investments,
Risks & Performance
2 ..... Investments
Alger American Small
Capitalization Portfolio ............ 2
Alger American Growth Portfolio ....... 2
Alger American Income &
Growth Portfolio .................... 2
2 Principal Risks
Alger American Small
Capitalization Portfolio ............ 3
Alger American Growth Portfolio ....... 3
Alger American Income &
Growth Portfolio .................... 3
3 ..... Performance
Alger American Small
Capitalization Portfolio ............ 3
Alger American Growth Portfolio ....... 3
Alger American Income &
Growth Portfolio .................... 4
4 ........... Fees and Expenses
5 ........... Management & Organization
5 ........... Shareholder Information
Distributor ........................... 5
Transfer Agent ........................ 5
Purchasing and Redeeming Fund Shares... 6
8 ........... Financial Highlights
Back Cover: How to obtain more information
<PAGE>
[GRAPHIC OMITTED]
RISK/RETURN SUMMARY: INVESTMENTS, RISKS & PERFORMANCE
INVESTMENTS: THE ALGER AMERICAN FUND
The investment goal and primary approach of each portfolio is discussed
individually below. All of the portfolios invest primarily in equity securities,
such as common or preferred stocks, which are listed on U.S. exchanges or in the
over-the-counter market. They invest primarily in "growth" stocks. The Fund's
Manager, Fred Alger Management, Inc., believes that these companies tend to fall
into one of two categories:
o 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.
o 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 company's market capitalization will dictate in which portfolio(s) it will
be placed. The market capitalization of a company is its price per share
multiplied by its number of outstanding shares.
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
GOAL
THE ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO SEEKS LONG-TERM CAPITAL
APPRECIATION.
APPROACH
It focuses on small, fast-growing companies that offer innovative products,
services or technologies to a rapidly expanding marketplace. Under normal
circumstances, the portfolio invests primarily in the equity securities of small
capitalization companies. A small capitalization company is one that has a
market capitalization within the range of the Russell(R) 2000 Growth Index or
the S&P(R) SmallCap 600 Index.
ALGER AMERICAN GROWTH PORTFOLIO
GOAL
THE ALGER AMERICAN GROWTH PORTFOLIO SEEKS LONG-TERM CAPITAL APPRECIATION.
APPROACH
It focuses on growing companies that generally have broad product lines,
markets, financial resources and depth of management. Under normal
circumstances, the portfolio invests primarily in the equity securities of large
companies. The portfolio considers a large company to have a market
capitalization of $1 billion or greater.
ALGER AMERICAN INCOME &GROWTH PORTFOLIO
GOAL
THE ALGER AMERICAN INCOME &GROWTH PORTFOLIO PRIMARILY SEEKS TO PROVIDE A HIGH
LEVEL OF DIVIDEND INCOME; ITS SECONDARY GOAL IS TO PROVIDE CAPITAL APPRECIATION.
APPROACH
The portfolio invests in dividend paying equity securities, such as common or
preferred stocks, preferably those which the Manager believes also offer
opportunities for capital appreciation.
[GRAPHIC OMITTED]
PRINCIPAL RISKS
RISKS APPLICABLE TO ALL PORTFOLIOS
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. A portfolio's
price per share will fluctuate due to changes in the market prices of its
investments. Also, a Fund 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 portfolios' investment styles and objectives, an investment in them
may be better suited to investors who seek long-term capital growth and can
tolerate fluctuations in their investment's value.
2
<PAGE>
A portfolio's trading in some stocks may be relatively short-term, meaning the
Fund 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.
There may be additional risks applicable to a specific portfolio because of its
investment approach.
RISKS APPLICABLE TO ALGER AMERICAN
SMALL CAPITALIZATION PORTFOLIO
An additional risk of investing in the portfolio is:
o the possibility of greater risk by investing in smaller, less seasoned
companies rather than larger, more established companies owing to such factors
as inexperienced management and limited financial resources
RISKS APPLICABLE TO ALGER AMERICAN
GROWTH PORTFOLIO
The portfolio's primary risks are those summarized above in "Risks Applicable to
All Portfolios".
RISKS APPLICABLE TO ALGER AMERICAN
INCOME & GROWTH PORTFOLIO
An additional risk of investing in the portfolio is:
o the possibility that companies may cut or fail to declare dividends due to
market downturns or other reasons
[GRAPHIC OMITTED]
PERFORMANCE
The following bar charts show the changes in each portfolio's performance from
year to year and give you some indication of the risks of investing in the Fund.
They assume reinvestment of dividends and distributions.
The Average Annual Total Return tables compare a portfolio's performance over
several periods with that of an appropriate benchmark index. The annual returns
assume reinvestment of dividends and distributions. Remember that how a
portfolio has performed 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.
Each index used in the tables is a broad index designed to track a particular
market or market segment. No expenses or fees are reflected in the returns for
the indexes, which are unmanaged. All returns for the indexes assume
reinvestment of dividends and interest on the underlying securities that make up
the respective index.
o S&P 500 Index(R): An index of large company common stocks considered to be
representative of the U.S. stock market in general.
o Russell 2000 Growth Index(R): An index of common stocks designed to track
performance of small capitalization companies.
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
Annual Total Return as of December 31 each year (%)
[Graph]
64.48 8.71 57.54 3.55 13.28 -4.38 44.31 4.18 11.39 15.53
- ----- ----- ----- ---- ----- ----- ----- ----- ----- -----
89 90 91 92 93 94 95 96 97 98
Best Quarter: 25.73% Q1 1991
Worst Quarter: -20.72% Q3 1990
Average Annual Total Return as of December 31, 1998
Since
Inception
1 Year 5 Years 10 Years (9/21/88)
- -------------------------------------------------------
American Small
Capitalization 15.53% 13.09% 19.85% 18.86%
Russell 2000 Growth
Index(R) 1.23% 10.22% 11.54% 11.22%
ALGER AMERICAN GROWTH PORTFOLIO
Annual Total Return as of December 31 each year (%)
[Graph]
4.14 40.39 12.38 22.47 1.45 36.37 13.35 25.75 48.07
- ---- ------ ----- ----- ---- ----- ----- ----- -----
90 91 92 93 94 95 96 97 98
Best Quarter: 25.93% Q4 1998
Worst Quarter: -16.21% Q3 1990
Average Annual Total Return as of December 31, 1998
Since
Inception
1 Year 5 Years (1/9/89)
- ----------------------------------------------------------
American Growth 48.07% 23.90% 22.03%
S&P 500 Index(R) 28.58% 24.06% 19.05%
3
<PAGE>
ALGER AMERICAN INCOME & GROWTH PORTFOLIO
Annual Total Return as of December 31 each year (%)
[Graph]
7.40 0.28 23.51 8.64 10.34 -8.28 35.13 19.68 36.29 32.39
- --- ---- ----- ---- ----- ----- ----- ----- ----- -----
89 90 91 92 93 94 95 96 97 98
Best Quarter: 21.37% Q4 1998
Worst Quarter: -13.94% Q3 1990
Average Annual Total Return as of December 31, 1998
Since
Inception
1 Year 5 Years 10 Years (11/15/88)
- -----------------------------------------------------------
American
Income & Growth 32.39% 21.76% 15.62% 15.51%
S&P 500 Index(R) 28.58% 24.06% 19.21% 19.06%
[GRAPHIC OMITTED]
FEES AND EXPENSES
Investors incur certain fees and expenses in connection with an investment in
the Fund. The following table shows the fees and expenses that you may incur if
you buy and hold shares of the portfolios.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING
EXPENSES
(expenses that are deducted
from Fund assets)
SHAREHOLDER FEES
(fees paid directly from TOTAL ANNUAL FUND
your investment) Management Fees Distribution Fees Other Expenses OPERATING EXPENSES
=========================================================================================================================
<S> <C> <C> <C> <C> <C>
Alger American Small None .85% None .04% .89%
Capitalization
Portfolio
- --------------------------------------------------------------------------------------------------------------------------
Alger American None .75% None .04% .79%
Growth
Portfolio
- --------------------------------------------------------------------------------------------------------------------------
Alger American None .635% None .075% .70%
Income & Growth
Portfolio
</TABLE>
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 Fund with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the Fund for the time periods
indicated. The example also assumes that your investment has a 5% return each
year and that the Fund'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:
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
ALGER AMERICAN SMALL $91 $284 $493 $1,096
CAPITALIZATION
PORTFOLIO
- --------------------------------------------------------------------------------
ALGER AMERICAN $81 $252 $439 $978
GROWTH
PORTFOLIO
- --------------------------------------------------------------------------------
ALGER AMERICAN $72 $224 $390 $871
INCOME & GROWTH
PORTFOLIO
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.
ADDITIONAL INFORMATION ABOUT
THE FUND'S INVESTMENTS
Each 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 a temporary unacceptable risk of loss, rather than
directly to promote the portfolio's investment objective. The portfolio may not
achieve its objective during such periods.
Other securities the portfolios may invest in are discussed in the Fund's
Statement of Additional Information (see back cover).
4
<PAGE>
[GRAPHIC OMITTED]
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 each
portfolio's assets according to its goal and for placing orders with
broker-dealers to purchase and sell securities on behalf of the portfolios. The
Fund has had the same manager since inception and, for the most recent fiscal
year, the portfolios paid the Manager fees at these annual rates based on a
percentage of daily net assets: Small Capitalization Portfolio--.85%; Growth
Portfolio--.75%; Income & Growth Portfolio-- .625%.
PORTFOLIO MANAGERS
David Alger, Seilai Khoo and Ron Tartaro are the individuals responsible for the
day-to-day management of the portfolios' investments. Mr. Alger, a manager of
all of the portfolios since their inception, has been employed by the Manager as
Executive Vice President and Director of Research since 1971, and as President
since 1995. Ms. Khoo, a co-manager of the Small Capitalization Portfolio, has
been employed by the Manager since 1989, as a senior research analyst until 1995
and as a Senior Vice President and co-manager since 1995. Mr. Tartaro, a
co-manager of the Growth and Income & Growth Portfolios, 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.
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 each
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 each 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
portfolios are valued on the basis of amortized cost.
DIVIDENDS AND DISTRIBUTIONS
The Fund declares and pays dividends and distributions by the portfolios
annually. The Fund expects that these annual payments to shareholders will
consist of both capital gains and net investment income.
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
5
<PAGE>
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.
NAV (NET ASSET VALUE) IS COMPUTED BY ADDING TOGETHER THE VALUE OF THE
PORTFOLIO'S INVESTMENTS PLUS CASH AND OTHER ASSETS, SUBTRACTING ITS LIABILITIES
AND THEN DIVIDING THE RESULT BY THE NUMBER OF ITS OUTSTANDING SHARES.
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 a 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.
6
<PAGE>
[GRAPHIC OMITTED]
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand each
portfolio's financial performance for the periods shown. Certain information
reflects financial results for a single Fund share. The total returns in the
table represent the rate that an investor would have earned or lost on an
investment in the Fund (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.
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR
<TABLE>
<CAPTION>
Year Ended December 31,
- ---------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 43.75 $ 40.91 $ 39.41 $ 27.31 $ 30.88
---------- -------- ---------- -------- --------
Net investment income (loss) (0.02) (0.05)(i) (0.04)(i) (0.09) (0.03)(i)
Net realized and unrealized gain (loss)
on investments 6.30 4.45 1.70 12.19 (1.45)
---------- -------- ---------- -------- --------
Total from investment operations 6.28 4.40 1.66 12.10 (1.48)
---------- -------- ---------- -------- --------
Dividends from net investment income -- -- -- -- --
Distributions from net realized gains (6.06) (1.56) (0.16) -- (2.09)
---------- -------- ---------- -------- --------
Total distributions (6.06) (1.56) (0.16) -- (2.09)
---------- -------- ---------- -------- --------
Net asset value, end of year $ 43.97 $ 43.75 $ 40.91 $ 39.41 $ 27.31
========== ======== ========== ======== ========
Total Return 15.53% 11.39% 4.18% 44.31% (4.38%)
========== ======== ========== ======== ========
Ratios and Supplemental Data:
Net assets, end of year
(000's omitted) 1,216,584 $997,586 $1,469,518 $984,212 $397,037
========== ======== ========== ======== ========
Ratio of expenses to average net assets 0.89% 0.89% 0.88% 0.92% 0.96%
========== ======== ========== ======== ========
Ratio of net investment income (loss)
to average net assets (0.20%) (0.12%) (0.09%) (0.48%) (0.10%)
========== ======== ========== ======== ========
Portfolio Turnover Rate 142.90% 104.43% 110.04% 80.66% 117.61%
========== ======== ========== ======== ========
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
- ---------------------------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 27.26 $ 26.79 $ 17.02 $ 15.79 $ 9.60
-------- -------- -------- -------- --------
Net investment income (loss) (0.05) (0.06) (0.03) 0.02 0.04
Net realized and unrealized gain (loss)
on investments 3.67 0.91 9.82 1.35 6.15
-------- -------- -------- -------- --------
Total from investment operations 3.62 0.85 9.79 1.37 6.19
-------- -------- -------- -------- --------
Dividends from net investment income -- -- (0.02) (0.01) --
Distributions from net realized gains -- (0.38) -- (0.13) --
-------- -------- -------- -------- --------
Total distributions -- (0.38) (0.02) (0.14) --
-------- -------- -------- -------- --------
Net asset value, end of year $ 30.88 $ 27.26 $ 26.79 $ 17.02 $ 15.79
======== ======== ======== ======== ========
Total Return 13.28% 3.55% 57.54% 8.71% 64.48%(ii)
======== ======== ======== ======== ========
Ratios and Supplemental Data:
Net assets, end of year (000's omitted) $238,850 $135,718 $ 56,798 $ 7,149 $ 569
======== ======== ======== ======== ========
Ratio of expenses to average net assets 1.03% 0.98% 1.06% 1.50%(iii) 1.50%(iii)
======== ======== ======== ======== ========
Ratio of net investment income (loss)
to average net assets (0.35%) (0.37%) (0.12%) 0.50% 1.11%
======== ======== ======== ======== ========
Portfolio Turnover Rate 148.07% 108.06% 125.90% 132.46% 133.61%
======== ======== ======== ======== ========
</TABLE>
(i) Amount was computed based on average shares outstanding during the year
(ii) Unaudited
(iii) Amounts have been reduced by 0.33% and 9.15% for the years ended December
31, 1990 and 1989, respectively, due to expense reimbursements.
9
<PAGE>
ALGER AMERICAN GROWTH PORTFOLIO
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 $ 42.76 $ 34.33 $ 31.16 $ 23.13 $ 24.67
---------- ---------- -------- -------- --------
Net investment income (loss) 0.09 0.13 0.12 0.02 0.07
Net realized and unrealized gain (loss)
on investments 18.32 8.66 4.00 8.33 0.15
---------- ---------- -------- -------- --------
Total from investment operations 18.41 8.79 4.12 8.35 0.22
---------- ---------- -------- -------- --------
Dividends from net investment income (0.13) (0.13) (0.02) (0.07) (0.03)
Distributions from net realized gains (7.82) (0.23) (0.93) (0.25) (1.73)
---------- ---------- -------- -------- --------
Total Distributions (7.95) (0.36) (0.95) (0.32) (1.76)
---------- ---------- -------- -------- --------
Net asset value, end of period $ 53.22 $ 42.76 $ 34.33 $ 31.16 $ 23.13
========== ========== ======== ======== ========
Total Return 48.07% 25.75% 13.35% 36.37% 1.45%
========== ========== ======== ======== ========
Ratios and Supplemental Data:
Net assets, end of period
(000's omitted) $1,905,719 $1,072,529 $991,028 $502,974 $150,390
========== ========== ======== ======== ========
Ratio of expenses to average net assets 0.79% 0.79% 0.79% 0.85% 0.86%
========== ========== ======== ======== ========
Ratio of net investment income (loss)
to average net assets 0.25% 0.27% 0.50% 0.18% 0.48%
========== ========== ======== ======== ========
Portfolio Turnover Rate 127.38% 129.50% 82.86% 118.33% 111.76%
========== ========== ======== ======== ========
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
From
January 9, 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 $ 20.17 $ 18.00 $ 12.86 $ 12.41 $ 10.00
-------- -------- -------- -------- --------
Net investment income (loss) 0.03 0.03 0.08(i) 0.07 0.09
Net realized and unrealized gain (loss)
on investments 4.50 2.19 5.11 0.44 2.32
-------- -------- -------- -------- --------
Total from investment operations 4.53 2.22 5.19 0.51 2.41
-------- -------- -------- -------- --------
Dividends from net investment income (0.03) (0.03) (0.05) (0.06) --
Distributions from net realized gains -- (0.02) -- -- --
-------- -------- -------- -------- --------
Total Distributions (0.03) (0.05) (0.05) (0.06) --
-------- -------- -------- -------- --------
Net asset value, end of period $ 24.67 $ 20.17 $ 18.00 $ 12.86 $ 12.41
======== ======== ======== ======== ========
Total Return 22.47% 12.38% 40.39% 4.14% 24.10%(iii)
======== ======== ======== ======== ========
Ratios and Supplemental Data:
Net assets, end of period
000's omitted) $ 74,878 $ 30,316 $ 10,094 $ 1,228 $ 171
======== ======== ======== ======== ========
Ratio of expenses to average net assets 0.97% 0.99% 1.29% 1.50%(iv) 1.50%(iv)
======== ======== ======== ======== ========
Ratio of net investment income (loss)
to average net assets 0.25% 0.33% 0.52% 1.69% 1.30%
======== ======== ======== ======== ========
Portfolio Turnover Rate 112.64% 63.91% 58.95% 86.77% 79.59%
======== ======== ======== ======== ========
</TABLE>
(i) Amount was computed based on average shares outstanding during the period.
(ii) Ratios have been annualized; total return has not been annualized
(iii) Unaudited
(iv) Amounts have been reduced by 2.31% and 7.32% for the years ended December
31, 1990 and 1989, respectively, due to expense reimbursements.
11
<PAGE>
ALGER AMERICAN INCOME & GROWTH PORTFOLIO
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR
<TABLE>
<CAPTION>
Year Ended December 31,
- -------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 10.99 $ 8.42 $ 17.79 $ 13.30 $ 15.31
-------- -------- -------- -------- --------
Net investment income 0.03 0.03 0.09(ii) 0.11(ii) 0.17
Net realized and unrealized gain (loss)
on investments 3.30 2.94 1.87 4.54 (1.47)
-------- -------- -------- -------- --------
Total from investment operations 3.33 2.97 1.96 4.65 (1.30)
-------- -------- -------- -------- --------
Dividends from net investment income (0.04) (0.04) (0.33) (0.16) (0.15)
Distributions from net realized gains (1.16) (0.36) (11.00) -- (0.56)
-------- -------- -------- -------- --------
Total Distributions (1.20) (0.40) (11.33) (0.16) (0.71)
-------- -------- -------- -------- --------
Net asset value, end of year $ 13.12 $ 10.99 $ 8.42 $ 17.79 $ 13.30
======== ======== ======== ======== ========
Total Return 32.39% 36.29% 19.68% 35.13% (8.28%)
======== ======== ======== ======== ========
Ratios and Supplemental Data:
Net assets, end of period
(000's omitted) $ 77,926 $ 47,399 $ 20,910 $ 8,639 $ 29,135
======== ======== ======== ======== ========
Ratio of expenses to average net assets 0.70% 0.74% 0.81% 0.75% 0.75%
======== ======== ======== ======== ========
Decrease reflected in above expense
ratios due to expense reimbursements -- -- -- -- --
======== ======== ======== ======== ========
Ratio of net investment income to
average net assets 0.31% 0.56% 0.94% 0.61% 1.22%
======== ======== ======== ======== ========
Portfolio Turnover Rate 131.67% 150.09% 121.60% 164.05% 177.97%
======== ======== ======== ======== ========
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
- ---------------------------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 13.93 $ 13.08 $ 10.67 $ 10.74 $ 10.00
-------- -------- -------- -------- --------
Net investment income 0.07 0.08 0.09 0.11 0.18
Net realized and unrealized gain (loss)
on investments 1.37 1.02 2.41 (0.08) 0.56
-------- -------- -------- -------- --------
Total from investment operations 1.44 1.10 2.50 0.03 0.74
-------- -------- -------- -------- --------
Dividends from net investment income (0.06) (0.12) (0.09) (0.10) --
Distributions from net realized gains -- (0.13) -- -- --
-------- -------- -------- -------- --------
Total Distributions (0.06) (0.25) (0.09) (0.10) --
-------- -------- -------- -------- --------
Net asset value, end of year $ 15.31 $ 13.93 $ 13.08 $ 10.67 $ 10.74
======== ======== ======== ======== ========
Total Return 10.34% 8.64% 23.51% 0.28% 7.40%(i)
======== ======== ======== ======== ========
Ratios and Supplemental Data:
Net assets, end of period
(000's omitted) $ 31,895 $ 8,671 $ 2,663 $ 436 $ 98
======== ======== ======== ======== ========
Ratio of expenses to average net assets 0.97% 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%
======== ======== ======== ======== ========
Ratio of net investment income to
average net assets 1.51% 1.62% 2.54% 3.61% 7.36%
======== ======== ======== ======== ========
Portfolio Turnover Rate 105.80% 100.62% 61.11% 56.90% --
======== ======== ======== ======== ========
</TABLE>
(i) Unaudited.
(ii) Amount was computed based on average shares outstanding during the period.
13
<PAGE>
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
<PAGE>
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 SMALL CAPITALIZATION 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 Fund 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 SMALL CAPITALIZATION PORTFOLIO
PROSPECTUS
MAY 1, 1999
TABLE OF CONTENTS
- ------------------------------------------------------
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
<PAGE>
This page intentionally left blank.
<PAGE>
[GRAPHIC OMITTED]
THE ALGER AMERICAN FUND--ALGER
AMERICAN SMALL CAPITALIZATION PORTFOLIO
RISK/RETURN SUMMARY: INVESTMENTS, RISKS & PERFORMANCE
INVESTMENT GOAL AND APPROACH
THE ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO SEEKS LONG-TERM CAPITAL
APPRECIATION.
It 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:
o 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.
o 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.
It focuses on small, fast-growing companies that offer innovative products,
services or technologies to a rapidly expanding marketplace. Under normal
circumstances, the portfolio invests primarily in the equity securities of small
capitalization companies. A small capitalization company is one that has a
market capitalization within the range of the Russell(R) 2000 Growth Index or
the S&P(R) SmallCap 600 Index. The market capitalization of a company is its
price per share multiplied by its number of outstanding shares.
[GRAPHIC OMITTED]
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 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.
In addition, there is the possibility of greater risk because the portfolio
invests in smaller, less seasoned companies rather than larger, more established
companies. Increased risk may result from such factors as inexperienced
management and limited financial resources.
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.
3
<PAGE>
[GRAPHIC OMITTED]
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.
o Russell 2000 Growth Index(R): An index of common stocks designed to track
performance of small capitalization companies. The index is unmanaged and no
expenses or fees are reflected in the returns for the index. The returns for
the index assume reinvestment of dividends of the underlying securities that
make up the index.
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
Annual Total Return as of December 31 each year (%)
64.48 8.71 57.54 3.55 13.28 -4.38 44.31 4.18 11.39 15.53
- ----- ----- ----- ---- ----- ----- ----- ----- ----- -----
89 90 91 92 93 94 95 96 97 98
Best Quarter: 25.73% Q1 1991
Worst Quarter: -20.72% Q3 1990
Average Annual Total Return as of December 31, 1998
Since
Inception
1 Year 5 Years 10 Years (9/21/88)
- ------------------------------------------------------
American Small
Capitalization 15.53% 13.09% 19.85% 18.86%
Russell 2000
Growth Index 1.23% 10.22% 11.54% 11.22%
[GRAPHIC OMITTED]
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.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING
EXPENSES
(expenses that are deducted
from Fund assets)
SHAREHOLDER FEES
(fees paid directly from TOTAL ANNUAL FUND
your investment) Management Fees Distribution Fees Other Expenses OPERATING EXPENSES
=========================================================================================================================
<S> <C> <C> <C> <C> <C>
Alger American Small None .85% None .04% .89%
Capitalization
Portfolio
</TABLE>
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:
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
ALGER AMERICAN SMALL $91 $284 $493 $1,096
CAPITALIZATION
PORTFOLIO
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.
4
<PAGE>
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).
[GRAPHIC OMITTED]
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 .85%.
PORTFOLIO MANAGERS
David Alger and Seilai Khoo 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. Ms.
Khoo has been employed by the Manager since 1989, as a senior research analyst
until 1995 and as a Senior Vice President and co-manager since 1995.
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.
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 59 1/2 are sub-
5
<PAGE>
ject 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.
NAV (NET ASSET VALUE) IS COMPUTED BY ADDING TOGETHER THE VALUE OF THE
PORTFOLIO'S INVESTMENTS PLUS CASH AND OTHER ASSETS, SUBTRACTING ITS LIABILITIES
AND THEN DIVIDING THE RESULT BY THE NUMBER OF ITS OUTSTANDING SHARES.
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.
6
<PAGE>
[GRAPHIC OMITTED]
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 Fund share. The total returns in the
table represent the rate that an investor would have earned or lost on an
investment in the Fund (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, 1998 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.
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR
<TABLE>
<CAPTION>
Year Ended December 31,
- ---------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 43.75 $ 40.91 $ 39.41 $ 27.31 $ 30.88
---------- -------- ---------- -------- --------
Net investment income (loss) (0.02) (0.05)(i) (0.04)(i) (0.09) (0.03)(i)
Net realized and unrealized gain (loss)
on investments 6.30 4.45 1.70 12.19 (1.45)
---------- -------- ---------- -------- --------
Total from investment operations 6.28 4.40 1.66 12.10 (1.48)
---------- -------- ---------- -------- --------
Dividends from net investment income -- -- -- -- --
Distributions from net realized gains (6.06) (1.56) (0.16) -- (2.09)
---------- -------- ---------- -------- --------
Total distributions (6.06) (1.56) (0.16) -- (2.09)
---------- -------- ---------- -------- --------
Net asset value, end of year $ 43.97 $ 43.75 $ 40.91 $ 39.41 $ 27.31
========== ======== ========== ======== ========
Total Return 15.53% 11.39% 4.18% 44.31% (4.38%)
========== ======== ========== ======== ========
Ratios and Supplemental Data:
Net assets, end of year
(000's omitted) 1,216,584 $997,586 $1,469,518 $984,212 $397,037
========== ======== ========== ======== ========
Ratio of expenses to average net assets 0.89% 0.89% 0.88% 0.92% 0.96%
========== ======== ========== ======== ========
Ratio of net investment income (loss)
to average net assets (0.20%) (0.12%) (0.09%) (0.48%) (0.10%)
========== ======== ========== ======== ========
Portfolio Turnover Rate 142.90% 104.43% 110.04% 80.66% 117.61%
========== ======== ========== ======== ========
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
- ---------------------------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 27.26 $ 26.79 $ 17.02 $ 15.79 $ 9.60
-------- -------- -------- -------- --------
Net investment income (loss) (0.05) (0.06) (0.03) 0.02 0.04
Net realized and unrealized gain (loss)
on investments 3.67 0.91 9.82 1.35 6.15
-------- -------- -------- -------- --------
Total from investment operations 3.62 0.85 9.79 1.37 6.19
-------- -------- -------- -------- --------
Dividends from net investment income -- -- (0.02) (0.01) --
Distributions from net realized gains -- (0.38) -- (0.13) --
-------- -------- -------- -------- --------
Total distributions -- (0.38) (0.02) (0.14) --
-------- -------- -------- -------- --------
Net asset value, end of year $ 30.88 $ 27.26 $ 26.79 $ 17.02 $ 15.79
======== ======== ======== ======== ========
Total Return 13.28% 3.55% 57.54% 8.71% 64.48%(ii)
======== ======== ======== ======== ========
Ratios and Supplemental Data:
Net assets, end of year (000's omitted) $238,850 $135,718 $ 56,798 $ 7,149 $ 569
======== ======== ======== ======== ========
Ratio of expenses to average net assets 1.03% 0.98% 1.06% 1.50%(iii) 1.50%(iii)
======== ======== ======== ======== ========
Ratio of net investment income (loss)
to average net assets (0.35%) (0.37%) (0.12%) 0.50% 1.11%
======== ======== ======== ======== ========
Portfolio Turnover Rate 148.07% 108.06% 125.90% 132.46% 133.61%
======== ======== ======== ======== ========
</TABLE>
(i) Amount was computed based on average shares outstanding during the year
(ii) Unaudited
(iii) Amounts have been reduced by 0.33% and 9.15% for the years ended December
31, 1990 and 1989, respectively, due to expense reimbursements.
8
<PAGE>
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 to 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
<PAGE>
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 GROWTH 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 Fund 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 GROWTH PORTFOLIO
PROSPECTUS
MAY 1, 1999
TABLE OF CONTENTS
- -------------------------------------------------------------------
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
<PAGE>
[GRAPHIC OMITTED]
RISK/RETURN SUMMARY: INVESTMENTS, RISKS & PERFORMANCE
THE ALGER AMERICAN FUND--
ALGER AMERICAN GROWTH PORTFOLIO
INVESTMENT GOAL AND APPROACH
THE ALGER AMERICAN GROWTH PORTFOLIO SEEKS LONG-TERM CAPITAL APPRECIATION.
It 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:
o 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.
o 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.
It focuses on growing companies that generally have broad product lines,
markets, financial resources and depth of management. Under normal
circumstances, the portfolio invests primarily in the equity securities of large
companies. The portfolio considers a large company to have a market
capitalization of $1 billion or greater. The market capitalization of a company
is its price per share multiplied by its number of shares outstanding.
[GRAPHIC OMITTED]
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 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 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.
[GRAPHIC OMITTED]
PERFORMANCE
The following bar chart shows changes in the portfolio's performance from year
to year and gives you some indication of the risks of investing in the
portfolio.
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 how the portfolio has performed 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.
2
<PAGE>
o S&P 500(R) Index: An index of large company common stocks considered to be
representative of the U.S. stock market in general. The index is unmanaged
and no expenses or fees are reflected in the returns for the index. The
returns for the index assume reinvestment of dividends of the underlying
securities that make up the index.
ALGER AMERICAN GROWTH PORTFOLIO
Annual Total Return as of December 31 each year (%)
4.14 40.39 12.38 22.47 1.45 36.37 13.35 25.75 48.07
- ---- ------ ----- ----- ---- ----- ----- ----- -----
90 91 92 93 94 95 96 97 98
Best Quarter: 25.93% Q4 1998
Worst Quarter: -16.21% Q3 1990
Average Annual Total Return as of December 31, 1998
Since
Inception
1 Year 5 Years (1/9/89)
- ------------------------------------------------------
American Growth 48.07% 23.90% 22.03%
S&P 500 Index 28.58% 24.06% 19.05%
[GRAPHIC OMITTED]
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.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING
EXPENSES
(expenses that are deducted
from Fund assets)
SHAREHOLDER FEES
(fees paid directly from TOTAL ANNUAL FUND
your investment) Management Fees Distribution Fees Other Expenses OPERATING EXPENSES
=========================================================================================================================
<S> <C> <C> <C> <C> <C>
Alger American None .75% None .04% .79%
Growth
Portfolio
</TABLE>
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:
1 Year 3 Years 5 Years 10 Years
- -------------------------------------------------------------------------------
Alger American $81 $252 $439 $978
Growth
Portfolio
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.
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).
3
<PAGE>
[GRAPHIC OMITTED]
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 and Ron Tartaro 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.
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.
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
<PAGE>
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
distributions 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 59-1/2 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.
NAV (NET ASSET VALUE) IS COMPUTED BY ADDING TOGETHER THE VALUE OF THE
PORTFOLIO'S INVESTMENTS PLUS CASH AND OTHER ASSETS, SUBTRACTING ITS LIABILITIES
AND THEN DIVIDING THE RESULT BY THE NUMBER OF ITS OUTSTANDING SHARES.
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
<PAGE>
GRAPHIC OMITTED]
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 Fund share. The total returns in the
table represent the rate that an investor would have earned or lost on an
investment in the Fund (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.
ALGER AMERICAN GROWTH PORTFOLIO
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 $ 42.76 $ 34.33 $ 31.16 $ 23.13 $ 24.67
---------- ---------- -------- -------- --------
Net investment income (loss) 0.09 0.13 0.12 0.02 0.07
Net realized and unrealized gain (loss)
on investments 18.32 8.66 4.00 8.33 0.15
---------- ---------- -------- -------- --------
Total from investment operations 18.41 8.79 4.12 8.35 0.22
---------- ---------- -------- -------- --------
Dividends from net investment income (0.13) (0.13) (0.02) (0.07) (0.03)
Distributions from net realized gains (7.82) (0.23) (0.93) (0.25) (1.73)
---------- ---------- -------- -------- --------
Total Distributions (7.95) (0.36) (0.95) (0.32) (1.76)
---------- ---------- -------- -------- --------
Net asset value, end of period $ 53.22 $ 42.76 $ 34.33 $ 31.16 $ 23.13
========== ========== ======== ======== ========
Total Return 48.07% 25.75% 13.35% 36.37% 1.45%
========== ========== ======== ======== ========
Ratios and Supplemental Data:
Net assets, end of period
(000's omitted) $1,905,719 $1,072,529 $991,028 $502,974 $150,390
========== ========== ======== ======== ========
RATIO OF EXPENSES TO AVERAGE NET ASSETS 0.79% 0.79% 0.79% 0.85% 0.86%
========== ========== ======== ======== ========
Ratio of net investment income (loss)
to average net assets 0.25% 0.27% 0.50% 0.18% 0.48%
========== ========== ======== ======== ========
Portfolio Turnover Rate 127.38% 129.50% 82.86% 118.33% 111.76%
========== ========== ======== ======== ========
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
From
January 9, 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 $ 20.17 $ 18.00 $ 12.86 $ 12.41 $ 10.00
-------- -------- -------- -------- --------
Net investment income (loss) 0.03 0.03 0.08(i) 0.07 0.09
Net realized and unrealized gain (loss)
on investments 4.50 2.19 5.11 0.44 2.32
-------- -------- -------- -------- --------
Total from investment operations 4.53 2.22 5.19 0.51 2.41
-------- -------- -------- -------- --------
Dividends from net investment income (0.03) (0.03) (0.05) (0.06) --
Distributions from net realized gains -- (0.02) -- -- --
-------- -------- -------- -------- --------
Total Distributions (0.03) (0.05) (0.05) (0.06) --
-------- -------- -------- -------- --------
Net asset value, end of period $ 24.67 $ 20.17 $ 18.00 $ 12.86 $ 12.41
======== ======== ======== ======== ========
Total Return 22.47% 12.38% 40.39% 4.14% 24.10%(iii)
======== ======== ======== ======== ========
Ratios and Supplemental Data:
Net assets, end of period
000's omitted) $ 74,878 $ 30,316 $ 10,094 $ 1,228 $ 171
======== ======== ======== ======== ========
Ratio of expenses to average net assets 0.97% 0.99% 1.29% 1.50%(iv) 1.50%(iv)
======== ======== ======== ======== ========
Ratio of net investment income (loss)
to average net assets 0.25% 0.33% 0.52% 1.69% 1.30%
======== ======== ======== ======== ========
Portfolio Turnover Rate 112.64% 63.91% 58.95% 86.77% 79.59%
======== ======== ======== ======== ========
</TABLE>
(i) Amount was computed based on average shares outstanding during the period.
(ii) Ratios have been annualized; total return has not been annualized
(iii) Unaudited
(iv) Amounts have been reduced by 2.31% and 7.32% for the years ended December
31, 1990 and 1989, respectively, due to expense reimbursements.
7
<PAGE>
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 to 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
<PAGE>
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 INCOME & GROWTH 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 Fund 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 INCOME &
GROWTH PORTFOLIO
PROSPECTUS
MAY 1, 1999
TABLE OF CONTENTS
- ----------------------------------------------------
3 .......... Risk/Return Summary: Investments,
Risks & Performance
4 .......... Fees and Expenses
4 .......... Management & Organization
5 .......... Shareholder Information
Purchasing and Redeeming
Fund Shares ..................... 5
Financial Highlights ............ 6
Back Cover: How to obtain more information
<PAGE>
[This page intentionally left blank]
<PAGE>
[GRAPHIC OMITTED]
RISK/RETURN SUMMARY: INVESTMENTS, RISKS & PERFORMANCE
THE ALGER AMERICAN FUND-
ALGER AMERICAN INCOME & GROWTH PORTFOLIO
INVESTMENT GOAL AND APPROACH
THE ALGER AMERICAN INCOME & GROWTH PORTFOLIO SEEKS TO PROVIDE A HIGH LEVEL OF
DIVIDEND INCOME; ITS SECONDARY GOAL IS TO PROVIDE CAPITAL APPRECIATION.
It 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:
o 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.
o 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 invests in dividend paying equity securities, such as common or
preferred stocks, preferably those which the Manager believes also offer
opportunities for capital appreciation.
[GRAPHIC OMITTED]
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. 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
portfolio's investment styles and objectives, 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.
In addition, there is the possibility that companies may cut or fail to declare
dividends due to market downturns or other reasons.
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.
[GRAPHIC OMITTED]
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 performance reflects 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. The index is unmanaged and
no expenses or fees are reflected in the returns for the index. The returns for
the index assume reinvestment of dividends of the underlying securities that
make up the index.
3
<PAGE>
ALGER AMERICAN INCOME & GROWTH PORTFOLIO
Annual Total Return as of December 31 each year (%)
[Graph]
7.40 0.28 23.51 8.64 10.34 -8.28 35.13 19.68 36.29 32.39
- --- ---- ----- ---- ----- ----- ----- ----- ----- -----
89 90 91 92 93 94 95 96 97 98
Best Quarter: 21.37% Q4 1998
Worst Quarter: -13.94% Q3 1990
Average Annual Total Return as of December 31, 1998
Since
Inception
1 Year 5 Years 10 Years (11/15/88)
- -----------------------------------------------------------
American
Income & Growth 32.39% 21.76% 15.62% 15.51%
S&P 500 Index(R) 28.58% 24.06% 19.21% 19.06%
[GRAPHIC OMITTED]
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.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING
EXPENSES
(expenses that are deducted
from Fund assets)
SHAREHOLDER FEES
(fees paid directly from TOTAL ANNUAL FUND
your investment) Management Fees Distribution Fees Other Expenses OPERATING EXPENSES
=========================================================================================================================
<S> <C> <C> <C> <C> <C>
Alger American None .635% None .075% .70%
Income & Growth
Portfolio
</TABLE>
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:
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Alger American $72 $224 $390 $871
Income & Growth
Portfolio
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.
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).
[GRAPHIC OMITTED]
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
4
<PAGE>
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 .625%.
PORTFOLIO MANAGERS
David Alger and Ron Tartaro 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.
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.
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.
NAV (NET ASSET VALUE) IS COMPUTED BY ADDING TOGETHER THE VALUE OF THE
PORTFOLIO'S INVESTMENTS PLUS CASH AND OTHER ASSETS, SUBTRACTING ITS LIABILITIES
AND THEN DIVIDING THE RESULT BY THE NUMBER OF ITS OUTSTANDING SHARES.
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
<PAGE>
[GRAPHIC OMITTED]
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand each
portfolio's financial performance for the periods shown. Certain information
reflects financial results for a single Fund share. The total returns in the
table represent the rate that an investor would have earned or lost on an
investment in the Fund (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.
ALGER AMERICAN INCOME & GROWTH PORTFOLIO
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR
<TABLE>
<CAPTION>
Year Ended December 31,
- -------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 10.99 $ 8.42 $ 17.79 $ 13.30 $ 15.31
-------- -------- -------- -------- --------
Net investment income 0.03 0.03 0.09(ii) 0.11(ii) 0.17
Net realized and unrealized gain (loss)
on investments 3.30 2.94 1.87 4.54 (1.47)
-------- -------- -------- -------- --------
Total from investment operations 3.33 2.97 1.96 4.65 (1.30)
-------- -------- -------- -------- --------
Dividends from net investment income (0.04) (0.04) (0.33) (0.16) (0.15)
Distributions from net realized gains (1.16) (0.36) (11.00) -- (0.56)
-------- -------- -------- -------- --------
Total Distributions (1.20) (0.40) (11.33) (0.16) (0.71)
-------- -------- -------- -------- --------
Net asset value, end of year $ 13.12 $ 10.99 $ 8.42 $ 17.79 $ 13.30
======== ======== ======== ======== ========
Total Return 32.39% 36.29% 19.68% 35.13% (8.28%)
======== ======== ======== ======== ========
Ratios and Supplemental Data:
Net assets, end of period
(000's omitted) $ 77,926 $ 47,399 $ 20,910 $ 8,639 $ 29,135
======== ======== ======== ======== ========
Ratio of expenses to average net assets 0.70% 0.74% 0.81% 0.75% 0.75%
======== ======== ======== ======== ========
Decrease reflected in above expense
ratios due to expense reimbursements -- -- -- -- --
======== ======== ======== ======== ========
Ratio of net investment income to
average net assets 0.31% 0.56% 0.94% 0.61% 1.22%
======== ======== ======== ======== ========
Portfolio Turnover Rate 131.67% 150.09% 121.60% 164.05% 177.97%
======== ======== ======== ======== ========
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
- ---------------------------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 13.93 $ 13.08 $ 10.67 $ 10.74 $ 10.00
-------- -------- -------- -------- --------
Net investment income 0.07 0.08 0.09 0.11 0.18
Net realized and unrealized gain (loss)
on investments 1.37 1.02 2.41 (0.08) 0.56
-------- -------- -------- -------- --------
Total from investment operations 1.44 1.10 2.50 0.03 0.74
-------- -------- -------- -------- --------
Dividends from net investment income (0.06) (0.12) (0.09) (0.10) --
Distributions from net realized gains -- (0.13) -- -- --
-------- -------- -------- -------- --------
Total Distributions (0.06) (0.25) (0.09) (0.10) --
-------- -------- -------- -------- --------
Net asset value, end of year $ 15.31 $ 13.93 $ 13.08 $ 10.67 $ 10.74
======== ======== ======== ======== ========
Total Return 10.34% 8.64% 23.51% 0.28% 7.40%(i)
======== ======== ======== ======== ========
Ratios and Supplemental Data:
Net assets, end of period
(000's omitted) $ 31,895 $ 8,671 $ 2,663 $ 436 $ 98
======== ======== ======== ======== ========
Ratio of expenses to average net assets 0.97% 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%
======== ======== ======== ======== ========
Ratio of net investment income to
average net assets 1.51% 1.62% 2.54% 3.61% 7.36%
======== ======== ======== ======== ========
Portfolio Turnover Rate 105.80% 100.62% 61.11% 56.90% --
======== ======== ======== ======== ========
</TABLE>
(i) Unaudited.
(ii) Amount was computed based on average shares outstanding during the period.
7
<PAGE>
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]
<PAGE>
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 MIDCAP GROWTH 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 Fund 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 MIDCAP GROWTH PORTFOLIO
PROSPECTUS
MAY 1, 1999
TABLE OF CONTENTS
- -----------------------------------------------------------------
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
<PAGE>
[GRAPHIC OMITTED]
THE ALGER AMERICAN FUND-
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
RISK/RETURN SUMMARY: INVESTMENTS, RISKS & PERFORMANCE
INVESTMENT GOAL AND APPROACH
THE ALGER AMERICAN MIDCAP GROWTH PORTFOLIO SEEKS LONG-TERM CAPITAL APPRECIATION.
It 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:
o 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.
o 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.
It focuses on midsize companies with promising growth potential. Under normal
circumstances, the portfolio invests primarily in the equity securities of
companies having a market capitalization within the range of companies in the
S&P(R) MidCap 400 Index. The market capitalization of a company is its price per
share multiplied by its number of outstanding shares.
[GRAPHIC OMITTED]
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 portfolio's investment styles and objectives, 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.
In addition, there is the possibility of greater risk because the portfolio
invests in medium-sized companies rather than larger, more established
companies. Increased risk may result from such factors as inexperienced
management and limited financial resources.
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
<PAGE>
[GRAPHIC OMITTED]
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.
o S&P Midcap 400 Index(R): An index of common stocks designed to track
performance of medium capitalization companies. The index is unmanaged and no
expenses or fees are reflected in the returns for the index. The returns for
the index assume reinvestment of dividends of the underlying securities that
make up the index.
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
Annual Total Return as of December 31 each year (%)
- -1.54 44.45 11.9 15.01 30.3
- ----- ----- ---- ----- ----
94 95 96 97 98
Best Quarter: 27.07% Q4 1998
Worst Quarter: -14.91% Q3 1998
Average Annual Total Return as of December 31, 1998
Since
Inception
1 Year 5 Years (5/3/93)
- ------------------------------------------------------
American MidCap 30.30% 18.98% 23.50%
S&P Midcap 400 Index 19.11% 18.84% 18.99%
[GRAPHIC OMITTED]
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.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING
EXPENSES
(expenses that are deducted
from Fund assets)
SHAREHOLDER FEES
(fees paid directly from TOTAL ANNUAL FUND
your investment) Management Fees Distribution Fees Other Expenses OPERATING EXPENSES
=========================================================================================================================
<S> <C> <C> <C> <C> <C>
Alger American None .80% None .04% .84%
MidCap Growth
Portfolio
</TABLE>
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 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:
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Alger American $86 $268 $466 $1,037
MidCap Growth
Portfolio
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
<PAGE>
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).
[GRAPHIC OMITTED]
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 Fund 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 .80%.
PORTFOLIO MANAGERS
David Alger and Ron Tartaro 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.
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
<PAGE>
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 59-1/2 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.
NAV (NET ASSET VALUE) IS COMPUTED BY ADDING TOGETHER THE VALUE OF THE
PORTFOLIO'S INVESTMENTS PLUS CASH AND OTHER ASSETS, SUBTRACTING ITS LIABILITIES
AND THEN DIVIDING THE RESULT BY THE NUMBER OF ITS OUTSTANDING SHARES.
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
<PAGE>
[GRAPHIC OMITTED]
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 Fund share. The total returns in the
table represent the rate that an investor would have earned or lost on an
investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by Arthur Andersen LLP whose
report, along with the Fund's financial statements, are included in the Annual
Report, which is available upon request.
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
From
May 3, 1993
(commencement
of operations) to
Year Ended December 31, December 31,
- -------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993(i)
----- ----- ----- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 24.18 $ 21.35 $ 19.44 $ 13.46 $ 13.72 $ 10.00
-------- -------- -------- -------- ------- -------
Net investment income (loss) 0.00(ii) (0.04) 0.03 (0.03) 0.00(ii) (0.02)
Net realized and unrealized gain (loss)
on investments 6.95 3.20 2.29 6.01 (0.21) 3.88
-------- -------- -------- -------- ------- -------
Total from investment operations 6.95 3.16 2.32 5.98 (0.21) 3.86
-------- -------- -------- -------- ------- -------
Dividends from net investment income -- (0.01) -- -- -- --
Distributions from net realized gains (2.26) (0.32) (0.41) -- (0.05) (0.14)
-------- -------- -------- -------- ------- -------
Total Distributions (2.26) (0.33) (0.41) -- (0.05) (0.14)
-------- -------- -------- -------- ------- -------
Net asset value, end of period $ 28.87 $ 24.18 $ 21.35 $ 19.44 $ 13.46 $ 13.72
======== ======== ======== ======== ======= =======
Total Return 30.30% 15.01% 11.90% 44.45% (1.54%) 38.67%
======== ======== ======== ======== ======= =======
Ratios and Supplemental Data:
Net assets, end of period
(000's omitted) $689,571 $444,967 $394,847 $185,349 $62,178 $21,301
======== ======== ======== ======== ======= =======
Ratio of expenses to average net assets 0.84% 0.84% 0.84% 0.90% 0.97% 1.50%(iii)
======== ======== ======== ======== ======= =======
Ratio of net investment income (loss)
to average net assets 0.00% (0.15%) 0.08% (0.25%) 0.03% (0.58%)
======== ======== ======== ======== ======= =======
Portfolio Turnover Rate 152.21% 151.98% 90.97% 104.74% 83.96% 67.22%
======== ======== ======== ======== ======= =======
</TABLE>
(i) Ratios have been annualized; total return has not been annualized.
(ii) Amount was computed based on average shares outstanding durin the period.
(iii) Amounts have been reduced by 0.33% due to expense reimbursements.
<PAGE>
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]
<PAGE>
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 LEVERAGED
ALLCAP 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 Fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
<PAGE>
THE ALGER
AMERICAN FUND
ALGER AMERICAN LEVERAGED
ALLCAP PORTFOLIO
PROSPECTUS
MAY 1, 1999
TABLE OF CONTENTS
- ----------------------------------------------------
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
<PAGE>
[GRAPHIC OMITTED]
THE ALGER AMERICAN FUND--
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
RISK/RETURN SUMMARY: INVESTMENTS,
RISKS & PERFORMANCE
INVESTMENT GOAL AND APPROACH
THE ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO SEEKS LONG-TERM CAPITAL
APPRECIATION.
It 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:
o 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.
o 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.
Under normal circumstances, the portfolio invests in the equity securities of
companies of any size which demonstrate promising growth potential.
The portfolio can leverage, that is, borrow money, up to one-third of its total
assets to buy additional securities. By borrowing money, the portfolio has the
potential to increase its returns if the increase in the value of the securities
purchased exceeds the cost of borrowing, including interest paid for the money
borrowed.
[GRAPHIC OMITTED]
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 portfolio's investment styles and objectives, 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.
In addition, there is the risk that the cost of borrowing money to leverage will
exceed the returns for the securities purchased or that the securities purchased
may actually go down in value; thus, the portfolio's net asset value can
decrease more quickly than if the portfolio had not borrowed.
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
<PAGE>
[GRAPHIC OMITTED]
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 Return Table beneath it compares the portfolio's performance
over several periods with that of a broad measure of market performance. The
performance reflects 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.
o S&P 500 Index: An index of large company common stocks considered to be
representative of the U.S. stock market in general. The index is unmanaged and
no expenses or fees are reflected in the returns for the index. The returns
for the index assume reinvestment of dividends of the underlying securities
that make up the index.
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
Annual Total Return as of December 31 each year (%)
[Graph]
12.04 19.68 57.83
- ----- ----- -----
96 97 98
Best Quarter: 31.95% Q4 1998
Worst Quarter: -5.70% Q4 1997
Average Annual Total Return as of December 31, 1998
Since
Inception
1 Year (1/25/95)
- --------------------------------------------------
American Leveraged
AllCap 57.83% 39.34%
S&P 500 Index(R) 28.58% 30.43%
[GRAPHIC OMITTED]
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.
<TABLE>
<CAPTION>
ANNUAL FUND OPERATING
EXPENSES
(expenses that are deducted
from Fund assets)
SHAREHOLDER FEES
(fees paid directly from TOTAL ANNUAL FUND
your investment) Management Fees Distribution Fees Other Expenses OPERATING EXPENSES
=========================================================================================================================
<S> <C> <C> <C> <C> <C>
Alger American None .85% None .11%* .96%
Leveraged AllCap
Portfolio
</TABLE>
*Included in Other Expenses is 0.03% of interest expense.
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:
1 Year 3 Years 5 Years 10 Years
- --------------------------------------------------------------------------------
Alger American $98 $306 $531 $1,178
Leveraged AllCap
Portfolio
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
<PAGE>
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).
[GRAPHIC OMITTED]
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 .85%.
PORTFOLIO MANAGERS
David Alger and Ron Tartaro 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.
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.
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, distri-
4
<PAGE>
butions 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 59-1/2 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.
NAV (NET ASSET VALUE) IS COMPUTED BY ADDING TOGETHER THE VALUE OF THE
PORTFOLIO'S INVESTMENTS PLUS CASH AND OTHER ASSETS, SUBTRACTING ITS LIABILITIES
AND THEN DIVIDING THE RESULT BY THE NUMBER OF ITS OUTSTANDING SHARES.
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
<PAGE>
[GRAPHIC OMITTED]
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 Fund share. The total returns in the
table represent the rate that an investor would have earned or lost on an
investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by Arthur Andersen LLP whose
report, along with the Fund's financial statements, are included in the Annual
Report, which is available upon request.
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
From
January 25, 1995
(commencement
of operations) to
Year Ended December 31, December 31,
- --------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995(i)
----- ----- ----- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 23.17 $ 19.36 $ 17.43 $ 10.00
--------- --------- --------- --------
Net investment income (loss) (0.05) (0.03) (0.03)(ii) (0.03)
Net realized and unrealized gain on investments 12.99 3.84 2.14 7.46
--------- --------- --------- --------
Total from investment operations 12.94 3.81 2.11 7.43
Distributions from net realized gains (1.21) -- (0.18) --
--------- --------- --------- --------
Net asset value, end of period $ 34.90 $ 23.17 $ 19.36 $17.43
========= ========= ========= ========
Total Return 57.83% 19.68% 12.04% 74.30%
========= ========= ========= ========
Ratios and Supplemental Data:
Net assets, end of period (000's omitted) $ 101,710 $ 53,488 $ 34,925 $ 5,497
========= ========= ========= ========
Ratio of expenses excluding interest
to average net assets 0.93% 0.96% 1.06% 1.50%
========= ========= ========= ========
Ratio of expenses including interest
to average net assets 0.96% 1.00% 1.09% 1.56%(iii)
========= ========= ========= ========
Ratio of net investment income (loss)
to average net assets (0.27%) (0.17%) (0.15%) (0.71%)
========= ========= ========= ========
Portfolio Turnover Rate 143.59% 164.27% 102.10% 178.23%
========= ========= ========= ========
Amount of debt outstanding at end of period -- -- -- --
========= ========= ========= ========
Average amount of debt outstanding during the period $ 246,101 $ 201,644 $ 76,079 $ 8,122
========= ========= ========= ========
Average daily number of shares outstanding
during the period 2,480,478 2,135,458 1,107,187 75,460
========= ========= ========= ========
Average amount of debt per share during the period $ 0.10 $ 0.09 $ 0.07 $ 0.11
========= ========= ========= ========
</TABLE>
(i) Ratios have been annualized; total return has not been annualized.
(ii) Amount was computed based on average shares outstanding during the year.
(iii) Amount has been reduced by 2.36% due to expense reimbursements.
6
<PAGE>
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 to 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
<PAGE>
================================================================================
THE |
ALGER |
AMERICAN | MEETING THE CHALLENGE
FUND | OF INVESTING
|
|
STATEMENT |
OF ADDITIONAL | MAY 1, 1999
INFORMATION |
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
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, 1999. 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.
<PAGE>
================================================================================
MAY 1, 1999
|
THE |
ALGER | 1 WORLD TRADE CENTER
AMERICAN | SUITE 9333
FUND | NEW YORK, NEW YORK 10048
| (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 & 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.
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.
CONTENTS
The Portfolios........................................................... 2
Investment Strategies and Policies....................................... 3
Net Asset Value.......................................................... 11
Purchases and Redemptions................................................ 12
Participating Insurance Companies and Plans.............................. 13
Management............................................................... 13
Expenses................................................................. 16
Dividends and Distributions.............................................. 16
Taxes.................................................................... 16
Custodian................................................................ 17
Transfer Agent........................................................... 17
Counsel to the Fund...................................................... 17
Certain Shareholders..................................................... 17
Organization............................................................. 20
Determination of Performance............................................. 20
Investor and Shareholder Information..................................... 22
Financial Statements..................................................... F-1
Appendix................................................................. A-1
<PAGE>
THE PORTFOLIOS
The Fund is a diversified, open-end management investment company that offers a
selection of six portfolios, each having distinct investment objectives and
policies.
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.
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 & 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. 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. 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
-2-
<PAGE>
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.
IN GENERAL
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.
INVESTMENT STRATEGIES AND POLICIES
CERTAIN SECURITIES AND INVESTMENT TECHNIQUES
The Prospectus discusses the investment objectives of each Portfolio and the
primary strategies 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. There is no guarantee that any
Portfolio's objectives will be achieved.
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 all other
Portfolios.
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.
Certain of these securities may have volatility risks, prepayment risks and
extension risk, which could have a negative impact on the investing portfolio's
net asset value.
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 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
-3-
<PAGE>
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 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
-4-
<PAGE>
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.
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, as amended. 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 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
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. 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 securities
-5-
<PAGE>
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 exchange 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 a foreign exchange may be held in custody by a bank or
other depository located in that market. It should be noted that certain of the
risks associated with foreign securities may also apply to American Depositary
Receipts and American Depositary Shares.
BORROWING (ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO)
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 cost of
borrowing, including 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 may
also borrow from banks for temporary or emergency purposes. 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)
The Portfolio may buy and sell (write) exchange listed options in order to
obtain additional return or to hedge the value of its portfolio although, as in
the past, it does not currently intend to rely on these strategies extensively,
if at all. 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". Although the Portfolio will in any event generally not purchase or
write options that appear to lack an active secondary market, there is no
assurance that a liquid secondary market on an exchange will exist for any
particular option. 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.
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.
-6-
<PAGE>
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. 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 would realize a profit from a closing transaction if the price of
the transaction were less than the premium received from writing the option or
more than the premium paid to purchase the option; the Portfolio would realize a
loss from a closing transaction if the price of the transaction were 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. 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, were
unable to effect a closing purchase transaction in a secondary market, it would
not be able to sell the underlying security until the option expired or it
delivered the underlying security upon exercise or otherwise cover 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 would be obligated, in return for the
premium received, to make delivery of this amount. The Portfolio could offset
its position in stock index options prior to expiration by entering into a
closing transaction on an exchange or it could let the option expire
unexercised.
Use of options on securities indexes entails the risk that trading in the
options may be interrupted if trading in certain securities included in the
index is interrupted. The Portfolio would not purchase these options unless
Alger Management were satisfied with the development, depth and liquidity of the
market and Alger Management believed the options could 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 would 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 might be forced to
liquidate portfolio securities to meet settlement obligations.
Although Alger Management will attempt to take appropriate measures to minimize
the risks relating to any
-7-
<PAGE>
trading by the Portfolio input and call options, there can be no assurance that
the Portfolio will succeed in any option-trading program it undertakes.
STOCK INDEX FUTURES AND OPTIONS ON STOCK
INDEX FUTURES (ALGER AMERICAN LEVERAGED
ALLCAP PORTFOLIO)
If the Portfolio utilizes these investments, it will do so only for hedging, not
speculative, purposes. 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 would purchase and sell futures
contracts on the stock index for which it could 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, although it has not invested in
index futures in the past.
The risk of imperfect correlation will increase 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, if it uses a hedging strategy, buy or sell stock index
futures contracts in a greater or lesser dollar amount than the dollar amount of
the securities being hedged if the historical volatility of the stock index
futures has been less or greater than that of the securities. Such
"over-hedging" or "under-hedging" may adversely affect the 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 would 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 could be effected or that
there would be correlation between price movements in the options on stock index
futures and price movements in the Portfolio's securities which were the subject
of the hedge. In addition, the Portfolio's purchase of such options would be
based upon predictions as to anticipated market trends, which could prove to be
inaccurate.
The Portfolio's use, if any, of stock index futures and options thereon will in
all cases be consistent with applicable regulatory requirements and in
particular the rules and regulations of the Commodity Futures Trading Commission
and will be entered into, it at all, only for bona fide hedging, risk management
or other portfolio management purposes. Typically, maintaining a futures
contract or selling an option thereon requires the Portfolio to deposit with a
financial intermediary as security for its obligations an amount of cash or
other specified assets (initial margin) which initially is typically 1% to 10%
of the face amount of the contract (but may be higher in some circumstances).
Additional cash or assets (variation margin) may be required to be deposited
thereafter on a daily basis as the market-to-market value of the contract
fluctuates. The purchase of an option on stock index futures involves payment of
a premium for the option without any further obligation on the part of the
Portfolio. If the Portfolio were to exercise an option on a futures contract it
would 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, im-
-8-
<PAGE>
mediately 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.
OTHER INVESTMENTS
In addition to the securities and investment techniques listed above under "The
Portfolios," 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.
INVESTMENT RESTRICTIONS
The investment restrictions numbered 1 through 12 below have been adopted by
each of the Portfolios as fundamental policies. The Portfolios' investment
objectives are also 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 Portfolio, which is defined in the Act as the lesser of (a)
67 percent or more of the shares of the Portfolio 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 of the 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 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.
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; pro-
-9-
<PAGE>
vided 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.
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.
-10-
<PAGE>
These securities are normally purchased directly from the issuer or from an
underwriter or market maker for the securities. The cost of securities purchased
from underwriters includes an underwriting commission or concession and the
prices at which securities are purchased from and sold to dealers include a
dealer's mark-up or mark-down. U.S. Government securities are generally
purchased from underwriters or dealers, although certain newly issued U.S.
Government securities may be purchased directly from the U.S. Treasury or from
the issuing agency or instrumentality.
To the extent consistent with applicable provisions of the Act and the rules and
exemptions adopted by the SEC thereunder, as well as other regulatory
requirements, the Fund's Board of Trustees has determined that portfolio
transactions will be executed through Fred Alger & Company, Incorporated ("Alger
Inc.") if, in the judgment of Alger Management, the use of Alger Inc. is likely
to result in price and execution at least as favorable as those of other
qualified broker-dealers and if, in particular transactions, Alger Inc. charges
the Portfolio involved a rate consistent with that charged to comparable
unaffiliated customers in similar transactions. Such transactions will be fair
and reasonable to the Portfolio's shareholders. Over-the-counter purchases and
sales are transacted directly with principal market makers except in those cases
in which better prices and executions may be obtained elsewhere. Principal
transactions are not entered into with affiliates of the Fund except pursuant to
exemptive rules or orders adopted by the SEC.
In selecting brokers or dealers to execute portfolio transactions on behalf of a
Portfolio, Alger Management seeks the best overall terms available. In assessing
the best overall terms available for any transaction, Alger Management will
consider the factors it deems relevant, including the breadth of the market in
the investment, the price of the investment, the financial condition and
execution capability of the broker or dealer and the reasonableness of the
commission, if any, for the specific transaction and on a continuing basis. In
addition, Alger Management is authorized, in selecting parties to execute a
particular transaction and in evaluating the best overall terms available, to
consider the brokerage and research services, as those terms are defined in
section 28(e) of the Securities Exchange Act of 1934, provided to the Portfolio
involved, the other Portfolios and/or other accounts over which Alger Management
or its affiliates exercise investment discretion. Alger Management's fees under
its agreements with the Portfolios are not reduced by reason of its receiving
brokerage and research service. The Fund's Board of Trustees will periodically
review the commissions paid by the Portfolios to determine if the commissions
paid over representative periods of time are reasonable in relation to the
benefits inuring to the Portfolios. During the fiscal year ended December 31,
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
was paid to 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 was paid to Alger
Inc. During the fiscal year ended December 31, 1998, the Fund paid an aggregate
of approximately $7,974,970 in commissions to broker-dealers in connection with
portfolio transactions, of which $7,917,064 (99%) was paid to Alger Inc. During
the fiscal year ended December 31, 1998, 97% 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.
The turnover rate for Alger American Small Capitalization Portfolio for 1998
significantly exceeded 1997's due to portfolio repositioning in response to
midyear market volatility.
NET ASSET VALUE
Net asset value 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.
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<PAGE>
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 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. The Fund does not assess any fees, either when it sells
or when it redeems its shares. Surrender charges, mortality and expense risk
frees 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. Participants should contact
their Plan sponsor for information concerning the appropriate procedure for
investing in the Fund.
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.
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
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<PAGE>
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.
PARTICIPATING INSURANCE
COMPANIES AND PLANS
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 might cause the Portfolio to sell portfolio securities at disadvantageous
prices, and orderly portfolio management could be disrupted to the potential
detriment of the VA contract and VLI policy holders or Plan Participants. 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.
MANAGEMENT
TRUSTEES AND OFFICERS OF THE FUND
The Fund is governed by a Board of Trustees which is responsible for protecting
the interests of shareholders under Massachusetts law. 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. The following companies are
affiliates of Alger Management: Alger Associates, Inc. ("Associates"), Alger
Inc., Alger Properties, Inc. ("Properties"), Alger Shareholder Services, Inc.
("Services"), Alger Life Insurance Agency, Inc. ("Agency"), and Analysts
Resources, Inc. ("ARI"). Unless otherwise noted, the address of each person
named below is 1 World Trade Center, Suite 9333, New York, New York 10048.
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<TABLE>
<CAPTION>
NAME, AGE AND POSITION
WITH THE FUND AND ADDRESS PRINCIPAL OCCUPATIONS
<S> <C>
Fred M. Alger III (64)* Chairman of the Boards of Associates, Alger Inc., Alger Management,
Chairman of the Board Properties, Services, Agency, Fred Alger International Advisory S.A.
("International"), The Alger American Asset Growth Fund ("Asset Growth")
and ARI.
David D. Alger (55)* President and Director of Associates, Alger Management, Alger Inc.,
President and Trustee ARI, Properties, Services, International and Agency; Director of
Asset Growth.
Gregory S. Duch (47) 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 (46) 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 (45) Senior Vice President of Alger Inc.
Assistant Secretary &
Assistant Treasurer
Arthur M. Dubow (65) Trustee of the Arthur Dubow Foundation; private investor since 1985; Director
Trustee of Coolidge Investment Corporation; formerly Chairman of the Board of
P.O. Box 969 Institutional Shareholder Services, Inc. and President of Fourth
Wainscott, NY 11975 Estate, Inc.
Stephen E. O'Neil (66) Attorney-at-law; private investor since 1981; Director of Nova Care, Inc.
Trustee and Brown-Forman Distillers Corporation; formerly President and Vice Chairman of
805 Third Avenue City Investing Company and Director of Centerre Bancorporation and Syntro Corporation,
New York, NY 10022 and Counsel to the law firm of Kohler & Barnes P.C.
Nathan E. Saint-Amand, M. D. (61) Medical doctor in private practice.
Trustee
2 East 88th Street
New York, NY 10128
John T. Sargent (74) Private investor since 1987; Director of Atlantic Mutual Insurance Co.;
Trustee formerly Director of River Bank America.
5 Beekman Place
New York, NY 10022
B.Joseph White (53) Dean, University of Michigan ; President, William Davidson
Trustee Institute at the University of Michigan Business School; Professor
University of Michigan of Business Administration, University of Michigan Business
Business School Business School School; Director, Gordon Food Service; Trustee and
701 Tappan Street Chair, Audit Committee, Equity Residential Properties Trust;
Ann Arbor, MI 48109 Director and Chair, Compensation Committee, Kelly Services, Inc.
</TABLE>
* Fred M. Alger III an David D. Alger are "interested persons" of the Fund, as
defined in the Act. Fred M. Alger and David D. Alger are brothers.
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<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 independent Trustee a fee of $1500 for each meeting
he attends, to an annual maximum of $6000. Effective February 1999, independent
Trustees are reimbursed for their expenses in attending meetings.
The Fund does not offer its Trustees any pension or retirement benefits and has
not done so in the past. The following table provides compensation amounts paid
to independent Trustees of the Fund for the fiscal year ended December 31, 1998.
Mr. White, now an independent Trustee, was not a Trustee of the Fund during that
period. Effective February, 1999, he became a Trustee of the Fund.
COMPENSATION TABLE
<TABLE>
<CAPTION>
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 $3,000 $14,250
</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 is responsible for the overall administration of the Fund, subject to
the supervision of the Board of Trustees. It pays the salaries of all officers
who are employed by both it and the Fund. 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 SEC. 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.
Under the Management Agreements, Alger Management receives a fee from each
Portfolio at the following annual rates based on the Portfolio's average daily
net assets: .85% (Alger American Small Capitalization and Leveraged AllCap
Portfolios), .80% (Alger American MidCap Growth Portfolio), .75% (Alger American
Growth and Balanced Portfolios) and .625% (Alger American Income & Growth
Portfolio). This fee is computed daily and paid monthly.
During the fiscal years ended December 31, 1996, 1997, and 1998 Alger Management
earned under the terms of the Management Agreements $92,934, $217,844 and
$365,820, respectively, in respect of Alger American Income & Growth Portfolio;
$10,617,051, $12,582,027 and $8,665,222, respectively, in respect of Alger
American Small Capitalization Portfolio; $5,604,710, $8,988,054 and $10,304,264,
respectively, in respect of Alger American Growth Portfolio; $55,775, $103,223
and $154,672, respectively, in respect of Alger American Balanced Portfolio; and
$2,330,374, $3,536,454 and $4,156,932, respectively, in respect of Alger
American MidCap Growth Portfolio; and $177,612, $399,269 and $567,333,
respectively, in respect of Alger American Leveraged AllCap Portfolio.
-15-
<PAGE>
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 .45% 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.
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.
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.
UNDERWRITER
Alger Inc., the Underwriter for the Fund, is located at 30 Montgomery Street,
Jersey City, NJ 07302. It is the corporate parent of Alger Management.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP serves as independent public accountants for 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.
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
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 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.
If, in any taxable year, a Portfolio fails to qualify as a regulated investment
company under the Code or fails to meet the distribution requirement, it would
be taxed in the same manner as an ordinary corporation and distributions to its
shareholders would not be deductible by the Portfolio in computing its taxable
income. In addition, in the event of a failure to qualify, the
-16-
<PAGE>
Portfolio's distributions, to the extent derived from the Portfolio's current or
accumulated earnings and profits would constitute dividends (eligible for the
corporate dividends-received deduction) which are taxable to shareholders as
ordinary income, even though those distributions might otherwise (at least in
part) have been treated in the shareholders' hands as long-term capital gains.
If a Portfolio fails to qualify as a regulated investment company in any year,
it must pay out its earnings and profits accumulated in that year in order to
qualify again as a regulated investment company. In addition, if a Portfolio
failed to qualify as a regulated investment company for a period greater than
one taxable year, the Portfolio may be required to recognize any net built-in
gains (the excess of the aggregate gains, including items of income, over
aggregate losses that would have been realized if it had been liquidated) in
order to qualify as a regulated investment company in a subsequent year.
Each Portfolio has been structured so that each qualifies separately as a
regulated investment company under Subchapter M of the Internal Revenue Code of
1986, as amended (the "Code"). To so qualify, a Portfolio must, among other
things: (a) derive at least 90% of its gross income in each taxable year from
dividends, interest, payments with respect to securities loans and gains from
the sale or other disposition of stock or securities; 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. ("Services"), 30 Montgomery Street, Jersey
City, New Jersey 07302, serves as transfer agent for the Fund pursuant to a
transfer agency agreement. Under the transfer agency agreement Services
processes purchases and redemptions of shares of the 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. Pursuant to the transfer agency agreement
Services is compensated on a per-account and, for certain transactions, a
per-transaction basis.
COUNSEL TO THE FUND
The law firm Hollyer Brady Smith Troxell Barrett Rockett Hines & Mone LLP, 551
Fifth Avenue, New York, NY 10176, acts as counsel to the Fund.
CERTAIN SHAREHOLDERS
Set forth below is certain information regarding significant shareholders of the
Portfolios. At April 1, 1999,
-17-
<PAGE>
Ameritas Variable Life Insurance Co. Separate Account VA-2 Variable Annuity
owned beneficially or of record 47.47% of Alger American Income & Growth
Portfolio and 67.57% of Alger American Balanced Portfolio. On the same date,
American Skandia Life Assurance Company owned beneficially or of record 49.53%
of Alger American Small Capitalization Portfolio, 56.08% of Alger American
Growth Portfolio and 77.02% 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.
At April 1, 1999, the Fund's officers and Trustees as a group owned less than 1%
of any portfolio's shares.
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 1, 1999 and record and beneficial holdings are in each instance denoted as
follows: record/beneficial.
-18-
<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 */-- 49.53%/-- 56.08%/-- */-- 77.02%/-- */--
Life Assurance
Corporation
Class 1
Tower One
Corporate Drive
P. O. Box 883
Shelton, CT 06484
Transamerica 7.16%/-- */-- */-- */-- */-- */--
Life Ins. & Annuity
401 N. Tryon St.
Charlotte, NC 28210
Ameritas Variable 8.23%/-- */-- */-- 9.35%/-- */-- 6.36%/--
Life Insurance Co.
Separate Acct V
P.O. Box 82550
Lincoln, NE 68501
Ameritas Variable 47.47%/-- 6.26%/-- */-- 67.57%/-- 6.34%/-- 19.31%/--
Life Insurance Co.
Separate Acct. VA-2
Variable Annuity Product
P.O. Box 82550
Lincoln, NE 68501
Sun Life of Canada (US) 5.37%/-- */-- */-- */-- */-- */--
P.O. Box 934
Boston, MA 02117
Aetna Life Insurance 17.32%/-- */-- */-- 18.70%/-- */-- 13.67%/--
and Annuity Company
151 Farmington Avenue
Hartford, CT 06156
Security First Life Ins. Co. */-- 5.82%/-- */-- */-- */-- */--
Separate Account A
11365 W. Olympic Blvd
Los Angeles, CA 90064
New York Life */-- 5.31%/-- */-- */-- */-- */--
Morris Corp. Ctr. 1
300 Interpace Pkwy
Parsippany, NJ 07054
CG Variable Annuity */-- */-- */-- */-- */-- 15.03%/--
Separate Acct II
900 Cottage Grove Road
Hartford, CT 06152
Conseco Variable */-- */-- */-- */-- */-- 9.67%/--
Insurance Co.
11825 North Pennsylvania St.
Carmel, IN 46032
GE Life & Annuity */-- 9.55%/-- 7.23%/-- */-- */-- */--
Separate Acct. III
Variable Products Dept.
6610 W. Broad St.
Richmond, VA 23230
Lincoln Benefit 6.03%/-- */-- */-- */-- */-- */--
Life
P.O. Box 80469
Lincoln, NE 68501
Security Life of Denver */-- */-- */-- */-- */-- 7.36%/--
Separate Account L1
8515 East Orchard Rd.
Englewood, CO 80111
</TABLE>
- -------------------
* Indicates shareholder owns less than 5% of the Portfolio's shares.
-19-
<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 & 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 Fund offers an unlimited number of shares of
six series, representing the shares of the Portfolios. The Fund's Board of
Trustees may establish additional Portfolios at any time. 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 have equal voting rates, which cannot be adversely modified,
other than by majority vote. 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.
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.
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.
Under normal circumstances, other than the shares issued to 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.
DETERMINATION OF PERFORMANCE
Each Portfolio may include quotations of its "total return" in advertisements or
reports to shareholders or prospective investors. Total return figures show the
-20-
<PAGE>
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 "total return" and "yield" 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
were as follows:
<TABLE>
<CAPTION>
Period
Five Ten from
Years Years Inception*
Year Ended Ended Ended through
12/31/98 12/31/98 12/31/98 12/31/98
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Alger American Balanced
(formerly Alger
American Fixed Income) 31.51% 16.41% N/A 12.05%
Alger American Income &
Growth 32.39% 21.76% 15.62% 15.51%
Alger American Small
Capitalization 15.53% 13.09% 19.85% 18.86%
Alger American Growth 48.07% 23.90% N/A 22.03%
Alger American MidCap
Growth 30.30% 18.98% N/A 23.50%
Alger American Leveraged
AllCap 57.83% N/A N/A 39.34%
</TABLE>
* 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. All performance figures are based on historical
earnings. 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
Partici-
-21-
<PAGE>
pating 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.
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.
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.
-22-
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1998
================================================================================
SHARES COMMON STOCKS--86.8% VALUE
------ -----
AIRLINES--1.0%
360,400 US Airways Group Inc.* ......................... $ 18,740,800
------------
BROADCASTING--1.9%
605,400 Comcast Corp. Cl. A. Special ................... 35,529,715
------------
BUSINESS SERVICES--1.5%
368,000 IMS Health Inc. ................................ 27,761,184
------------
COMMUNICATIONS--6.4%
363,500 America Online Inc. ............................ 58,160,000
134,500 COX Communications Inc. Cl. A.* ................ 9,297,313
771,200 MCI Worldcom Inc.* ............................. 55,333,600
------------
122,790,913
------------
COMMUNICATION EQUIPMENT--4.5%
383,300 Ascend Communications, Inc.* ................... 25,201,975
297,900 Cisco Systems, Inc.* ........................... 27,648,993
209,600 Corning Inc. ................................... 9,432,000
993,400 Ericsson(LM)Telephone Co. ADR B ................ 23,780,009
------------
86,062,977
------------
COMPUTER RELATED &
BUSINESS EQUIPMENT--7.5%
423,200 Compaq Computer Corp. .......................... 17,748,162
486,200 Dell Computer Corp.* ........................... 35,584,006
421,200 EMC Corp.* ..................................... 35,802,000
292,800 International Business Machines Corp. .......... 54,094,800
------------
143,228,968
------------
COMPUTER SOFTWARE--3.8%
221,600 Compuware Corp.* ............................... 17,312,500
389,800 Microsoft Corporation* ......................... 54,060,582
------------
71,373,082
------------
CONGLOMERATE--3.1%
787,880 Tyco International Ltd. ........................ 59,436,091
------------
DRUG DISTRIBUTION--2.9%
459,450 Cardinal Health, Inc. .......................... 34,860,769
259,700 McKesson Corp. ................................. 20,532,661
------------
55,393,430
------------
FINANCIAL SERVICES--13.5%
453,100 BankAmerica Corp. .............................. 27,242,638
236,400 Bank of New York Inc. .......................... 9,515,100
956,200 Citigroup Inc. ................................. 47,331,900
579,800 Federal Home Loan Mortgage Corporation ......... 37,361,152
1,636 Firstar Corp. .................................. 152,557
312,200 First Union Corp. .............................. 18,985,819
986,900 Household International Inc. ................... 39,105,913
611,700 Kansas City Southern Industries Inc. ........... 30,088,300
417,400 Morgan Stanley Dean Witter & Co. ............... 29,635,400
110,100 State Street Corp. ............................. 7,658,886
124,400 SunAmerica Inc. ................................ 10,091,950
------------
257,169,615
------------
FOOD CHAINS--4.5%
150,000 Fred Meyer, Inc.* .............................. 9,037,500
620,200 Kroger Co.* .................................... 37,522,100
627,800 Safeway Inc.* .................................. 38,256,876
-----------
84,816,476
-----------
INSURANCE--1.7%
327,525 American International Group, Inc. ............ 31,647,102
-----------
LEISURE & ENTERTAINMENT--1.3%
511,400 Carnival Corp. ................................ 24,547,200
-----------
MEDICAL DEVICES--1.8%
472,800 Medtronic, Inc. ............................... 35,105,400
-----------
PHARMACEUTICALS--13.7%
138,400 Bristol Myers Squibb Co. ...................... 18,519,719
155,000 Elan Corp PLC-ADR*+ ........................... 10,782,265
358,600 Eli Lilly & Company ........................... 31,870,575
299,700 Merck & Co., Inc. ............................. 44,262,094
392,200 Pfizer Inc. ................................... 49,196,784
455,600 Schering-Plough Corporation ................... 25,171,900
513,700 SmithKline Beecham PLC-ADS .................... 35,702,150
603,300 Warner-Lambert Co. ............................ 45,360,920
------------
260,866,407
------------
POLLUTION CONTROL--3.1%
1,279,100 Waste Management, Inc. ........................ 59,638,037
------------
RETAILING--10.9%
600,000 CVS Corp. ..................................... 33,000,000
348,100 Costco Companies Inc.* ........................ 25,128,643
1,014,300 Home Depot, Inc. .............................. 62,062,988
156,000 Office Depot Inc.* ............................ 5,762,328
694,000 Staples Inc.* ................................. 30,319,472
642,200 Wal-Mart Stores Inc. .......................... 52,299,484
------------
208,572,915
------------
SEMICONDUCTORS--3.7%
448,600 Intel Corp. ................................... 53,187,362
211,700 Texas Instruments, Incorporated ............... 18,113,687
--------------
71,301,049
--------------
TOTAL COMMON STOCKS
(COST $1,137,197,676) .................... 1,653,981,361
--------------
See Notes to Financial Statements.
F-1
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1998 (CONT'D)
================================================================================
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- --------- SHORT-TERM INVESTMENTS--11.9% ------
<S> <C> <C>
SHORT-TERM CORPORATE NOTES--10.5%
$48,000,000 Bank Austria Finance Inc.,
5.87%, 1/6/99 ............................ $ 47,960,867
50,000,000 Bayerische Vereinsbank A.G.,
5.80%, 1/5/99 ............................ 49,967,778
20,000,000 Ciba Speciality Chemicals Corp.,
5.75%, 1/13/99 ........................... 19,961,667
15,000,000 Ford Motor Credit Company,
5.77%, 1/6/99 ............................ 14,987,979
20,000,000 Hertz Corporation,
5.70%, 1/7/99 ............................ 19,981,000
48,000,000 Paribas Finance, Inc.,
5.50%, 1/6/99 ............................ 47,963,333
--------------
TOTAL SHORT-TERM CORPORATE NOTES
(COST $200,822,624) ...................... 200,822,624
--------------
SECURITIES HELD UNDER
REPURCHASE AGREEMENTS--1.4%
Securities Held Under Repurchase
Agreements, 4.70%, 1/4/99, with
Bear, Stearns & Co. Inc., dtd 12/31/98,
repurchase price $26,209,137; collateralized
by U.S. Government Securities
(total par value $27,118,000
due 1/21/99-11/15/27) .................... 26,195,457
--------------
TOTAL SHORT-TERM INVESTMENTS
(COST $227,018,081 ) .................... 227,018,081
--------------
TOTAL INVESTMENTS
(COST $1,364,215,757)(A) ......................... 98.7% 1,880,999,442
Other Assets in Excess of Liabilities .............. 1.3 24,719,511
----- --------------
NET ASSETS ......................................... 100.0% $1,905,718,953
===== ==============
</TABLE>
- --------------------------------------------------------------------------------
* Non-income producing security.
+ Securities partially or fully on loan.
(a) At December 31, 1998, the net unrealized appreciation on investments, based
on cost for federal income tax purposes of $1,364,215,757, amounted to
$516,783,685 which consisted of aggregate gross unrealized appreciation of
$526,745,601 and gross unrealized depreciation of $9,961,916.
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,
---------------------------------------------------------------------
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of year $ 42.76 $ 34.33 $ 31.16 $ 23.13 $ 24.67
- -----------------------------------------------------------------------------------------------------------------------------
Net investment income 0.09 0.13 0.12 0.02 0.07
Net realized and unrealized gain on investments 18.32 8.66 4.00 8.33 0.15
- -----------------------------------------------------------------------------------------------------------------------------
Total from investment operations 18.41 8.79 4.12 8.35 0.22
- -----------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (0.13) (0.13) (0.02) (0.07) (0.03)
Distributions from net realized gains (7.82) (0.23) (0.93) (0.25) (1.73)
- -----------------------------------------------------------------------------------------------------------------------------
Total Distributions (7.95) (0.36) (0.95) (0.32) (1.76)
- -----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $ 53.22 $ 42.76 $ 34.33 $ 31.16 $ 23.13
=============================================================================================================================
Total Return 48.07% 25.75% 13.35% 36.37% 1.45%
=============================================================================================================================
Ratios and Supplemental Data:
Net assets, end of year (000's omitted) $1,905,719 $1,072,529 $991,028 $502,974 $150,390
=============================================================================================================================
Ratio of expenses to average net assets 0.79% 0.79% 0.79% 0.85% 0.86%
=============================================================================================================================
Ratio of net investment income to average
net assets 0.25% 0.27% 0.50% 0.18% 0.48%
=============================================================================================================================
Portfolio Turnover Rate 127.38% 129.50% 82.86% 118.33% 111.76%
=============================================================================================================================
</TABLE>
See Notes to Financial Statements.
F-3
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1998
================================================================================
SHARES VALUE
------ COMMON STOCKS--89.2% -----
ADVERTISING--1.9%
564,050 Outdoor Systems, Inc.* ........... $ 16,921,500
187,500 Young & Rubicam Inc.* ............ 6,070,313
------------
22,991,813
------------
AIRLINES--2.3%
135,600 ASA Holdings Inc. ................ 4,135,800
275,200 Continental Airlines Inc. Cl. B.* 9,219,200
466,000 SkyWest Inc. ..................... 15,232,608
------------
28,587,608
------------
APPAREL--.5%
148,600 AnnTaylor Stores Corporation*+ ... 5,860,487
------------
BIO-TECHNOLOGY--6.1%
117,500 Biogen Inc.* ..................... 9,752,500
411,500 Centocor, Inc.*+ ................. 18,568,938
229,800 IDEC Pharmaceuticals Corporation*+ 10,800,600
358,500 Medimmune Inc.* .................. 35,648,523
------------
74,770,561
------------
BROADCASTING--1.6%
141,900 Cablevision Systems Corp. Cl. A.* 7,121,677
197,300 Jacor Communications Inc.* ....... 12,701,188
------------
19,822,865
------------
BUILDING & CONSTRUCTION--.5%
243,400 Champion Enterprises Inc.*+ ....... 6,663,075
------------
BUSINESS SERVICES--4.2%
355,000 Bisys Group Inc.* ................. 18,326,875
112,900 ChoicePoint Inc. * ................ 7,282,050
257,500 Clarify Inc.*+ .................... 6,292,785
21,900 IMS Health Inc. ................... 1,652,092
261,500 Rent-Way Inc.*+ ................... 6,357,850
201,400 Siebel Systems Inc.* .............. 6,835,113
144,700 United Stationers Inc.*+ .......... 3,762,200
------------
50,508,965
------------
COMMUNICATIONS--1.9%
310,400 At Home Corp. Series A.* .......... 23,047,200
------------
COMMUNICATION EQUIPMENT--3.0%
185,200 Ascend Communications, Inc.* ...... 12,176,900
146,700 Dycom Industries Inc.*+ ........... 8,380,238
114,000 L-3 Communications Holdings, Inc.* 5,308,182
152,700 Newbridge Networks Corp.* ......... 4,638,263
156,100 Visual Networks, Inc.*+ ........... 5,853,750
------------
36,357,333
------------
COMPUTER RELATED &
BUSINESS EQUIPMENT--2.4%
441,100 Maxtor Corp.* ..................... 6,175,400
380,200 Quantum Corp.* .................... 8,079,250
232,100 Sanmina Corporation* .............. 14,506,250
------------
28,760,900
------------
COMPUTER SERVICES--8.2%
392,900 Ceridian Corp.* ................... $ 27,429,528
42,300 eBay Inc.* ........................ 10,204,875
304,000 Excite Inc.* ...................... 12,787,152
40,000 Inktomi Corp.* .................... 5,175,000
217,000 Keane Inc.* ....................... 8,666,546
200,000 Lycos Inc.* ....................... 11,112,600
186,200 QRS Corp.* ........................ 8,937,600
17,500 Ticketmaster Online CitySearch Inc.
Cl. B.* ......................... 980,000
61,000 Yahoo Inc.* ....................... 14,453,188
------------
99,746,489
------------
COMPUTER SOFTWARE--4.7%
232,500 Citrix Systems, Inc.* ............. 22,567,148
170,000 Compuware Corp.* .................. 13,281,250
260,200 Dendrite International Inc. * ..... 6,496,934
196,500 Intuit Inc.* ...................... 14,246,250
------------
56,591,582
------------
CONSUMER PRODUCTS--1.9%
303,300 Dial Corp. ........................ 8,757,788
239,700 Furniture Brands International
Inc.* . 6,531,825
226,100 Pittway Corp. Cl. A ............... 7,475,544
------------
22,765,157
------------
DRUG DISTRIBUTION--4.8%
65,000 AmeriSource Health Corp Cl. A.* ... 4,225,000
971,200 Bergen Brunswig Corp. Cl. A ....... 33,870,600
591,900 Omnicare, Inc. .................... 20,568,525
------------
58,664,125
------------
FINANCIAL SERVICES--7.4%
140,402 Commerce Bancshares Inc. .......... 5,967,085
326,300 Dime Bancorp Inc. ................. 8,626,719
293,900 Finova Group Inc. ................. 15,852,378
490,600 Kansas City Southern Industries
Inc. ............................ 24,131,632
539,900 National Commerce Bancorp+ ........ 10,157,139
286,200 North Fork Bancorporation Inc. .... 6,851,056
708,800 Sovereign Bancorp Inc. ............ 10,100,400
126,500 Wilmington Trust Corp. ............ 7,795,563
------------
89,481,972
------------
FOOD CHAINS--1.7%
585,000 Food Lion Inc. Cl. A .............. 6,215,625
237,300 Fred Meyer, Inc.* ................. 14,297,325
------------
20,512,950
------------
FOODS & BEVERAGES--4.2%
419,000 Earthgrains Company ............... 12,963,021
456,500 Starbucks Corp.* .................. 25,621,063
255,700 U.S. Foodservice* ................. 12,529,300
------------
51,113,384
------------
INSURANCE--.1%
71,300 Fremont General Corp. ............. 1,764,674
------------
F-4
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1998 (CONT'D)
================================================================================
<TABLE>
<CAPTION>
SHARES VALUE
------ COMMON STOCKS (CONT'D) -----
<S> <C> <C>
MANUFACTURING--.8%
194,500 Leggett & Platt Inc. ............................ 4,279,000
202,688 Palm Harbor Homes Inc.*+ ........................ 5,105,292
------------
9,384,292
------------
MEDICAL DEVICES--.9%
282,500 Biomet Inc. ..................................... 11,370,625
------------
MEDICAL SERVICES--3.8%
503,800 Health Management Associates Inc. Cl. A.* ....... 10,894,675
386,800 Hooper Holmes Inc.+ ............................. 11,217,200
54,500 Impath Inc.* .................................... 1,444,250
573,400 MedQuist Inc.* .................................. 22,649,300
-----------
46,205,425
-----------
PHARMACEUTICALS--5.6%
567,400 Alza Corp.* ..................................... 29,646,650
210,000 Elan Corp PLC-ADR*+ ............................. 14,608,230
438,800 Forest Laboratories, Inc.* ...................... 23,338,893
-----------
67,593,773
-----------
RESTAURANTS & LODGING--2.3%
166,672 CKE Restaurants Inc. ............................ 4,906,490
587,100 Outback Steakhouse, Inc.* ....................... 23,410,613
-----------
28,317,103
-----------
RETAILING--15.3%
66,200 Amazon.com Inc.* ................................ 21,266,750
552,600 BJ's Wholesale Club Inc.* ....................... 25,592,564
855,800 Bed Bath & Beyond Inc.* ......................... 29,204,175
483,000 Borders Group Inc.* ............................. 12,045,054
249,700 Ethan Allen Interiors Inc. ...................... 10,237,700
1,003,300 Family Dollar Stores Inc. ....................... 22,072,600
594,800 Linens'n Things Inc.* ........................... 23,568,950
105,000 Mens Wearhouse Inc.* ............................ 3,333,750
400,000 Office Depot Inc.* .............................. 14,775,200
600,700 Williams Sonoma Inc.* ........................... 24,216,018
------------
186,312,761
------------
SEMICONDUCTORS--.6%
212,500 Microchip Technology Incorporated*+ 7,862,500
------------
SEMICONDUCTOR CAPITAL EQUIPMENT--.8%
323,500 ASM Lithography Holding NV* ..................... 9,866,750
------------
TEXTILES--.7%
253,900 WestPoint Stevens Inc.* ......................... 8,013,846
------------
TRANSPORTATION--1.0%
347,200 Coach USA Inc.*+ ................................ 12,043,674
------------
TOTAL COMMON STOCKS
(COST $810,130,782) ............................ 1,084,981,889
--------------
PRINCIPAL
AMOUNT
- ---------
Short-Term Corporate Notes--10.3%
$40,000,000 Bayerische Vereinsbank A.G.,
5.80%, 1/5/99 ............................... 39,974,222
20,000,000 Cooperative Association of
Tractor Dealers Inc. Cl. A.,
5.75%, 1/11/99 .............................. 19,968,056
Ford Motor Credit Company,
15,000,000 5.77%, 1/6/99 ............................... 14,987,979
30,000,000 5.69%, 1/8/99 ............................... 29,966,808
20,000,000 Hertz Corporation,
5.70%, 1/7/99 ............................... 19,981,000
--------------
TOTAL SHORT-TERM CORPORATE NOTES
(COST $124,878,065) ......................... 124,878,065
--------------
SECURITIES HELD UNDER
REPURCHASE AGREEMENTS--.9%
Securities Held Under Repurchase
Agreements, 4.70%, 1/4/99, with
Bear, Stearns & Co. Inc., dtd 12/31/98,
repurchase price $11,347,964; collateralized
by U.S. Government Securities
(total par value $11,650,000
due 1/15/07-11/15/27) ........................ 11,342,041
-------------
TOTAL SHORT-TERM INVESTMENTS
(COST $136,220,106) ........................... 136,220,106
--------------
TOTAL INVESTMENTS
(COST $946,350,888)(A) ........................... 100.4% 1,221,201,995
Liabilities in Excess of Other Assets .............. (.4) (4,618,255)
------ --------------
NET ASSETS ......................................... 100.0% 1,216,583,740
====== ==============
</TABLE>
- --------------------------------------------------------------------------------
* Non-income producing security.
+ Securities partially or fully on loan.
(a) At December 31, 1998, the net unrealized appreciation on investments, based
on cost for federal income tax purposes of $946,350,888, amounted to
$274,851,107 which consisted of aggregate gross unrealized appreciation of
$287,853,658 and gross unrealized depreciation of $13,002,551.
See Notes to Financial Statements.
F-5
<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,
----------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 43.75 $ 40.91 $ 39.41 $ 27.31 $ 30.88
- -------------------------------------------------------------------------------------------------------------------------
Net investment loss (0.02) (0.05)(i) (0.04)(i) (0.09) (0.03)(i)
Net realized and unrealized gain
(loss) on investments 6.30 4.45 1.70 12.19 (1.45)
- -------------------------------------------------------------------------------------------------------------------------
Total from investment operations 6.28 4.40 1.66 12.10 (1.48)
Distributions from net realized gains (6.06) (1.56) (0.16) -- (2.09)
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $ 43.97 $ 43.75 $ 40.91 $ 39.41 $ 27.31
=========================================================================================================================
Total Return 15.53% 11.39% 4.18% 44.31% (4.38%)
=========================================================================================================================
Ratios and Supplemental Data:
Net assets, end of year (000's omitted) $1,216,584 $997,586 $1,469,518 $984,212 $397,037
=========================================================================================================================
Ratio of expenses to average net assets 0.89% 0.89% 0.88% 0.92% 0.96%
=========================================================================================================================
Ratio of net investment loss to
average net assets (0.20%) (0.12%) (0.09%) (0.48%) (0.10%)
=========================================================================================================================
Portfolio Turnover Rate 142.90% 104.43% 110.04% 80.66% 117.61%
=========================================================================================================================
</TABLE>
(i) Amount was computed based on average shares outstanding during the year.
See Notes to Financial Statements.
F-6
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN INCOME AND GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1998
================================================================================
SHARES VALUE
------ COMMON STOCKS--94.7% -----
BROADCASTING--2.1%
28,000 Comcast Corp. Cl. A. Special ..................... $ 1,643,264
-----------
BUSINESS SERVICES--3.4%
34,700 IMS Health Inc. .................................. 2,617,699
-----------
COMMUNICATIONS--4.6%
33,000 MCI Worldcom Inc.* ............................... 2,367,750
20,000 Time Warner Inc. ................................. 1,241,260
-----------
3,609,010
-----------
COMMUNICATION EQUIPMENT--2.0%
17,000 Cisco Systems, Inc.* ............................. 1,577,820
-----------
COMPUTER RELATED &
BUSINESS EQUIPMENT--2.4%
10,000 International Business Machines Corp. ............ 1,847,500
-----------
COMPUTER SOFTWARE--2.8%
16,000 Microsoft Corporation* ........................... 2,219,008
-----------
CONGLOMERATE--7.5%
26,000 General Electric Co. ............................. 2,653,638
41,804 Tyco International Ltd. .......................... 3,153,610
-----------
5,807,248
-----------
DRUG DISTRIBUTION--3.7%
37,500 Cardinal Health, Inc. ............................ 2,845,313
-----------
FINANCIAL SERVICES--15.4%
21,000 Bank of New York Inc. ............................ 845,250
43,000 Citigroup Inc. ................................... 2,128,500
21,400 Federal Home Loan Mortgage Corporation ........... 1,378,973
21,000 Fifth Third Bancorp .............................. 1,497,573
29,000 First Union Corp. ................................ 1,763,577
31,000 Kansas City Southern Industries Inc. ............. 1,524,828
12,000 Mellon Bank Corp. ................................ 825,000
11,000 Morgan Stanley Dean Witter & Co. ................. 781,000
8,500 State Street Corp. .............. ................ 591,286
20,000 U.S. Bancorp Inc. ................................ 710,000
-----------
12,045,987
-----------
FOOD CHAINS--2.6%
34,000 Kroger Co.* ...................................... 2,057,000
-----------
FOODS & BEVERAGES--1.5%
38,000 Earthgrains Company .............................. 1,175,644
-----------
INSURANCE--2.9%
23,025 American International Group, Inc. ............... 2,224,790
-----------
LEISURE & ENTERTAINMENT--1.2%
19,000 Carnival Corp. ................................... $ 912,000
-----------
MEDICAL DEVICES--2.5%
10,000 Allegiance Corp. ................................. 466,250
20,000 Medtronic, Inc. .................................. 1,485,000
-----------
1,951,250
-----------
PHARMACEUTICALS--16.0%
15,000 Alza Corp.* ...................................... 783,750
17,000 Bristol Myers Squibb Co. ......................... 2,274,821
15,000 Elan Corp PLC-ADR* ............................... 1,043,445
14,400 Forest Laboratories, Inc.* ....................... 765,907
26,900 Pfizer Inc. ...................................... 3,374,282
34,800 Schering-Plough Corporation ...................... 1,922,700
30,500 Warner-Lambert Co. ............................... 2,293,234
-----------
12,458,139
-----------
POLLUTION CONTROL--2.6%
42,900 Waste Management, Inc. ........................... 2,000,213
-----------
RETAILING--18.5%
26,000 Bed Bath & Beyond Inc.* .......................... 887,250
28,800 CVS Corp. ........................................ 1,584,000
12,000 Costco Companies Inc.* ........................... 866,256
40,000 Family Dollar Stores Inc. ........................ 880,000
15,000 Gap Inc. ......................................... 843,750
50,000 Home Depot, Inc. ................................. 3,059,400
37,000 Rite Aid Corp. ................................... 1,833,831
39,000 Wal-Mart Stores Inc. ............................. 3,176,082
22,000 Walgreen Co. ..................................... 1,288,386
-----------
14,418,955
-----------
SEMICONDUCTORS--3.0%
20,000 Intel Corp. ...................................... 2,371,260
-----------
TOTAL COMMON STOCKS
(COST $55,020,005) ............................ 73,782,100
-----------
PRINCIPAL SHORT-TERM INVESTMENTS--5.4%
AMOUNT SHORT-TERM CORPORATE NOTES--4.5%
- --------
$2,000,000 Bayerische Vereinsbank A.G.,
5.80%, 1/5/99 .................................. 1,998,711
1,500,000 Ford Motor Credit Company,
5.77%, 1/6/99 .................................. 1,498,799
-----------
TOTAL SHORT-TERM CORPORATE NOTES
(COST $3,497,510) .............................. 3,497,510
-----------
See Notes to Financial Statements.
F-7
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN INCOME AND GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1998 (CONT'D)
================================================================================
SHORT-TERM INVESTMENTS (CONT'D) VALUE
-----
SECURITIES HELD UNDER
REPURCHASE AGREEMENTS--.9%
Securities Held Under Repurchase
Agreements, 4.70%, 1/4/99, with
Bear, Stearns & Co. Inc., dtd
12/31/98, repurchase price
$688,452; collateralized by U.S.
Treasury Bonds (par value $625,000
due 11/15/27 ............................ $ 688,092
-----------
TOTAL SHORT-TERM INVESTMENTS
(COST $4,185,602) ....................... 4,185,602
-----------
TOTAL INVESTMENTS
(COST $59,205,607)(A) ........................ 100.1% 77,967,702
Liabilities in Excess of Other Assets .......... (.1) (42,081)
----- -----------
NET ASSETS ..................................... 100.0% $77,925,621
===== ===========
- --------------------------------------------------------------------------------
* Non-income producing security.
a) At December 31, 1998, the net unrealized appreciation on investments, based
on cost for federal income tax purposes of $59,205,607, amounted to
$18,762,095 which consisted of aggregate gross unrealized appreciation of
$18,844,645 and gross unrealized depreciation of $82,550.
F-8
<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,
--------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 10.99 $ 8.42 $ 17.79 $ 13.30 $ 15.31
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income 0.03 0.03 0.09(i) 0.11(i) 0.17
Net realized and unrealized gain
(loss) on investments 3.30 2.94 1.87 4.54 (1.47)
- ---------------------------------------------------------------------------------------------------------------------------
Total from investment operations 3.33 2.97 1.96 4.65 (1.30)
- ---------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (0.04) (0.04) (0.33) (0.16) (0.15)
Distributions from net realized gains (1.16) (0.36) (11.00) -- (0.56)
- ---------------------------------------------------------------------------------------------------------------------------
Total Distributions (1.20) (0.40) (11.33) (0.16) (0.71)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $ 13.12 $ 10.99 $ 8.42 $ 17.79 $ 13.30
===========================================================================================================================
Total Return 32.39% 36.29% 19.68% 35.13% (8.28%)
===========================================================================================================================
Ratios and Supplemental Data:
Net assets, end of year (000's omitted) $77,926 $47,399 $20,910 $ 8,639 $29,135
===========================================================================================================================
Ratio of expenses to average net assets 0.70% 0.74% 0.81% 0.75% 0.75%
===========================================================================================================================
Ratio of net investment income to average
net assets 0.31% 0.56% 0.94% 0.61% 1.22%
===========================================================================================================================
Portfolio Turnover Rate 131.67% 150.09% 121.60% 164.05% 177.97%
===========================================================================================================================
</TABLE>
(i) Amount was computed based on average shares outstanding during the year.
See Notes to Financial Statements.
F-9
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1998
================================================================================
<TABLE>
<CAPTION>
SHARES VALUE
------ COMMON STOCKS--58.0% -----
<S> <C> <C>
AIRLINES--.2%
1,000 US Airways Group Inc.* ............................. $ 52,000
---------
BIO-TECHNOLOGY--.4%
1,200 Biogen Inc.* ....................................... 99,600
---------
BROADCASTING--.8%
4,100 Comcast Corp Special .............................. 240,621
---------
BUSINESS SERVICES--.8%
3,00 IMS Health Inc. .................................... 226,314
---------
COMMUNICATIONS--4.0%
3,200 America Online Inc. ................................ 512,000
1,400 COX Communications Inc. Cl. A.* 96,775
7,200 MCI Worldcom Inc.* ................................. 516,600
---------
1,125,375
---------
COMMUNICATION EQUIPMENT--3.2%
4,400 Ascend Communications, Inc.* ....................... 289,300
2,800 Cisco Systems, Inc.* ............................... 259,876
2,200 Corning Inc. ....................................... 99,000
9,500 Ericsson(LM)Telephone Co. ADR B. ................... 227,411
-----------
875,587
-----------
COMPUTER RELATED &
BUSINESS EQUIPMENT--5.2%
4,400 Compaq Computer Corp. .............................. 184,527
5,300 Dell Computer Corp.* ............................... 387,896
4,500 EMC Corp.* ......................................... 382,500
2,900 International Business Machines Corp. .............. 535,775
-----------
1,490,698
-----------
COMPUTER SOFTWARE--2.5%
2,400 Compuware Corp.* ................................... 187,500
3,800 Microsoft Corporation* ............................. 527,014
-----------
714,514
-----------
CONGLOMERATE--2.1%
7,950 Tyco International Ltd. ............................ 599,732
-----------
DRUG DISTRIBUTION--1.7%
3,900 Cardinal Health, Inc. .............................. 295,913
2,400 McKesson Corp. ..................................... 189,751
-----------
485,664
-----------
FINANCIAL SERVICES--9.6%
4,900 BankAmerica Corp. .................................. 294,613
2,300 Bank of New York Inc. .............................. 92,575
9,300 Citigroup Inc. ..................................... 460,350
5,300 Federal Home Loan Mortgage Corporation ............. 341,521
3,000 First Union Corp. .................................. 182,439
9,400 Household International Inc. ....................... 372,475
6,000 Kansas City Southern Industries Inc. ............... 295,128
5,300 Morgan Stanley Dean Witter & Co. ................... 376,300
3,300 Paine Webber Group Inc. ............................ 127,463
1,200 State Street Corp. ................................. 83,476
1,100 SunAmerica Inc. .................................... 89,238
-----------
2,715,578
-----------
FOOD CHAINS--3.3%
1,500 Fred Meyer, Inc.* .................................. 90,375
7,700 Kroger Co.* ........................................ 465,850
6,200 Safeway Inc.* ...................................... 377,816
-----------
934,041
-----------
INSURANCE--1.0%
2,850 American International Group, Inc. ................. 275,381
-----------
LEISURE & ENTERTAINMENT--.8%
4,500 Carnival Corp. ..................................... 216,000
-----------
MEDICAL DEVICES--1.3%
4,800 Medtronic, Inc. .................................... 356,400
-----------
PHARMACEUTICALS--9.5%
1,300 Bristol Myers Squibb Co. ........................... 173,957
1,000 Elan Corp PLC-ADR* ................................. 69,563
1,600 Forest Laboratories, Inc.* ......................... 85,101
3,500 Eli Lilly & Company ................................ 311,063
2,900 Merck & Co., Inc. .................................. 428,295
4,100 Pfizer Inc. ........................................ 514,296
4,400 Schering-Plough Corporation ........................ 243,100
5,000 SmithKline Beecham PLC-ADS ......................... 347,500
6,600 Warner-Lambert Co. ................................. 496,241
-----------
2,669,116
-----------
POLLUTION CONTROL--2.0%
12,400 Waste Management, Inc. ............................. 578,150
-----------
RETAILING--7.1%
4,700 CVS Corp. .......................................... 258,500
2,700 Costco Companies Inc.* ............................. 194,908
10,800 Home Depot, Inc. ................................... 660,830
2,500 Office Depot Inc.* ................................. 92,345
6,700 Staples Inc.* ...................................... 292,710
6,300 Wal-Mart Stores Inc. ............................... 513,059
-----------
2,012,352
-----------
SEMICONDUCTORS--2.5%
4,400 Intel Corp. ........................................ 521,677
2,000 Texas Instruments, Incorporated .................... 171,126
-----------
692,803
-----------
TOTAL COMMON STOCKS
(COST $11,287,179) .............................. 16,359,926
-----------
</TABLE>
F-10
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1998 (CONT'D)
================================================================================
<TABLE>
<CAPTION>
SHARES VALUE
------ COMMON STOCKS--12.1% -----
<S> <C> <C>
AUTOMOTIVE--1.7%
$200,000 Ford Capital B.V.,
9.50%, 6/1/10 ..................................... $ 260,982
200,000 General Motors Acceptance Corp.,
7.125%, 6/1/99 ................................... 201,706
----------
462,688
----------
BANKS--.7%
200,000 NationsBank Corp. MTN,
7.23%, 5/2/99 .................................... 201,124
----------
ELECTRIC & GAS COMPANIES--1.8%
100,000 Cincinnati Gas & Electric Co. A.,
7.20%, 10/1/23 ................................... 108,890
400,000 Potomac Electric Power Co.,
7.00%, 1/15/24 ................................... 406,000
----------
514,890
----------
FINANCIAL SERVICES--6.1%
BankAmerica Corp.,
200,000 6.625%, 10/15/07 ................................. 210,606
100,000 7.125%, 5/12/05+ ................................. 106,932
400,000 Bankers Trust Corp.,
7.00%, 3/13/18 ................................... 404,000
260,000 Chase Manhattan Bank,
8.50%, 2/15/02 ................................... 281,970
200,000 Citicorp,
7.125%, 6/1/03 ................................... 211,328
100,000 Citigroup Inc.,
7.75%, 6/15/99 ................................... 101,097
200,000 Merrill Lynch & Co.,
6.75%, 4/30/01 ................................... 204,778
200,000 Transamerica Finance Corp.,
7.85%, 10/21/99 .................................. 202,982
----------
1,723,693
----------
LEISURE & ENTERTAINMENT--1.1%
300,000 Walt Disney Corp.,
6.375%, 3/30/01 ................................. 306,519
-----------
POLLUTION CONTROL--.7%
200,000 Waste Management Inc.,
8.25%, 11/15/99 ................................ 204,302
-----------
TOTAL CORPORATE BONDS
(COST $3,419,380) ................................ $ 3,413,216
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL U.S. GOVERNMENT & AGENCY
AMOUNT OBLIGATIONS--8.0% VALUE
------ -----
<S> <C> <C>
200,000 U.S. Treasury Notes,
7.50%, 10/31/99 .... ........................... $ 204,438
Federal Home Loan Bank,
250,000 6.00%, 1/27/03 ..... .......................... 250,050
255,000 6.55%, 9/9/13 ...... .......................... 253,286
Federal National Mortgage Association,
200,000 8.50%, 2/1/05 ................................. 207,250
400,000 6.75%, 2/4/28 ................................. 400,876
633,000 7.00%, 3/4/13 ................................. 632,899
300,000 6.42%, 7/14/08 ................................ 300,375
-----------
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS
(COST $2,253,705) .............................. 2,249,174
-----------
SHORT-TERM INVESTMENTS--20.6%
Short-Term Corporate Notes--17.7%
$1,000,000 Bayerische Vereinsbank A.G.,
5.80%, 1/5/99 ................................. 999,354
1,000,000 Ford Motor Credit Company,
5.77%, 1/6/99 ................................. 999,199
1,000,000 Duke Energy Corporation,
5.35%, 1/7/99 ................................. 999,108
1,000,000 EagleFunding Capital Corp.,
5.70%, 1/19/99 ................................ 997,150
1,000,000 Hertz Corporation,
5.70%, 1/7/99 ................................ 999,050
-----------
TOTAL SHORT-TERM CORPORATE NOTES
(COST $4,993,861) ............................. 4,993,861
-----------
SECURITIES HELD UNDER
REPURCHASE AGREEMENTS--2.9%
Securities Held Under Repurchase
Agreements, 4.70%, 1/4/99, with
Bear, Stearns & Co. Inc., dtd
12/31/98, repurchase price
$823,899; collateralized by U.S.
Treasury Strips (par value
$3,240,000 due 8/15/23) ........................ 823,469
-----------
TOTAL SHORT-TERM INVESTMENTS
(COST $5,817,330) .............................. 5,817,330
-----------
TOTAL INVESTMENTS
(COST $22,777,594)(A) ......................... 98.7% 27,839,646
Other Assets in Excess of Liabilities ........... 1.3 368,674
----- -----------
NET ASSETS ...................................... 100.0% $28,208,320
===== ===========
</TABLE>
- --------------------------------------------------------------------------------
* Non-income producing security.
Securities partially or fully on loan.
(a) At December 31, 1998, the net unrealized appreciation on investments, based
on cost for federal income tax purposes of $22,777,594, amounted to
$5,062,052 which consisted of aggregate gross unrealized appreciation of
$5,163,753 and gross unrealized depreciation of $101,701.
See Notes to Financial Statements.
F-11
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN BALANCED PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR
================================================================================
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------------------------
1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 10.76 $ 9.24 $ 13.64 $ 10.80 $ 11.58
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income 0.19 0.17 0.21(i) 0.33(i) 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 year $ 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 year (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%
===========================================================================================================================
Ratio of net investment income 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>
(i) Amount was computed based on average shares outstanding during the year.
See Notes to Financial Statements.
F-12
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1998
================================================================================
SHARES VALUE
------ COMMON STOCKS--84.8% -----
ADVERTISING--.5%
102,000 Young & Rubicam Inc.* ........... ............... $ 3,302,250
-----------
AIRLINES--2.1%
165,300 Continental Airlines Inc. Cl. B.* 5,537,550
168,000 US Airways Group Inc.* ......................... 8,736,000
-----------
14,273,550
-----------
APPLIANCES & TOOLS--.5%
65,300 Black & Decker Corp. ........................... 3,660,914
-----------
BIO-TECHNOLOGY--4.1%
127,600 Biogen Inc.* ................................... 10,590,800
397,600 Centocor, Inc.*+ ............................... 17,941,700
-----------
28,532,500
-----------
BROADCASTING--2.6%
187,900 Comcast Corp. Cl. A. Special ................... 11,027,475
109,400 Jacor Communications Inc.* ..................... 7,042,625
-----------
18,070,100
-----------
BUILDING & CONSTRUCTION--1.4%
347,700 Champion Enterprises Inc.* ..................... 9,518,288
-----------
BUSINESS SERVICES--2.4%
147,400 IMS Health Inc. ................................ 11,119,561
166,600 Siebel Systems Inc.* ........................... 5,654,071
-----------
16,773,632
-----------
COMMUNICATIONS--5.1%
133,400 America Online Inc. ............................ 21,344,000
94,700 At Home Corp. Series A.* ....................... 7,031,475
93,000 COX Communications Inc. Cl. A.* ................ 6,428,625
-----------
34,804,100
-----------
COMMUNICATION EQUIPMENT--2.8%
95,900 Ascend Communications, Inc.* ................... 6,305,425
151,800 Corning Inc. ................................... 6,831,000
205,400 Newbridge Networks Corp.* ...................... 6,239,025
-----------
19,375,450
-----------
COMPUTER RELATED
& BUSINESS EQUIPMENT--4.1%
523,000 Quantum Corp.* ................................. 11,113,750
277,600 Sanmina Corporation* ........................... 17,350,000
-----------
28,463,750
-----------
COMPUTER SERVICES--2.9%
282,500 Ceridian Corp.* ................................ 19,722,173
-----------
COMPUTER SOFTWARE--4.8%
97,000 Citrix Systems, Inc.* .......................... 9,415,110
86,700 Compuware Corp.* ............................... 6,773,438
233,900 Intuit Inc.* ................................... 16,957,750
-----------
33,146,298
-----------
CONSUMER PRODUCTS--1.5%
113,500 Dial Corp. ..................................... 3,277,312
250,000 Furniture Brands International Inc.* ........... 6,812,500
-----------
10,089,812
-----------
DRUG DISTRIBUTION--5.9%
75,900 Cardinal Health, Inc. .......................... $ 5,758,913
274,500 McKesson Corp. ................................. 21,702,794
384,200 Omnicare, Inc. ................................. 13,350,950
-----------
40,812,657
-----------
FINANCIAL SERVICES--10.0%
401,100 Dime Bancorp Inc. .............................. 10,604,282
95,200 Finova Group Inc. .............................. 5,134,898
91,076 Firstar Corp. .................................. 8,492,837
444,200 Kansas City Southern Industries Inc. ........... 21,849,310
154,850 Paine Webber Group Inc. ........................ 5,981,081
423,000 Sovereign Bancorp Inc. ......................... 6,027,750
159,800 State Street Corp. ............................. 11,116,167
------------
69,206,325
------------
FOOD CHAINS--1.3%
151,800 Fred Meyer, Inc.* ............................... 9,145,950
------------
FOODS & BEVERAGES--4.1%
223,300 Aurora Foods Inc.*+ ............................. 4,424,243
188,200 Starbucks Corp.* ................................ 10,562,725
201,000 Suiza Foods Corp.*+ ............................. 10,238,538
62,000 U.S. Foodservice* ............................... 3,038,000
------------
28,263,506
------------
INSURANCE--.4%
118,000 Fremont General Corp. ........................... 2,920,500
------------
LEISURE & ENTERTAINMENT--2.0%
555,900 International Game Technology ................... 13,515,597
------------
MANUFACTURING--2.0%
526,600 Leggett & Platt Inc. ............................ 11,585,200
123,000 Wabash National Corp. ........................... 2,498,498
------------
14,083,698
------------
MEDICAL DEVICES--1.9%
285,000 Allegiance Corp. ................................ 13,288,125
------------
MEDICAL SERVICES--1.4%
458,700 Health Management Associates Inc. Cl. A.* ....... 9,919,388
------------
PAPER PACKAGING & FOREST PRODUCTS--.5%
69,600 Sealed Air Corp.* ............................... 3,553,985
------------
PHARMACEUTICALS--4.4%
238,600 Alza Corp.* ..................................... 12,466,850
112,600 Elan Corp PLC-ADR*+ ............................. 7,832,793
189,200 Forest Laboratories, Inc.* ...................... 10,063,170
------------
30,362,813
------------
POLLUTION CONTROL--1.7%
231,500 Waste Management, Inc. 10,793,688
------------
RESTAURANTS & LODGING--2.6%
369,700 Outback Steakhouse, Inc.* 14,741,788
75,000 Papa John's International Inc.* 3,309,375
------------
18,051,163
------------
F-13
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1998 (CONT'D)
===============================================================================
SHARES COMMON STOCKS (CONT'D) VALUE
------ -------
RETAILING--7.8%
403,800 Bed Bath & Beyond Inc.* ......................... $ 13,779,675
57,200 Best Buy Company Inc.* .......................... 3,510,650
169,000 CVS Corp. ....................................... 9,295,000
469,400 Office Depot Inc.* .............................. 17,338,697
240,700 Williams Sonoma Inc.* ........................... 9,703,338
------------
53,627,360
------------
SEMICONDUCTORS--3.1%
61,000 Linear Technology Corporation .................... 5,463,343
438,300 Microchip Technology Incorporated*+ .............. 16,217,100
------------
21,680,443
------------
TRANSPORTATION--.9%
170,300 Coach USA Inc* ................................... 5,907,366
------------
TOTAL COMMON STOCKS
(COST $479,473,074) ............................ 584,865,381
------------
RINCIPAL
AMOUNT SHORT-TERM INVESTMENTS--8.7% VALUE
------- -----
SHORT-TERM CORPORATE NOTES--7.0%
$18,000,000 Bayerische Vereinsbank A.G.,
5.80%, 1/5/99 .................................. $17,988,400
15,000,000 CSC Enterprises,
5.65%, 1/14/99 ................................. 14,969,396
15,000,000 Ford Motor Credit Company,
5.69%, 1/8/99 .................................. 14,983,404
------------
TOTAL SHORT-TERM CORPORATE NOTES
(COST $47,941,200) ............................. 47,941,200
------------
SECURITIES HELD UNDER
REPURCHASE AGREEMENTS--1.7%
Securities Held Under Repurchase
Agreements, 4.70%, 1/4/99, with
Bear, Stearns & Co. Inc., dtd
12/31/98, repurchase price
$11,608,043; collateralized by
U.S.Treasury Strips (total par
value $41,712,000 due
8/15/21-8/15/23) .............................. 11,601,984
------------
TOTAL SHORT-TERM INVESTMENTS
(COST $59,543,184) ............................. 59,543,184
------------
TOTAL INVESTMENTS
(COST $539,016,258)(A) .............................. 93.5% 644,408,565
Other Assets in Excess of Other Liabilities ........... 6.5 45,162,892
----- ------------
NET ASSETS 100.0% 689,571,457
===== ===========
- --------------------------------------------------------------------------------
* Non-income producing security.
+ Securities partially or fully on loan.
(a) At December 31, 1998, the net unrealized appreciation on investments, based
on cost for federal income tax purposes of $539,016,258, amounted to
$105,392,307 which consisted of aggregate gross unrealized appreciation of
$111,771,452 and aggregate gross unrealized depreciation of $6,379,145.
See Notes to Financial Statements.
F-14
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR
================================================================================
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 24.18 $ 21.35 $ 19.44 $ 13.46 $ 13.72
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 0.00(i) (0.04) 0.03 (0.03) 0.00(i)
Net realized and unrealized gain
(loss) on investments 6.95 3.20 2.29 6.01 (0.21)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 6.95 3.16 2.32 5.98 (0.21)
- ---------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income -- (0.01) -- -- --
Distributions from net realized gains (2.26) (0.32) (0.41) -- (0.05)
- ----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (2.26) (0.33) (0.41) -- (0.05)
- ----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $ 28.87 $ 24.18 $ 21.35 $ 19.44 $ 13.46
==================================================================================================================================
Total Return 30.30% 15.01% 11.90% 44.45% (1.54%)
==================================================================================================================================
Ratios and Supplemental Data:
Net assets, end of year (000's omitted) $689,571 $444,967 $394,847 $185,349 $62,178
==================================================================================================================================
Ratio of expenses to average net assets 0.84% 0.84 0.84% 0.90% 0.97%
==================================================================================================================================
Ratio of net investment income (loss) to
average net assets 0.00% (0.15%) 0.08% (0.25%) 0.03%
==================================================================================================================================
Portfolio Turnover Rate 152.21% 151.98% 90.97% 104.74% 83.96%
==================================================================================================================================
</TABLE>
(i) Amount was computed based on average shares outstanding during the year.
See Notes to Financial Statements.
F-15
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1998
================================================================================
SHARES COMMON STOCKS--96.5% VALUE
------ -----
BROADCASTING--4.1%
32,000 Cablevision Systems Corp. Cl. A*. ................. $ 1,606,016
30,000 Comcast Corp. Cl. A. Special ...................... 1,760,640
28,000 Infinity Broadcasting Corp. Cl. A.* ............... 766,500
-----------
4,133,156
-----------
BUSINESS SERVICES--2.5%
33,700 IMS Health Inc. .................................... 2,542,261
-----------
COMMUNICATION EQUIPMENT--6.9%
29,200 Ascend Communications, Inc.* ....................... 1,919,900
49,000 Cisco Systems, Inc.* ............................... 4,547,837
23,000 Ericsson(LM)Telephone Co. ADR B. ................... 550,574
-----------
7,018,311
-----------
COMMUNICATIONS--9.7%
29,500 America Online Inc. ................................ 4,720,000
14,000 COX Communications Inc. Cl. A.* .................... 967,750
58,700 MCI Worldcom Inc.* ................................. 4,211,725
-----------
9,899,475
-----------
COMPUTER RELATED &
BUSINESS EQUIPMENT--4.4%
36,500 Dell Computer Corp.* ............................... 2,671,361
21,400 EMC Corp.* ......................................... 1,819,000
-----------
4,490,361
-----------
COMPUTER SERVICES--4.0%
2,500 eBay Inc.* ......................................... 603,125
4,000 Inktomi Corp.* ..................................... 517,500
10,000 Ticketmaster Online CitySearch Inc. Cl. B.* ........ 560,000
10,000 Yahoo Inc.* ........................................ 2,369,375
-----------
4,050,000
-----------
COMPUTER SOFTWARE--7.4%
10,000 Citrix Systems, Inc.* .............................. 970,630
20,900 Compuware Corp.* ................................... 1,632,813
35,600 Microsoft Corporation* ............................. 4,937,293
-----------
7,540,736
-----------
CONGLOMERATE--2.8%
37,730 Tyco International Ltd. ............................ 2,846,276
-----------
DRUG DISTRIBUTION--2.8%
37,500 Cardinal Health, Inc. .............................. 2,845,313
-----------
FINANCIAL SERVICES--10.9%
23,100 Bank of New York Inc. .............................. 929,775
52,000 Citigroup Inc. ..................................... 2,574,000
24,100 Federal Home Loan Mortgage Corporation ............. 1,552,956
25,000 First Union Corp. .................................. 1,520,325
40,000 Kansas City Southern Industries Inc. ............... 1,967,520
25,000 Morgan Stanley Dean Witter & Co. ................... 1,775,000
20,000 U.S. Bancorp Inc. .................................. 710,000
-----------
11,029,576
-----------
FOOD CHAINS--2.4%
39,900 Kroger Co.* ........................................ 2,413,950
-----------
INSURANCE--2.3%
24,350 American International Group, Inc. ................. 2,352,819
-----------
MEDICAL DEVICES--2.0%
20,000 Allegiance Corp. ................................... 932,500
15,000 Medtronic, Inc. .................................... 1,113,750
-----------
2,046,250
-----------
PHARMACEUTICALS--10.0%
25,000 Alza Corp.* ........................................ 1,306,250
20,100 Elan Corp PLC-ADR* ................................. 1,398,216
24,300 Pfizer Inc. ........................................ 3,048,143
32,400 Schering-Plough Corporation ........................ 1,790,100
35,100 Warner-Lambert Co. ................................. 2,639,099
-----------
10,181,808
-----------
POLLUTION CONTROL--2.2%
48,240 Waste Management, Inc. ............................. 2,249,190
-----------
RETAILING--18.1%
15,500 Amazon.com Inc.* ................................... 4,979,375
50,000 Bed Bath & Beyond Inc.* ............................ 1,706,250
10,000 Costco Companies Inc.* ............................. 721,880
18,000 CVS Corp. .......................................... 990,000
50,000 Ethan Allen Interiors Inc. ......................... 2,050,000
56,400 Home Depot, Inc. ................................... 3,451,003
10,000 Linens'n Things Inc.* .............................. 396,250
27,000 Rite Aid Corp. ..................................... 1,338,200
34,200 Wal-Mart Stores Inc. ............................... 2,785,180
-----------
18,418,138
-----------
SEMICONDUCTORS--4.0%
20,000 Intel Corp. ........................................ 2,371,260
20,000 Texas Instruments, Incorporated .................... 1,711,260
-----------
4,082,520
-----------
TOTAL COMMON STOCKS
(COST $68,173,626) ............................... 98,140,140
-----------
F-16
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1998 (CONT'D)
================================================================================
PRINCIPAL
AMOUNT VALUE
------- SHORT-TERM INVESTMENTS--2.7% ------
SHORT-TERM CORPORATE NOTES--1.9%
$2,000,000 Bayerische Vereinsbank A.G.,
5.80%, 1/5/99 (COST $1,998,711) ............... $ 1,998,711
------------
SECURITIES HELD UNDER
REPURCHASE AGREEMENTS--.8%
Securities Held Under Repurchase
Agreements, 4.70%, 1/4/99, with
Bear, Stearns & Co. Inc., dtd
12/31/98, repurchase price
$793,707; collateralized by U.S.
Treasury Strips (par value
$875,000 due 8/15/00) 793,293
------------
TOTAL SHORT-TERM INVESTMENTS
(COST $2,792,004) 2,792,004
------------
TOTAL INVESTMENTS
(COST $70,965,630)(A) 99.2% 100,932,144
Other Assets in Excess of Liabilities .8 777,381
----- ------------
NET ASSETS 100.0% $101,709,525
===== ============
- --------------------------------------------------------------------------------
* Non-income producing security.
(a) At December 31, 1998, the net unrealized appreciation on investments, based
on cost for federal income tax purposes of $70,965,630, amounted to
$29,966,514 which consisted of aggregate gross unrealized appreciation of
$30,277,996 and aggregate gross unrealized depreciation of $311,482.
See Notes to Financial Statements.
F-17
<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)
1998 1997 1996 to December 31, 1995(i)
<S> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, beginning of period $ 23.17 $ 19.36 $ 17.43 $ 10.00
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment loss (0.05) (0.03) (0.03)(ii) (0.03)
Net realized and unrealized gain on investments 12.99 3.84 2.14 7.46
- -----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 12.94 3.81 2.11 7.43
Distribution from net realized gains (1.21) -- (0.18) --
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 34.90 $ 23.17 $ 19.36 $ 17.43
===================================================================================================================================
Total Return 57.83% 19.68% 12.04% 74.30%
===================================================================================================================================
Ratios and Supplemental Data:
Net assets, end of period (000's omitted) $ 101,710 $ 53,488 $ 34,925 $ 5,497
===================================================================================================================================
Ratio of expenses excluding interest to
average net assets 0.93% 0.96% 1.06% 1.50
===================================================================================================================================
Ratio of expenses including interest to
average net assets 0.96% 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 (0.27%) (0.17%) (0.15%) (0.71%)
===================================================================================================================================
Portfolio Turnover Rate 143.59% 164.27% 102.10% 178.23%
===================================================================================================================================
Amount of debt outstanding at end of period -- -- -- --
===================================================================================================================================
Average amount of debt outstanding during
the period $ 246,101 $ 201,644 $ 76,079 $ 8,122
===================================================================================================================================
Average daily number of shares outstanding
during the period 2,480,478 2,135,458 1,107,187 75,460
===================================================================================================================================
Average amount of debt per share during the
period $ 0.10 $ 0.09 $ 0.07 $ 0.11
====================================================================================================================================
</TABLE>
(i) Ratios have been annualized; total return has not been annualized.
(ii) Amount was computed based on average shares outstanding during the period.
See Notes to Financial Statements.
F-18
<PAGE>
THE ALGER AMERICAN FUND
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
================================================================================
<TABLE>
<CAPTION>
AMERICAN AMERICAN
SMALL INCOME
AMERICAN CAPITALIZA- AND
GROWTH TION GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Investments in securities, at value
(identified cost*)--see accompany-
ing schedules of investments $1,880,999,442 $1,221,201,995 $77,967,702
Receivable for investment securities
sold 67,223,370 7,281,631 --
Receivable for shares of beneficial
interest sold 2,140,294 4,607,505 62,245
Interest and dividends receivable 545,459 355,394 29,533
Other assets 36,231 40,075 1,444
- ----------------------------------------------------------------------------------------
Total Assets 1,950,944,796 1,233,486,600 78,060,924
- -----------------------------------------------------------------------------------------
LIABILITIES:
Payable for investment securities
purchased 29,424,198 -- --
Payable for shares of beneficial
interest redeemed 14,531,520 16,035,380 79,100
Accrued investment management fees 1,135,764 798,623 38,673
Accrued expenses 134,361 68,857 17,530
- -----------------------------------------------------------------------------------------
Total Liabilities 45,225,843 16,902,860 135,303
- -----------------------------------------------------------------------------------------
NET ASSETS $1,905,718,953 $1,216,583,740 $77,925,621
=========================================================================================
NET ASSETS CONSIST OF:
Paid-in capital $1,161,760,391 $ 828,708,591 $53,542,097
Undistributed net investment
income (accumulated loss) 3,387,974 (9,405,907) 192,762
Undistributed net realized gain 223,786,903 122,429,949 5,428,667
Net unrealized appreciation 516,783,685 274,851,107 18,762,095
- -----------------------------------------------------------------------------------------
NET ASSETS $1,905,718,953 $1,216,583,740 $77,925,621
=========================================================================================
Shares of beneficial interest
outstanding--Note 6 35,808,945 27,669,504 5,937,397
=========================================================================================
NET ASSET VALUE PER SHARE $ 53.22 $ 43.97 $ 13.12
=========================================================================================
*Identified cost $1,364,215,757 $ 946,350,888 $59,205,607
========================================================================================
</TABLE>
<TABLE>
<CAPTION>
AMERICAN AMERICAN
AMERICAN MIDCAP LEVERAGED
BALANCED GROWTH ALLCAP
PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Investments in securities, at value
(identified cost*)--see accompany-
ing schedules of investments $27,839,646 $644,408,565 $100,932,144
Receivable for investment securities
sold 585,165 52,345,195 919,769
Receivable for shares of beneficial
interest sold 52,575 4,853,289 168,553
Interest and dividends receivable 122,171 268,911 13,148
Other assets 445 13,915 1,584
- --------------------------------------------------------------------------------------
Total Assets 28,600,002 701,889,875 102,035,198
- --------------------------------------------------------------------------------------
LIABILITIES:
Payable for investment securities
purchased 363,447 11,593,130 --
Payable for shares of beneficial
interest redeemed 478 262,138 239,244
Accrued investment management fees 16,845 420,617 65,807
Accrued expenses 10,912 42,533 20,622
- ---------------------------------------------------------------------------------------
Total Liabilities 391,682 12,318,418 325,673
- ---------------------------------------------------------------------------------------
NET ASSETS $28,208,320 $689,571,457 $101,709,525
=======================================================================================
NET ASSETS CONSIST OF:
Paid-in capital $20,583,206 $475,42 $ 61,621,845
Undistributed net investment
income (accumulated loss) 422,191 (971,480) (298,637)
Undistributed net realized gain 2,140,871 109,730,292 10,419,803
Net unrealized appreciation 5,062,052 105,392,307 29,966,514
- ---------------------------------------------------------------------------------------
NET ASSETS $28,208,320 $689,571,457 $101,709,525
=======================================================================================
Shares of beneficial interest
outstanding--Note 6 2,173,431 23,881,618 2,914,691
=======================================================================================
NET ASSET VALUE PER SHARE $ 12.98 $ 28.87 $ 34.90
=======================================================================================
*Identified cost $22,777,594 $539,016,258 $ 70,965,630
======================================================================================
</TABLE>
See Notes to Financial Statements.
F-19
<PAGE>
THE ALGER AMERICAN FUND
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
================================================================================
<TABLE>
<CAPTION>
AMERICAN AMERICAN
SMALL INCOME
AMERICAN CAPITALIZA- AND
GROWTH TION GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
Income:
Interest $ 6,378,360 $ 3,990,237 $ 216,449
Dividends 7,822,844 3,040,556 377,898
- -----------------------------------------------------------------------------------------------
Total Income 14,201,204 7,030,793 594,347
- -----------------------------------------------------------------------------------------------
Expenses:
Management fees-- Note 3(a) 10,304,264 8,665,222 365,820
Interest on line of credit utilized -- -- --
Custodian fees 301,295 244,875 24,056
Transfer agent fees 2,500 2,500 2,500
Professional fees 55,065 37,650 5,351
Trustees' fees 3,750 3,750 3,750
Miscellaneous 162,118 101,950 10,883
- -----------------------------------------------------------------------------------------------
Total Expenses 10,828,992 9,055,947 412,360
- -----------------------------------------------------------------------------------------------
Net Investment Income (Loss) 3,372,212 (2,025,154) 181,987
- -----------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS
Net realized gain on investments 223,813,556 122,430,214 5,444,249
Net change in unrealized appreciation
on investments 338,483,830 51,310,113 11,504,771
- -----------------------------------------------------------------------------------------------
Net realized and unrealized gain
on investments 562,297,386 173,740,327 16,949,020
- -----------------------------------------------------------------------------------------------
NET INCREASE IN NET
ASSETS RESULTING FROM
OPERATIONS $565,669,598 $171,715,173 $17,131,007
===============================================================================================
</TABLE>
<TABLE>
<CAPTION>
AMERICAN AMERICAN
AMERICAN MIDCAP LEVERAGED
BALANCED GROWTH ALLCAP
PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
Income:
Interest $ 543,563 $ 2,334,780 $ 154,673
Dividends 76,299 2,014,176 304,913
- ------------------------------------------------------------------------------------------
Total Income 619,862 4,348,956 459,586
- ------------------------------------------------------------------------------------------
Expenses:
Management fees-- Note 3(a) 154,672 4,156,932 567,333
Interest on line of credit utilized -- -- 21,006
Custodian fees 18,875 130,055 26,946
Transfer agent fees 2,500 2,500 2,500
Professional fees 3,923 20,937 5,555
Trustees' fees 3,750 3,750 3,750
Miscellaneous 5,935 39,194 11,455
- ------------------------------------------------------------------------------------------
Total Expenses 189,655 4,353,368 638,545
- ------------------------------------------------------------------------------------------
Net Investment Income (Loss) 430,207 (4,412) (178,959)
- ------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED
GAIN ON INVESTMENTS
Net realized gain on investments 2,135,374 112,933,261 10,343,897
Net change in unrealized appreciation
on investments 3,469,514 35,788,129 23,275,972
- ------------------------------------------------------------------------------------------
Net realized and unrealized gain
on investments 5,604,888 148,721,390 33,619,869
- ------------------------------------------------------------------------------------------
NET INCREASE IN NET
ASSETS RESULTING FROM
OPERATIONS $ 6,035,095 $ 148,716,978 $ 33,440,910
===========================================================================================
</TABLE>
See Notes to Financial Statements.
F-20
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1998
================================================================================
- --------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH
Cash flows from operating activities:
Interest received $ 154,017
Dividends received 321,648
Interest paid (21,044)
Operating expenses paid (591,266)
Purchase of short-term securities, net (372,727)
Purchase of portfolio securities (106,914,674)
Proceeds from disposition of portfolio securities 92,576,905
Other 514
---------------------------------------------------------------------------
Net cash used in operating activities (14,846,627)
---------------------------------------------------------------------------
Cash flows from financing activities:
Dividends paid (2,761,338)
Proceeds from shares sold and dividends reinvested 40,194,208
Payments on shares redeemed (22,586,243)
---------------------------------------------------------------------------
Net cash provided by financing activities 14,846,627
--------------------------------------------------------------------------
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 $33,440,910
Increase in investments (13,790,727)
Increase in receivable for investments sold (919,769)
Decrease in interest and dividends receivable 16,079
Net realized gain (10,343,897)
Net increase in unrealized appreciation (23,275,972)
Increase in accrued expenses 26,235
Net decrease in other assets 514
---------------------------------------------------------------------------
Net cash used in operating activities $ (14,846,627)
===========================================================================
See Notes to Financial Statements.
F-21
<PAGE>
THE ALGER AMERICAN FUND
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
AMERICAN
AMERICAN INCOME
AMERICAN SMALL AND
GROWTH CAPITALIZATION GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net investment income (loss) $ 3,372,212 $ (2,025,154) $ 181,987
Net realized gain on investments 223,813,556 122,430,214 5,444,249
Net change in unrealized appreciation
on investments 338,483,830 51,310,113 11,504,771
- ----------------------------------------------------------------------------------------------
Net increase in net assets resulting
from operations 565,669,598 171,715,173 17,131,007
Dividends to shareholders:
Net investment income (3,246,329) -- (194,463)
Net realized gains (198,381,152) (131,575,498) (5,380,156)
Net increase from
shares of beneficial
interest transactions-- Note 6 469,147,944 178,858,157 18,970,341
- ----------------------------------------------------------------------------------------------
Total increase 833,190,061 218,997,832 30,526,729
Net Assets
Beginning of year 1,072,528,892 997,585,908 47,398,892
- ----------------------------------------------------------------------------------------------
End of year $ 1,905,718,953 $ 1,216,583,740 $ 77,925,621
==============================================================================================
Undistributed net investment income
(accumulated loss) $ 3,387,974 $ (9,405,907) $ 192,762
=============================================================================================
</TABLE>
<TABLE>
<CAPTION>
AMERICAN AMERICAN
AMERICAN MIDCAP LEVERAGED
BALANCED GROWTH ALLCAP
PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net investment income (loss) $ 430,207 $ (4,412) $ (178,959)
Net realized gain on investments 2,135,374 112,933,261 10,343,897
Net change in unrealized appreciation
on investments 3,469,514 35,788,129 23,275,972
- ------------------------------------------------------------------------------------------------
Net increase in net assets resulting
from operations 6,035,095 148,716,978 33,440,910
Dividends to shareholders:
Net investment income (295,352) -- --
Net realized gains (1,311,952) (41,830,668) (2,761,338)
Net increase from
shares of beneficial
interest transactions-- Note 6 7,166,779 137,718,447 17,541,955
- ------------------------------------------------------------------------------------------------
Total increase 11,594,570 244,604,757 48,221,527
Net Assets
Beginning of year 16,613,750 444,966,700 53,487,998
- ------------------------------------------------------------------------------------------------
End of year $ 28,208,320 $ 689,571,457 $ 101,709,525
================================================================================================
Undistributed net investment income
(accumulated loss) $ 422,191 $ (971,480) $ (298,637)
================================================================================================
</TABLE>
<PAGE>
THE ALGER AMERICAN FUND
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997
================================================================================
<TABLE>
<CAPTION>
AMERICAN
AMERICAN INCOME
AMERICAN SMALL AND
GROWTH CAPITALIZATION GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net investment income (loss) $ 3,277,196 $ (1,820,125) $ 195,876
Net realized gain on investments 199,900,299 139,147,522 5,378,374
Net change in unrealized appreciation
on investments 49,343,495 22,504,405 4,254,496
- ---------------------------------------------------------------------------------------------
Net increase in net assets resulting
from operations 252,520,990 159,831,802 9,828,746
Dividends to shareholders:
Net investment income (3,760,721) -- (141,500)
Net realized gains (6,810,754) (54,749,439) (1,170,590)
Net increase (decrease) from
shares of beneficial interest
transactions-- Note 6 (160,448,991) (577,014,924) 17,971,996
- ---------------------------------------------------------------------------------------------
Total increase (decrease) 81,500,524 (471,932,561) 26,488,652
Net Assets
Beginning of year 991,028,368 1,469,518,469 20,910,240
--------------------------------------------------------------------------------------------
End of year $1,072,528,89 $ 997,585,908 $47,398,892
=============================================================================================
Undistributed net investment income
(accumulated loss) $ 3,262,091 $ (7,380,753) $ 205,238
=============================================================================================
</TABLE>
<TABLE>
<CAPTION>
AMERICAN AMERICAN
AMERICAN MIDCAP LEVERAGED
BALANCED GROWTH ALLCAP
PORTFOLIO PORTFOLIO PORTFOLIO
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Net investment income (loss) $ 294,655 $ (653,590) $ (79,311)
Net realized gain on investments 1,319,306 38,971,626 3,587,761
Net change in unrealized appreciation
on investments 756,566 20,863,695 4,257,904
- -----------------------------------------------------------------------------------
Net increase in net assets resulting
from operations 2,370,527 59,181,731
7,766,354
Dividends to shareholders:
Net investment income (155,278) (250,596) --
Net realized gains (210,546) (6,110,692) --
Net increase (decrease) from
shares of beneficial interest
transactions-- Note 6 4,123,363 (2,700,477) 10,796,374
- -----------------------------------------------------------------------------------
Total increase (decrease) 6,128,066 50,119,966 18,562,728
Net Assets
Beginning of year 10,485,684 394,846,734 34,925,270
- -----------------------------------------------------------------------------------
End of year $16,613,750 $444,966,700 $53,487,998
==================================================================================
Undistributed net investment income
(accumulated loss) $ 287,336 $ (967,068) $ (119,678)
==================================================================================
</TABLE>
See Notes to Financial Statements.
F-22
<PAGE>
THE ALGER AMERICAN FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
================================================================================
NOTE 1--GENERAL:
The Alger American Fund (the "Fund") is a diversified, open-end registered
investment company organized as a 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 secondary
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, 1998, the value of securities loaned and
collateral received thereon were as follows:
Value of
Securities Value of
Loaned Collateral
------------ ------------
American Growth Portfolio .............. $ 4,758,109 $ 4,884,033
American Small Capitalization
Portfolio ............................ 63,585,006 64,909,546
American Income and Growth
Portfolio ............................ -- --
American Balanced Portfolio ............ 106,932 110,237
American MidCap Growth
Portfolio ............................ 27,724,121 28,330,588
American Leveraged AllCap
Portfolio ............................ -- --
(e) DIVIDENDS TO SHAREHOLDERS: Dividends anddistributions payable to
shareholders are recorded by the Fund on the ex-dividend date.
Dividends from net investment income are declared and paid annually.
F-23
<PAGE>
THE ALGER AMERICAN FUND
NOTES TO FINANCIAL STATEMENTS (CONT'D)
DECEMBER 31, 1998
================================================================================
Distributions 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 its Investment Management Agreement (the "Agreement") with Fred
Alger Management, Inc. ("Alger Management"), are payable monthly and computed
based on the average daily net assets of 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
Each Agreement further provides 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, 1998, 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.") $3,372,838, $2,535,652, $171,919, $31,609,
$1,636,242 and $168,804, 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"), an affiliate of Alger
Management, whereby Services will act as transfer agent for the Fund for a fee
of $2,500 per year, per Portfolio, plus out-of-pocket expenses.
(d) Certain trustees and officers of the Fund are directors and officers of
Alger Management, Alger Inc. and Services.
NOTE 4--SECURITIES TRANSACTIONS:
Purchases and sales of securities, other than short-term securities, for the
year ended December 31, 1998, were as follows:
PURCHASES SALES
----------- -----------
American Growth Portfolio................... $1,723,985,203 $1,598,358,938
American Small Capitalization
Portfolio................................. 1,360,996,321 1,371,887,498
American Income and Growth
Portfolio................................. 84,664,292 72,045,184
American Balanced Portfolio................. 19,187,530 16,675,060
American MidCap Growth
Portfolio................................. 751,122,359 726,513,142
American Leveraged AllCap
Portfolio................................. 106,914,674 93,496,190
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. To the extent American
Leveraged AllCap Portfolio borrows under this line, it must pledge securities
with a total value of at least twice the amount borrowed. During the year ended
December 31, 1998, the American Leveraged AllCap Portfolio had borrowings which
averaged $246,101 at a weighted average interest rate of 8.42%.
NOTE 6--SHARE CAPITAL:
The Fund has an unlimited number of authorized shares of beneficial interest of
$.001 par value.
F-24
<PAGE>
THE ALGER AMERICAN FUND
NOTES TO FINANCIAL STATEMENTS (CONT'D)
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
During the year ended December 31, 1998, transactions of shares of beneficial
interest were as follows:
SHARES AMOUNT
------ ------
American Growth
Portfolio:
Shares sold................ 22,276,285 $1,015,249,072
Dividends reinvested....... 4,809,435 201,563,406
----------- --------------
27,085,720 1,216,812,478
Shares redeemed............ (16,358,040) (747,664,534)
----------- --------------
Net increase............. 10,727,680 $ 469,147,944
=========== ==============
SHARES AMOUNT
------ ------
American Small Capitalization
Portfolio:
Shares sold................ 33,401,217 $1,342,889,723
Dividends reinvested....... 3,247,801 131,568,417
----------- --------------
36,649,018 1,474,458,140
Shares redeemed............ (31,781,393) (1,295,599,983)
----------- --------------
Net increase............. 4,867,625 $ 178,858,157
=========== ==============
SHARES AMOUNT
------ ------
American Income and Growth
Portfolio:
Shares sold................ 2,355,653 $ 27,413,251
Dividends reinvested....... 504,168 5,571,055
----------- --------------
2,859,821 32,984,306
Shares redeemed............ (1,236,899) (14,013,965)
----------- --------------
Net increase............. 1,622,922 $ 18,970,341
=========== ==============
SHARES AMOUNT
------ ------
American Balanced
Portfolio:
Shares sold................ 781,832 $ 8,989,415
Dividends reinvested....... 146,968 1,604,892
----------- --------------
928,800 10,594,307
Shares redeemed............ (299,561) (3,427,528)
----------- --------------
Net increase............. 629,239 $ 7,166,779
=========== ==============
SHARES AMOUNT
------ ------
American MidCap Growth
Portfolio:
Shares sold................ 14,298,667 $ 361,534,632
Dividends reinvested....... 1,688,763 41,830,666
----------- --------------
15,987,430 403,365,298
Shares redeemed............ (10,509,008) (265,646,851)
----------- --------------
Net increase............. 5,478,422 $ 137,718,447
=========== ==============
SHARES AMOUNT
------ ------
American Leveraged AllCap
Portfolio:
Shares sold................ 1,353,912 $ 37,604,075
Dividends reinvested....... 107,618 2,731,336
----------- --------------
1,461,530 40,335,411
Shares redeemed............ (854,961) (22,793,456)
----------- --------------
Net increase............. 606,569 $ 17,541,955
=========== ==============
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
=========== ==============
F-25
<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 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), including the schedules of investments, as of December 31,
1998, 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 and financial highlights. Our procedures included confirmation of
securities owned as of December 31, 1998, 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, 1998, 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
January 29, 1999
F-26
<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>
PART C
OTHER INFORMATION
Item 23. Exhibits
Exhibit No. Description of Exhibit
- ------------- ----------------------
(a-1) Agreement and Declaration of Trust (l) [EDGAR 4/98]
(a-2) Written Consent of the Sole Trustee of the Trust amending the
Agreement and Declaration of Trust (1)
(a-3) Amendment to Registrant's Agreement and Declaration of Trust to
establish the Alger American Fixed Income Portfolio (3)
(a-4) Certificate of Designation relating to the Alger American MidCap
Growth Portfolio (5) [EDGAR 4/98]
(a-5) Certificate of Designation relating to the Alger American Leveraged
AllCap Portfolio (6) [EDGAR 4/98]
(b) By-laws of Registrant (l) [EDGAR 4/98]
(c) See Exhibits (a-1) and (b)
C-1
<PAGE>
Exhibit No. Description of Exhibit
- ----------- ----------------------
(d-1) Investment Management Agreement for the Alger American Balanced
Portfolio (4) [EDGAR 4/98]
(d-2) Investment Management Agreement for the Alger American MidCap Growth
Portfolio (5) [EDGAR 4/98]
(d-3) Investment Management Agreement for the Alger American Leveraged
AllCap Portfolio (6) [EDGAR 4/98]
(d-4) Investment Management Agreement for the Alger American Money
Market Portfolio (3) [EDGAR 4/98]
(d-5) Investment Management Agreement for the Alger American Income
and Growth Portfolio (3) [EDGAR 4/98]
(d-6) Investment Management Agreement for the Alger American Small
Capitalization Portfolio (3) [EDGAR 4/98]
(d-7) Investment Management Agreement for the Alger American Growth
Portfolio (3) [EDGAR 4/98]
(e) Distribution Agreement (3) [EDGAR 4/98]
(g-1) Form of Custody Agreement (2)
(g-2) Form of Supplement to Custody Agreement relating to the Alger
American Fixed Income Portfolio (3)
(g-3) Amendment 1 to Custody Agreement (7)
(h) Transfer Agency Agreement (7)
(i-1) Opinions of Sullivan & Worcester (6)
(i-2) Opinion and Consent of Sullivan & Worcester (8)
C-2
<PAGE>
(j) Consent of Arthur Andersen LLP
(l-1) Purchase Agreement relative to the shares of the Alger American
Money Market, Income and Growth, Small Capitalization and Growth
Portfolios (2) [EDGAR 4/98]
(l-2) Purchase Agreement relative to the shares of the Alger American
Fixed Income Portfolio (3)
(l-3) 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]
(p) Powers of Attorney executed by David D. Alger, Gregory S. Duch,
Stephen E. O'Neil, Nathan E. Saint-Amand and B. Joseph White (8)
- -----------
(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 filed with the SEC on August 3, 1992.
(5) Incorporated by reference to Post-Effective Amendment No. 7 to the
Registration Statement filed with the SEC on March 5, 1993.
(6) Incorporated by reference to Post-Effective Amendment No. 9 to the
Registration Statement filed with the SEC on March 2, 1994.
(7) Incorporated by reference to Post-Effective Amendment No. 15 to the
Registration Statement filed with the SEC on April 9, 1998.
(8) Incorporated by reference to Post-Effective Amendment No. 17 to the
Registration Statement filed with the SEC on March 2, 1999.
C-3
<PAGE>
Item 24. Persons Controlled by or Under Common Control with Registrant
None.
Item 25. 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 26. 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 26 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 27. 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 27 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 28. 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 29. Management Services
Not applicable.
Item 30. Undertakings
Not applicable
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 1993 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 15th day of
April, 1999.
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
--------- ----- ----
* Chairman of the Board April 15, 1999
- ---------------------------------
Fred M. Alger III
/s/ David D. Alger President and Trustee April 15, 1999
- ---------------------------------- (Chief Executive Officer)
David D. Alger
/s/ Gregory S. Duch Treasurer April 15, 1999
- - -------------------------------- (Chief Financial and
Gregory S. Duch Accounting Officer)
* Trustee April 15, 1999
- ----------------------------------
Nathan E. Saint-Amand
* Trustee April 15, 1999
- ----------------------------------
Stephen E. O'Neil
* Trustee April 15, 1999
- ----------------------------------
Arthur M. Dubow
* Trustee April 15, 1999
- ----------------------------------
John T. Sargent
* Trustee April 15, 1999
- ----------------------------------
B. Joseph White
*By: /s/ Gregory S. Duch
- - --------------------------------
Gregory S. Duch
Attorney-In-Fact
<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. 17 X
---
and/or
---
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 ---
---
Amendment No. 19 x
---
(Check appropriate box or boxes)
THE ALGER AMERICAN FUND
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
--------------------------
E X H I B I T S
--------------------------
<PAGE>
INDEX TO EXHIBITS
Exhibit Page Number in Sequential
No. Number System
- -------- -------------------------
(j) Consent of Independent Accountants
EXHIBIT (j)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated January 29, 1999 on the financial statements of The Alger American Fund
for the year ended December 31, 1998 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. 19), 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 15, 1999
