As filed with the Securities and Exchange Commission on April 11, 2005
Securities Act File No. 33-21722
Investment Company Act File No. 811-5550
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM N-1A
Registration Statement Under The Securities Act of 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. 25 [X]
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Registration Statement Under The Investment Company Act of 1940 [X]
and/or
Amendment No. 27 [X]
(Check appropriate box or boxes)
111 Fifth Avenue
New York, New York 10003
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: 212-806-8800
Mr. Frederick A. Blum
Fred Alger Management, Inc.
111 Fifth Avenue
New York, NY 10003
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(Name and Address of Agent for Service)
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Page 1 of ____Pages
Exhibit Index at 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, 2005 pursuant to paragraph (b), or
[ ] 60 days after filing pursuant to paragraph (a), or
[ ] on [date] pursuant to paragraph (a)(2) of Rule 485
THE ALGER AMERICAN FUND
CLASS O SHARES
A POOLED FUNDING VEHICLE FOR:
o VARIABLE ANNUITY CONTRACTS
o VARIABLE LIFE INSURANCE POLICIES
o QUALIFIED PENSION PLANS
o QUALIFIED RETIREMENT PLANS
PROSPECTUS
MAY 1, 2005
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.
THE ALGER
AMERICAN FUND
CLASS O SHARES
PROSPECTUS
MAY 1, 2005
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 MidCap
Growth Portfolio ...............4
Alger American 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 and Organization
8 ............Shareholder Information
Distributor .......................8
Transfer Agent ....................8
Net Asset Value ...................8
Dividends and Distributions .......8
Classes of Fund Shares ............9
Purchasing and Redeeming
Fund Shares ....................9
Other Information .................9
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10 ...........Financial Highlights
Back Cover: How to obtain more information
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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.
Some portfolios must take into account a company's market capitalization when considering it for investment. 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 at least 80% of its net assets in the equity securities of companies that, at the time of purchase of the securities, have a total market capitalization within the range of the companies included in the Russell 2000 Growth Index or the S&P SmallCap 600 Index, updated quarterly. Both indexes are broad indexes of small capitalization stocks.
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
GOAL
The Alger American MidCap Growth Portfolio seeks long-term capital appreciation.
APPROACH
It focuses on midsized companies with promising growth potential. Under normal circumstances, the portfolio invests at least 80% of its net assets in the equity securities of companies that, at the time of purchase of the securities, have a market capitalization within the range of companies included in the Russell Midcap Growth Index or the S&P MidCap 400 Index, updated quarterly. Both indexes are designed to track the performance of medium capitalization stocks.
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 companies that 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 on fixed-income securities, especially those 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 that are rated within the four highest rating categories by an established rating agency or, if not rated, are determined by the Fund's Manager to be of comparable quality. Under normal circumstances, at least 25% of the portfolio's net assets are invested in fixed-income senior 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 that 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.
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 fluctuate 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. 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 investments' values.
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 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 and thereby adversely affect portfolio performance.
There may be additional risks applicable to a specific portfolio because of its investment approach.
To the extent that a portfolio invests in securities other than those that are its primary focus, the principal risks associated with such other investments, described in the Fund's Prospectus and Statement of Addition Information, are pertinent.
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 product lines or 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 product lines or 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; their market values tend to fall when interest rates rise and to rise when interest rates fall.
o the potential for a decline in the value of the portfolio's securities 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
Additional risks of investing in the portfolio are:
o smaller issuers in which the portfolio invests may have limited product lines or financial resources or lack management depth.
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.
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PERFORMANCE
The following bar charts and the tables beneath them give you some indication of the risks of an investment in a portfolio by showing changes in each portfolio's performance from year to year and by showing how the portfolio's average annual returns for the indicated periods compare with those of an appropriate benchmark index. They 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. Investors cannot invest directly in any index.
o Russell 1000 Growth Index: An index of common stocks designed to track performance of large capitalization companies with greater than average growth orientation.
o Russell 2000 Growth Index: An index of common stocks designed to track performance of small capitalization companies with greater than average growth orientation.
o Russell 3000 Growth Index: An index of common stocks designed to track performance of companies with greater than average growth orientation in general.
o Russell Midcap Growth Index: An index of common stocks designed to track performance of medium-capitalization companies with greater than average growth orientation.
o Lehman Brothers Government/Credit Bond Index: 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 all indexes presented.
[THE DATA BELOW REPRESENTS A GRAPH IN THE PRINTED PIECE]
44.31 4.18 11.39 15.53 43.42 -27.2 -29.51 -26.22 42.34 16.57 ----- ---- ----- ----- ----- ----- ------ ------ ----- ----- 95 96 97 98 99 00 01 02 03 04 |
Best Quarter: 31.06% Q4 1999 Worst Quarter: -26.52% Q1 2001
Average Annual Total Return as of December 31, 2004
Class O Since
Inception
1 Year 5 Years 10 Years (9/21/88)
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American Small
Capitalization 16.57% -8.88% 5.71% 10.82%
Russell 2000
Growth Index 14.31% -3.58% 7.11% 8.10%
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[THE DATA BELOW REPRESENTS A GRAPH IN THE PRINTED PIECE]
44.45 11.9 15.01 30.3 31.85 9.18 -6.52 -29.54 47.79 13.04 ----- ---- ----- ---- ----- ---- ----- ------ ----- ----- 95 96 97 98 99 00 01 02 03 04 |
Best Quarter: 27.07% Q4 1998 Worst Quarter: -18.60% Q3 2002
Average Annual Total Return as of December 31, 2004
Class O
Since
Inception
1 Year 5 Years 10 Years (5/3/93)
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American MidCap
Growth 13.04% 3.74% 14.39% 15.24%
Russell Midcap
Growth Index 15.48% -3.36% 11.23% 10.61%
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4
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[THE DATA BELOW REPRESENTS A GRAPH IN THE PRINTED PIECE]
36.37 13.35 25.75 48.07 33.74 -14.77 -11.81 -32.99 35.16 5.5 ----- ----- ----- ----- ----- ------ ------ ------ ----- --- 95 96 97 98 99 00 01 02 03 04 |
Best Quarter: 25.93% Q4 1998 Worst Quarter: -20.20% Q3 2002
Average Annual Total Return as of December 31, 2004
Class O
Since
Inception
1 Year 5 Years 10 Years (1/9/89)
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American Growth 5.50% -6.41% 10.70% 12.95%
Russell 1000
Growth Index 6.30% -9.29% 9.60% 10.89%
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[THE DATA BELOW REPRESENTS A GRAPH IN THE PRINTED PIECE]
28.62 10.17 19.82 31.51 29.21 -2.76 -1.93 -12.29 19.03 4.57 ----- ----- ----- ----- ----- ----- ----- ------ ----- ---- 95 96 97 98 99 00 01 02 03 04 |
Best Quarter: 16.94% Q4 1998 Worst Quarter: -6.58% Q4 2000
Average Annual Total Return as of December 31, 2004
Class O
Since
Inception
1 Year 5 Years 10 Years (9/5/89)
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American Balanced 4.57% 0.81% 11.63% 9.26%
Russell 1000
Growth Index 6.30% -9.29% 9.60% 9.51%
Lehman Brothers Gov't/
Credit Bond Index 4.21% 8.00% 7.80% 7.87%
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[THE DATA BELOW REPRESENTS A GRAPH IN THE PRINTED PIECE]
12.04 19.68 57.83 78.06 -24.83 -15.93 -33.91 34.72 8.19 ----- ----- ----- ----- ------ ------ ------ ----- ---- 96 97 98 99 00 01 02 03 04 |
Best Quarter: 40.16% Q4 1999 Worst Quarter: -21.93% Q4 2000
Average Annual Total Return as of December 31, 2004
Class O
Since
Inception
1 Year 5 Years (1/25/95)
-----------------------------------------------------------
American Leveraged
AllCap 8.19% -9.45% 14.97%
Russell 3000
Growth Index 6.93% -8.88% 9.20%
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[THE DATA BELOW REPRESENTS A GRAPH IN THE PRINTED PIECE]
35.13 19.68 36.29 32.39 42.45 -1.27 -14.32 -31.1 29.84 7.85 ----- ----- ----- ----- ----- ----- ------ ----- ----- ---- 95 96 97 98 99 00 01 02 03 04 |
Best Quarter: 35.96% Q4 1999 Worst Quarter: -19.33% Q3 2002
Average Annual Total Return as of December 31, 2004
Class O
Since
Inception
1 Year 5 Years 10 Years (11/15/88)
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American
Income & Growth 7.85% -3.98% 12.99% 10.50%
Russell 1000
Growth Index 6.30% -9.29% 9.60% 11.02%
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The Fund also offers Class S shares. Class S and Class O shares differ only in that Class S shares are subject to a distribution and shareholder servicing fee, whereas Class O shares are not. Because of the distribution and shareholder servicing fee, returns will be lower for Class S shares.
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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 Class O shares of the portfolios. The numbers shown below are based on each portfolio's expenses during its fiscal year ended December 31, 2004.
------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING
EXPENSES
(expenses that are deducted
from Fund assets)
---------------------------------------------------
SHAREHOLDER FEES TOTAL ANNUAL
(fees paid directly Management Distribution Other FUND OPERATING
from your investment) Fees (12b-1) Fees Expenses EXPENSES
===================== ====================== =========== ============= ========= ===============
ALGER AMERICAN SMALL None .85% None .12% .97%
CAPITALIZATION
PORTFOLIO
------------------------------------------------------------------------------------------------
ALGER AMERICAN None .80% None .12% .92%
MIDCAP GROWTH
PORTFOLIO
------------------------------------------------------------------------------------------------
ALGER AMERICAN None .75% None .11% .86%
GROWTH
PORTFOLIO
------------------------------------------------------------------------------------------------
ALGER AMERICAN None .75% None .12% .87%
BALANCED PORTFOLIO
------------------------------------------------------------------------------------------------
ALGER AMERICAN None .85% None .12% .97%
LEVERAGED ALLCAP
PORTFOLIO
------------------------------------------------------------------------------------------------
ALGER AMERICAN None .625% None .155% .78%
INCOME & GROWTH
PORTFOLIO
------------------------------------------------------------------------------------------------
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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 Class O shares of 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
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ALGER AMERICAN SMALL $99 $309 $536 $1,190
CAPITALIZATION
PORTFOLIO
-----------------------------------------------------------------------
ALGER AMERICAN $94 $293 $509 $1,131
MIDCAP GROWTH
PORTFOLIO
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ALGER AMERICAN $88 $274 $477 $1,061
GROWTH
PORTFOLIO
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ALGER AMERICAN $89 $278 $482 $1,073
BALANCED
PORTFOLIO
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ALGER AMERICAN $99 $309 $536 $1,190
LEVERAGED ALLCAP
PORTFOLIO
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ALGER AMERICAN $80 $249 $433 $966
INCOME & GROWTH
PORTFOLIO
------------------------------------------------------------------------
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The example above does not reflect charges and deductions which are, or may be, imposed under variable annuity contracts, variable life insurance policies, or pension or retirement plans. Such charges and deductions are described in the prospectus for the contract or policy accompanying this prospectus or in the plan documents.
ADDITIONAL INFORMATION ABOUT
THE FUND'S INVESTMENTS
Other securities the portfolios may invest in are discussed in the Fund's Statement of Additional Information (see back cover of this prospectus).
In times of adverse or unstable market or economic conditions, each portfolio may invest up to 100% of its assets in cash, high-grade bonds, or cash equivalents (such as commercial paper or paper market instruments) for temporary defensive reasons. 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. A portfolio may also hold these types of securities pending the investment of proceeds from the sale of portfolio securities or to meet anticipated redemptions of portfolio shares. The portfolio may not achieve its objective while in a temporary defensive or interim position.
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MANAGEMENT AND ORGANIZATION
MANAGER
Fred Alger Management, Inc.
111 Fifth Avenue
New York, NY 10003
The Manager has been an investment adviser since 1964, and manages investments totaling (at 12/31/04) $8.2 billion in mutual fund assets as well as $1.5 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
Fred M. Alger III is the chief market strategist for the portfolios, overseeing the investments of each portfolio since September 2001. Mr. Alger, who founded Fred Alger Management, Inc., has served as Chairman of the Board since 1964, and co-managed the portfolios prior to 1995. Dan C. Chung, CFA, Jill Greenwald, CFA, Patrick Kelly, CFA, Teresa McRoberts, Kevin Collins, CFA, John A. Curry and Andrew Silverberg are the individuals responsible for the day-to-day management of portfolio investments.
o Mr. Chung, manager of the MidCap Growth Portfolio since September 2001, manager of the Growth Portfolio since September 2004, co-manager of the Growth Portfolio from September 2001 to September 2004, co-manager of the Balanced Portfolio from September 2001 to September 2003, and co-manager of the Income & Growth Portfolio since September 2003 (and manager prior thereto from September 2001), has been employed by the Manager since 1994 as a Vice President and analyst from 1996 to 1999, as a Senior Vice President and senior analyst until 2000, as an Executive Vice President until 2003, as portfolio manager since 2000, as Chief Investment Officer since September 2001 and as President since 2003.
o Ms. Greenwald, manager of the Small Capitalization Portfolio since November 2001, has been employed by the Manager as a Senior Vice President and portfolio manager since November 2001, prior to which she was employed by the Manager as an analyst and later a senior analyst from 1986 to 1992, as a Managing Director and senior portfolio manager at Chase Manhattan Bank from 1994 through 1999 and as a Senior Vice President and Investment Officer at J&W Seligman & Co. from 1999 until November 2001.
o Mr. Kelly, co-manager of the Leveraged AllCap Portfolio since September 2004, has been employed by the Manager as a research associate from July 1999 to February 2001, as an Assistant Vice President and associate analyst from February 2001 to September 2001, as a Vice President and analyst from September 2001 to September 2004, and as a Senior Vice President and portfolio manager since September 2004.
o Ms. McRoberts, co-manager of the Leveraged AllCap Portfolio since September 2004, has been employed by the Manager as a Senior Vice President and portfolio manager since October 2001, prior to which she was a portfolio manager and partner at Maximus Capital from April 2001 until October 2001, a Vice President and portfolio manager at Morgan Stanley Dean Witter from June 1998 to March 2001 and a principal of that firm from December 2000 to March 2001. Ms. McRoberts had previously been employed by the Manager as a Vice President and senior analyst from July 1994 until May 1998.
o Mr. Collins, co-manager of the Balanced and Income & Growth Portfolios since September 2003, has been employed by the Manager as a Senior Vice President, portfolio manager and senior analyst since September 2003, prior to which period he was employed by the Manager as an analyst and later as a Vice President and senior analyst from 1996 until September 2003.
o Mr. Curry, co-manager of Balanced Portfolio since December 2004, has been employed by the Manager as a Vice President and portfolio manager since December 2004. Mr. Curry was previously Vice President at Janney Montgomery Scott, LLC (September 2003 to December 2004), prior to which he was a portfolio manager for Whitehall Asset Management's fixed-income institutional and retail assets (March 1999 to March 2003), and a portfolio manager at UBS Global Asset Management within the firm's institutional fixed-income assets division (July 1995 to February 1999).
o Mr. Silverberg, assistant portfolio manager of the MidCap Growth Portfolio since September 2003, has been employed by the Manager as a Vice President and senior analyst since September 2004, as an analyst from October 2001 to December 2004, and as an Assistant Vice President and analyst from September 2002 to December 2004, prior to which period he was a research analyst at Mark Asset Management Corporation from June 1999 until September 2001 and a research intern at MBF Capital Corporation from December 1998 until June 1999.
LEGAL PROCEEDINGS
Alger Management has been responding to inquiries, document requests and/or subpoenas from regulatory authorities, including the United States Securities and Exchange Commission ("SEC"), the Office of the New York State Attorney General, and the Attorney General of New Jersey, in connection with their investigation of practices in the mutual fund industry identified as "market timing" and "late trading." Alger Management has assured the Board of the Fund that if it be determined that improper trading practices in the Fund detrimentally affected its performance, Alger Management will make appropriate restitution.
Certain civil actions have developed out of the regulatory investigations. Several purported class actions and shareholder derivative suits have been filed against various parties; including, depending on the lawsuit, Alger Management, certain of the mutual funds managed by Alger Management (the "Alger Mutual Funds"), and certain current and former Alger Mutual Fund trustees and officers, alleging wrongful market-timing and late-trading activities. These cases have been transferred to the U.S. District Court of Maryland by the Judicial Panel on Multidistrict Litigation for consolidated pre-trial proceedings. On September 29, 2004, consolidated amended complaints involving these cases - a Consolidated Amended Fund Derivative Complaint (the "Derivative Complaint") and two substantially identical Consolidated Amended Class Action Complaints (together, the "Class Action Complaint") - were filed in the Maryland federal district court under the caption number 1:04-MD-15863 (JFM).
The Derivative Complaint, brought on behalf of the Alger Mutual Funds and Castle
Convertible Fund, Inc., a registered closed-end fund managed by Alger
Management, alleges (i) violations, by Alger Management and, depending on the
specific offense alleged, by its immediate parent the Distributor (Fred Alger &
Company, Incorporated) and/or the fund trustee defendants, of Sections 36(a),
36(b), 47, and 48 of the Investment Company Act of 1940 and of Sections 206 and
215 of the Investment Advisers Act of 1940, breach of fiduciary duty, and breach
of contract, (ii) various offenses by other, unrelated, third-party defendants,
and (iii) unjust enrichment by all the named defendants, all by virtue of the
alleged wrongful market-timing and late-trading activities. The complaint seeks,
among other things, removal of the trustee defendants and of Alger Management,
certain rescissory relief, disgorgement of management fees and allegedly
unlawful profits, compensatory and punitive monetary damages, and plaintiffs'
fees and expenses (including attorney and expert fees). The Class Action
Complaint names the Alger-related defendants named in the Derivative Complaint
as well as certain defendants not named in the Derivative Complaint, including
certain entities affiliated with Alger Management, certain Alger Mutual Funds,
including the Fund, and certain additional former trustees and a former officer
of the defendant Alger Mutual Funds. It alleges, on the basis of factual
allegations similar to those of the Derivative Complaint with respect to the
Alger defendants, (i) offenses by the Alger defendants similar to those alleged
in the Derivative Complaint, (ii) violations, by Alger Management, the
Distributor, their affiliates, the funds named as defendants, and the current
and former fund trustees and officers, of Sections 11, 12(a)(2) and 15 of the
Securities Act of 1933, Sections 10(b) (and Rule 10b-5 thereunder) and 20(a) of
the Securities Exchange Act of 1934, and Section 34(b) of the Investment Company
Act of 1940, (iii) breach of contract by the funds named as defendants, and (iv)
unjust enrichment by all of the named defendants. It seeks relief similar to
that sought in the Derivative Complaint.
Alger Management does not believe that the foregoing lawsuits will materially affect its ability to perform its management contracts with any of the funds that it manages, and the management of the Fund believes that the Fund will not be materially adversely affected by the pending lawsuits.
[GRAPHIC OMITTED]
SHAREHOLDER INFORMATION
DISTRIBUTOR
Fred Alger & Company, Incorporated
30 Montgomery Street
Jersey City, NJ 07302
TRANSFER AGENT
State Street Bank and Trust Company
c/o Boston Financial Data Services, Inc.
Attn: The Alger American Fund
P.O. Box 8480
Boston, MA 02266-8480
NET ASSET VALUE
The value 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 reliable or 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.
In determining whether market quotations are reliable and readily available, the Manager monitors information it routinely receives for significant events it believes will affect market prices of portfolio instruments held by the Fund. Significant events may affect a particular company (for example, a trading halt in the company's securities on an exchange during the day) or may affect securities markets (for example, a natural disaster such as an earthquake causes a market to close early). If the Manager is aware of a significant event that has occurred after the close of the market where a portfolio instrument is primarily traded, but before the close of the New York Stock Exchange, and the Manager believes that such event has affected or is likely to affect the price of the instrument, the Manager will use its best judgment to determine a fair value for that portfolio instrument under procedures adopted by the Board of Trustees.
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. Dividends and distributions may differ between classes of shares of a portfolio.
Federal income taxation of separate accounts of insurance companies, variable annuity contracts and variable life insurance contracts is discussed in the prospectuses of participating insurance companies. Generally, distributions by the Fund will not be taxable to holders of variable annuity contracts or variable life insurance policies if the insurance company separate accounts to which those distributions are made meet certain requirements, including certain diversification requirements that the Fund has undertaken to meet, under the Internal Revenue Code. Participants in 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 from their plan accounts. Generally, distributions from plan accounts 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.
CLASSES OF FUND SHARES
Each portfolio offers two classes of shares: Class O shares and Class S shares. Only Class O shares are offered in this prospectus. Both classes are offered only to separate accounts of insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies and to qualified pension and retirement plans. The classes differ only in that Class S shares are subject to a distribution and shareholder servicing fee, while Class O shares are not.
PURCHASING AND REDEEMING FUND SHARES
Because 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 Fund or its designated 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 seven days after it accepts a redemption request.
OTHER INFORMATION
The Fund may redeem some of your shares "in kind," which means that some of the proceeds will be paid with securities the applicable portfolio owns instead of cash.
Shares may be worth more or less when you redeem them than they were at the time you bought them.
The Board of Trustees has determined that the Fund may reject purchase orders, on a temporary or permanent basis, from investors that the Manager is able to determine, consistent with its compliance procedures and its reasonable business judgment, are exhibiting a pattern of frequent or short-term trading in Fund shares or shares of other funds sponsored by the Manager.
The Fund might not be able to detect frequent or short-term trading conducted by the underlying owners of shares held in omnibus accounts, and therefore might not be able to effectively prevent frequent or short-term trading in those accounts. There is no guarantee that the Fund's compliance procedures will be successful to identify investors who engage in excessive trading activity or to curtail that activity.
Each portfolio posts its month-end full portfolio with a 60-day lag, on its website, www.alger.com. The Fund reserves the right to change the policy for posting portfolio holdings on the website without further notice to shareholders. Following publication of portfolio holdings information on the Fund's website, it may be sent by the Fund to any party.
The Fund and Transfer Agent have reasonable procedures in place to determine that instructions submitted by telephone are genuine. They include requesting personal identification and recording calls. If the Fund and Transfer Agent follow these procedures, they are not liable for acting in good faith on telephone instructions.
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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 portfolio share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in the portfolio (assuming reinvestment of all dividends and distributions). Information for the periods shown from the year ended December 31, 2002 through the year ended December 31, 2004 has been audited by Ernst & Young LLP, the Fund's independent registered public accounting firm, whose report, along with the Fund's financial statements, is included in the Annual Report, which is available upon request. Information for the periods prior thereto has been audited by Arthur Andersen LLP.
Note that the Financial Highlights do 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.
INCOME FROM INVESTMENT OPERATIONS LESS DIVIDENDS AND DISTRIBUTIONS
--------------------------------- --------------------------------
NET ASSET NET REALIZED DISTRIBUTIONS
VALUE AND UNREALIZED TOTAL FROM DIVIDENDS FROM FROM NET
BEGINNING NET INVESTMENT GAIN (LOSS) INVESTMENT NET INVESTMENT REALIZED
OF PERIOD INCOME (LOSS) ON INVESTMENTS OPERATIONS INCOME GAINS
---------- -------------- --------------- ----------- -------------- -------------
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
CLASS O
Year ended 12/31/04 ............. $18.40 $(0.11) $ 2.51 $ 2.40 $ -- $ --
Year ended 12/31/03 ............. 12.45 (0.05) 6.00 5.95 -- --
Year ended 12/31/02 ............. 17.67 (0.10) (5.12) (5.22) -- --
YEAR ENDED 12/31/01 ............. 30.62 (0.09)(i) (1.23) (1.32) -- (11.63)
Year ended 12/31/00 ............. 32.23 (0.03)(i) 2.79 2.76 -- (4.37)
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
CLASS O
Year ended 12/31/04 ............. $17.38 $(0.27) $ 3.15 $ 2.88 $ -- $ --
Year ended 12/31/03 ............. 12.21 (0.15) 5.32 5.17 -- --
Year ended 12/31/02 ............. 16.55 (0.11) (4.23) (4.34) -- --
Year ended 12/31/01 ............. 23.49 (0.03) (6.90) (6.93) (0.01) --
Year ended 12/31/00 ............. 55.15 0.01(i) (12.80) (12.79) -- (18.87)
ALGER AMERICAN GROWTH PORTFOLIO
CLASS O
Year ended 12/31/04 ............. $33.29 $0.07 $ 1.76 $ 1.83 $ -- $ --
YEAR ENDED 12/31/03 ............. 24.63 (0.02) 8.68 8.66 -- --
Year ended 12/31/02 ............. 36.77 (0.01) (12.12) (12.13) (0.01) --
Year ended 12/31/01 ............. 47.27 0.01 (4.88) (4.87) (0.10) (5.53)
Year ended 12/31/00 ............. 64.38 0.10 (8.75) (8.65) -- (8.46)
ALGER AMERICAN INCOME & GROWTH PORTFOLIO
CLASS O
Year ended 12/31/04 ............. $9.37 $0.10 $ 0.63 $ 0.73 $(0.05) $ --
Year ended 12/31/03 ............. 7.24 0.05 2.11 2.16 (0.03) --
Year ended 12/31/02 ............. 10.57 0.02 (3.29) (3.27) (0.06) --
YEAR ENDED 12/31/01 ............. 13.26 0.05 (1.86) (1.81) (0.05) (0.83)
Year ended 12/31/00 ............. 17.58 0.05 (0.44) (0.39) (0.01) (3.92)
ALGER AMERICAN BALANCED PORTFOLIO
CLASS O
Year ended 12/31/04 ............. $13.16 $0.19 $ 0.40 $ 0.59 $(0.20) $ --
Year ended 12/31/03 ............. 11.29 0.19 1.94 2.13 (0.26) --
Year ended 12/31/02 ............. 13.08 0.20 (1.79) (1.59) (0.20) --
Year ended 12/31/01 ............. 13.77 0.18 (0.43) (0.25) (0.20) (0.24)
Year ended 12/31/00 ............. 15.57 0.20 (0.61) (0.41) (0.13) (1.26)
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
CLASS O
YEAR ENDED 12/31/04 ............. $28.09 $(0.07) $ 2.37 $ 2.30 $ -- $ --
Year ended 12/31/03 ............. 20.85 (0.07) 7.31 7.24 -- --
Year ended 12/31/02 ............. 31.55 (0.14) (10.56) (10.70) -- --
Year ended 12/31/01 ............. 38.80 0.00(i) (6.06) (6.06) -- (1.19)
Year ended 12/31/00 ............. 57.97 (0.02)(i) (13.77) (13.79) -- (5.38)
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(i) Amount was computed based on average shares outstanding during the year.
RATIOS/SUPPLEMENTAL DATA
------------------------------------
RATIO OF
NET
RATIO OF INVESTMENT
NET ASSET NET ASSETS, EXPENSES INCOME (LOSS) PORTFOLIO
TOTAL VALUE, END END OF PERIOD TO AVERAGE TO AVERAGE TURNOVER
DISTRIBUTIONS OF PERIOD TOTAL RETURN (000'S OMITTED) NET ASSETS NET ASSETS RATE
------------- ---------- ------------ --------------- ---------- ------------- ---------
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
CLASS O
Year ended 12/31/04 ............. $ -- $20.80 13.04% $ 482,868 0.92% (0.62)% 229.17%
Year ended 12/31/03 ............. -- 18.40 47.79 414,590 0.93 (0.70) 196.43
Year ended 12/31/02 ............. -- 12.45 (29.54) 240,063 0.93 (0.56) 323.83
YEAR ENDED 12/31/01 ............. (11.63) 17.67 (6.52) 355,015 0.88 (0.45) 130.11
Year ended 12/31/00 ............. (4.37) 30.62 9.18 332,734 0.84 (0.09) 130.85
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
CLASS O
Year ended 12/31/04 ............. $ -- $20.26 16.57% $ 484,760 0.97% (0.72)% 135.33%
Year ended 12/31/03 ............. -- 17.38 42.34 496,076 0.97 (0.70) 146.69
Year ended 12/31/02 ............. -- 12.21 (26.22) 376,550 0.97 (0.69) 111.82
Year ended 12/31/01 ............. (0.01) 16.55 (29.51) 517,364 0.92 (0.27) 181.80
Year ended 12/31/00 ............. (18.87) 23.49 (27.20) 700,370 0.90 0.03 217.69
ALGER AMERICAN GROWTH PORTFOLIO
CLASS O
Year ended 12/31/04 ............. $ -- $35.12 5.50% $1,028,652 0.86% 0.21% 194.25%
YEAR ENDED 12/31/03 ............. -- 33.29 35.16 1,115,959 0.85 (0.05) 167.53
Year ended 12/31/02 ............. (0.01) 24.63 (32.99) 874,914 0.85 (0.01) 238.03
Year ended 12/31/01 ............. (5.63) 36.77 (11.81) 1,540,327 0.81 0.03 87.79
Year ended 12/31/00 ............. (8.46) 47.27 (14.77) 1,809,937 0.79 0.12 108.27
ALGER AMERICAN INCOME & GROWTH PORTFOLIO
CLASS O
Year ended 12/31/04 ............. $ (0.05) $10.05 7.85% $ 93,554 0.78% 0.97% 96.49%
Year ended 12/31/03 ............. (0.03) 9.37 29.84 101,255 0.78 0.60 175.67
Year ended 12/31/02 ............. (0.06) 7.24 (31.10) 85,066 0.79 0.25 276.12
YEAR ENDED 12/31/01 ............. (0.88) 10.57 (14.32) 144,006 0.72 0.52 110.04
Year ended 12/31/00 ............. (3.93) 13.26 (1.27) 150,783 0.70 0.43 142.43
ALGER AMERICAN BALANCED PORTFOLIO
CLASS O
Year ended 12/31/04 ............. $ (0.20) $13.55 4.57% $ 309,744 0.87% 1.41% 177.66%
Year ended 12/31/03 ............. (0.26) 13.16 19.03 308,990 0.87 1.60 135.67
Year ended 12/31/02 ............. (0.20) 11.29 (12.29) 254,290 0.87 2.16 188.76
Year ended 12/31/01 ............. (0.44) 13.08 (1.93) 224,959 0.85 2.53 62.93
Year ended 12/31/00 ............. (1.39) 13.77 (2.76) 115,894 0.88 2.40 63.37
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
CLASS O
YEAR ENDED 12/31/04 ............. $ -- $30.39 8.19% $ 380,336 0.97% (0.14)% 182.41%
Year ended 12/31/03 ............. -- 28.09 34.72 382,289 0.97 (0.36) 161.71
Year ended 12/31/02 ............. -- 20.85 (33.91) 271,373 0.96 (0.49) 203.05
Year ended 12/31/01 ............. (1.19) 31.55 (15.93) 443,209 0.92 0.00 103.03
Year ended 12/31/00 ............. (5.38) 38.80 (24.83) 476,517 0.90 (0.03) 132.28
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FOR FUND INFORMATION:
By telephone: (800) 992-3863
By mail: Boston Financial Data Services, Inc.
Attn: The Alger American Fund
P.O. Box 8480
Boston, MA 02266-8480
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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, at the Fund's website at http://www. alger.com 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 of the Fund, by calling the Fund's toll-free number, at the Fund's website at http://www. alger.com or by writing to the address above.
Another way you can review and copy Fund documents is by visiting the SEC's Public Reference Room in Washington, DC. Copies can also be obtained, for a duplicating fee, by E-mail request to publicinfo@sec.gov or by writing to the SEC's Public Reference Section, Washington, DC 20549-0102. Information on the operation of the Public Reference Room is available by calling (202) 942-8090. Fund documents are also available on the EDGAR database on the SEC's internet site at http://www.sec.gov.
QUARTERLY FUND HOLDINGS
The portfolios file their complete schedule of portfolio holdings with the SEC for the first and third quarter of each fiscal year on Form N-Q. Forms N-Q are available online on the Fund's website at http://www.alger.com or on the SEC's website at http://www.sec.gov. The Fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330. A copy of the most recent quarterly holdings may also be obtained from the Fund by calling (800) 992-3863.
DISTRIBUTOR: FRED ALGER & COMPANY, INCORPORATED
THE ALGER AMERICAN FUND
SEC FILE #811-5550
FRED ALGER & COMPANY, INCORPORATED PRIVACY POLICY
YOUR PRIVACY IS OUR PRIORITY
At Fred Alger & Company, Incorporated ("Alger") we value the confidence you have placed in us. In trusting us with your assets, you provide us with personal and financial data. Alger is committed to maintaining the confidentiality of the personal nonpublic information ("personal information") entrusted to us by our customers. Your privacy is very important to us, and we are dedicated to safeguarding your personal information as we serve your financial needs.
OUR PRIVACY POLICY
We believe you should know about Alger's Privacy Policy and how we collect and protect your personal information. This Privacy Policy ("Policy") describes our practices and policy for collecting, sharing and protecting the personal information of our prospective, current and former customers. The Policy is applicable to Alger and its affiliates, Fred Alger Management, Inc., Alger National Trust Company and Alger Shareholder Services, Inc. as well as the following funds: The Alger Funds, The Alger Institutional Funds, The Alger American Fund, The China-U.S. Growth Fund, Spectra Fund and Castle Convertible Fund, Inc. We are proud of our Policy and hope you will take a moment to read about it.
INFORMATION WE COLLECT
The type of personal information we collect and use varies depending on the Alger products or services you select.
We collect personal information that enables us to serve your financial needs, develop and offer new products and services, and fulfill legal and regulatory requirements. Depending on the products or services you request, we obtain personal information about you from the following sources:
o Information, such as your name, address and social security number, provided on applications and other forms we receive from you or your representative;
o Information from your communications with Alger employees or from your representative, which may be provided to us by telephone, in writing or through Internet transactions; and
o Information about your transactions, such as the purchase and redemption of fund shares, account balances and parties to the transactions, which we receive from our affiliates or other third parties.
SHARING OF PERSONAL INFORMATION
We may share your personal information with our affiliates so that they may process and service your transactions.
However, Alger never sells customer lists to any third party. Further, we do not disclose personal information to nonaffiliated third parties, except as required by law or as permitted by law to service your account, such as follows:
o To third-party service providers that assist us in servicing your accounts (e.g. securities clearinghouses);
o To governmental agencies and law enforcement officials (e.g. valid subpoenas, court orders); and
o To financial institutions that perform marketing services on our behalf or with whom we have joint marketing agreements that provide for the confidentiality of personal information.
OUR SECURITY PRACTICES
We protect your personal information by maintaining physical, electronic and procedural safeguards. When you visit Alger's Internet sites your information is protected by our systems that utilize 128-bit data encryption, Secure Socket Layer (SSL) protocol, user names, passwords and other precautions. We have implemented safeguards to ensure that access to customer information is limited to employees, such as customer service representatives, who require such information to carry out their job responsibilities. Our employees are aware of their strict responsibility to respect the confidentiality of your personal information.
Thank you for choosing to invest with Alger. We value your relationship with us and assure you we will abide by our policy to protect your information.
THIS POLICY STATEMENT IS NOT PART OF THE PROSPECTUS.
THE ALGER AMERICAN FUND
CLASS S SHARES
A POOLED FUNDING VEHICLE FOR:
O VARIABLE ANNUITY CONTRACTS
O VARIABLE LIFE INSURANCE POLICIES
O QUALIFIED PENSION PLANS
O QUALIFIED RETIREMENT PLANS
PROSPECTUS
MAY 1, 2005
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.
THE ALGER
AMERICAN FUND
CLASS S SHARES
PROSPECTUS
MAY 1, 2005
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
Risks Applicable to All Equity
Portfolios .......................... 3
Risks Applicable to Alger American
Small Capitalization Portfolio ...... 3
Risks Applicable to Alger American
MidCap Growth Portfolio ............. 3
Risks Applicable to Alger American
Growth Portfolio .................... 3
Risks Applicable to Alger American
Balanced Portfolio .................. 3
Risks Applicable to Alger American
Leveraged AllCap Portfolio .......... 3
Risks Applicable to Alger American
Income & Growth Portfolio ........... 3
4 ............. Performance
Alger American Small
Capitalization Portfolio ............ 4
Alger American MidCap
Growth Portfolio .................... 4
Alger American 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 and Organization
8 ............. Shareholder Information
Distributor ........................... 8
Transfer Agent ........................ 8
Net Asset Value ....................... 8
Dividends and Distributions ........... 8
Classes of Fund Shares ................ 9
Purchasing and Redeeming
Fund Shares ......................... 9
Other Information ..................... 9
10 ............ Financial Highlights
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Back Cover: How to obtain more information
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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.
Some portfolios must take into account a company's market capitalization when considering it for investment. 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 at least 80% of its net assets in the equity securities of companies that, at the time of purchase of the securities, have a total market capitalization within the range of the companies included in the Russell 2000 Growth Index or the S&P SmallCap 600 Index, updated quarterly. Both indexes are broad indexes of small capitalization stocks.
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
GOAL
The Alger American MidCap Growth Portfolio seeks long-term capital appreciation.
APPROACH
It focuses on midsized companies with promising growth potential. Under normal circumstances, the portfolio invests at least 80% of its net assets in the 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 Russell Midcap Growth Index or the S&P MidCap 400 Index, updated quarterly. Both indexes are designed to track the performance of medium capitalization stocks.
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 companies that 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 on fixed-income securities, especially those 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 that are rated within the four highest rating categories by an established rating agency or, if not rated, are determined by the Fund's Manager to be of comparable quality. Under normal circumstances, at least 25% of the portfolio's net assets are invested in fixed-income senior 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 that 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.
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.
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PRINCIPAL RISKS
RISKS APPLICABLE TO ALL EQUITY PORTFOLIOS
As with any fund that invests in stocks, your investment will fluctuate 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. 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 investments' values.
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 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 and thereby adversely affect portfolio performance.
There may be additional risks applicable to a specific portfolio because of its investment approach.
To the extent that a portfolio invests in securities other than those that are its primary focus, the principal risks associated with such other investments, described in the Fund's Prospectus and Statement of Additional Information, are pertinent.
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 product lines or 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 product lines or 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; their market values tend to fall when interest rates rise and to rise when interest rates fall.
o the potential for a decline in the value of the portfolio's securities 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
Additional risks of investing in the portfolio are:
o smaller issuers in which the portfolio invests may have limited product lines or financial resources or lack management depth.
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 and the tables beneath them give you some indication of the risks of an investment in a portfolio by showing changes in each portfolio's performance from year to year and by showing how the portfolio's average annual returns for the indicated periods compare with those of an appropriate benchmark index. They 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. Investors cannot invest directly in any index.
o Russell 1000 Growth Index: An index of common stocks designed to track performance of large capitalization companies with greater than average growth orientation.
o Russell 2000 Growth Index: An index of common stocks designed to track performance of small capitalization companies with greater than average growth orientation.
o Russell 3000 Growth Index: An index of common stocks designed to track performance of companies with greater than average growth orientation in general.
o Russell Midcap Growth Index: An index of common stocks designed to track performance of medium-capitalization companies with greater than average growth orientation.
o Lehman Brothers Government/Credit Bond Index: 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 all indexes presented.
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
Annual Total Return as of December 31 (%) Class S
[THE DATA BELOW REPRESENTS A GRAPH IN THE PRINTED PIECE]
42.00 16.29 ----- ----- 03 04 |
Best Quarter: 16.31% Q2 2003 Worst Quarter: -7.21% Q3 2004
Average Annual Total Return as of December 31, 2004
Class S
Since
Inception
1 Year (5/1/02)
-------------------------------------------------------
American Small
Capitalization 16.29% 8.92%
Russell 2000
Growth Index 14.31% 8.20%
|
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
Annual Total Return as of December 31 (%) Class S
[THE DATA BELOW REPRESENTS A GRAPH IN THE PRINTED PIECE]
47.47 12.77
----- -----
03 04
Best Quarter: 20.62% Q2 2003
Worst Quarter: -8.13% Q3 2004
Average Annual Total Return as of December 31, 2004
Class S
Since
Inception
1 Year (5/1/02)
-------------------------------------------------------
American MidCap Growth 12.77% 8.33%
Russell Midcap Growth Index 15.48% 9.88%
|
ALGER AMERICAN GROWTH PORTFOLIO
Annual Total Return as of December 31 (%) Class S
[THE DATA BELOW REPRESENTS A GRAPH IN THE PRINTED PIECE]
34.82 5.24
----- -----
03 04
Best Quarter: 17.23% Q2 2003
Worst Quarter: -7.50% Q3 2004
Average Annual Total Return as of December 31, 2004
Class S
Since
Inception
1 Year (5/1/02)
--------------------------------------------------------
American Growth 5.24% 1.82%
Russell 1000
Growth Index 6.30% 4.05%
|
ALGER AMERICAN BALANCED PORTFOLIO
Annual Total Return as of December 31 (%) Class S
[THE DATA LISTED BELOW REPRESENTS A GRAPH IN THE PRINTED PIECE]
18.73 4.27
----- -----
03 04
Best Quarter: 10.26% Q2 2003
Worst Quarter: -3.53% Q3 2004
Average Annual Total Return as of December 31, 2004
Class S
Since
Inception
1 Year (5/1/02)
--------------------------------------------------------
American Balanced 4.27% 4.87%
Russell 1000
Growth Index 6.30% 4.05%
Lehman Brothers Gov't/
Credit Bond Index 4.21% 6.85%
|
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
Annual Total Return as of December 31 (%) Class S
[THE DATA LISTED BELOW REPRESENTS A GRAPH IN THE PRINTED PIECE]
34.23 7.90
----- -----
03 04
Best Quarter: 16.42% Q2 2003
Worst Quarter: -9.83% Q3 2004
Average Annual Total Return as of December 31, 2004
Class S
Since
Inception
1 Year (5/1/02)
--------------------------------------------------------
American Leveraged
AllCap 7.90% 2.21%
Russell 3000
Growth Index 6.93% 4.36%
|
ALGER AMERICAN INCOME & GROWTH PORTFOLIO
Annual Total Return as of December 31 (%) Class S
[THE DATA LISTED BELOW REPRESENTS A GRAPH IN THE PRINTED PIECE]
29.63 7.47
----- -----
03 04
Best Quarter: 16.13% Q2 2003
Worst Quarter: -6.22% Q3 2004
Average Annual Total Return as of December 31, 2004
Class S
Since
Inception
1 Year (5/1/02)
--------------------------------------------------------
American
Income & Growth 7.47% 2.10%
Russell 1000
Growth Index 6.30% 4.05%
|
The Fund also offers Class O shares. Class S and Class O shares differ only in that Class S shares are subject to a distribution and shareholder servicing fee, whereas Class O shares are not. Because of the distribution and shareholder servicing fee, returns will be lower for Class S shares.
[GRAPHIC OMNITTED]
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 Class S shares of the portfolios. The numbers below are based on each portfolio's expenses during its fiscal year ended December 31, 2004.
ANNUAL FUND OPERATING
EXPENSES
(expenses that are deducted
from Fund assets)
SHAREHOLDER
FEES TOTAL
(fees paid ANNUAL
directly FUND
from your Management Distribution Other OPERATING
investment) Fees (12b-1) Fees Expenses EXPENSES
-----------------------------------------------------------------------------------------------------------------
ALGER AMERICAN SMALL
CAPITALIZATION PORTFOLIO None .85% .25% .12% 1.22%
-----------------------------------------------------------------------------------------------------------------
ALGER AMERICAN None .80% .25% .12% 1.17%
MIDCAP GROWTH
PORTFOLIO
-----------------------------------------------------------------------------------------------------------------
ALGER AMERICAN None .75% .25% .11% 1.11%
GROWTH
PORTFOLIO
-----------------------------------------------------------------------------------------------------------------
ALGER AMERICAN None .75% .25% .12% 1.12%
BALANCED PORTFOLIO
-----------------------------------------------------------------------------------------------------------------
ALGER AMERICAN None .85% .25% .12% 1.22%
LEVERAGED ALLCAP
PORTFOLIO
-----------------------------------------------------------------------------------------------------------------
ALGER AMERICAN None .625% .25% .165% 1.04%
INCOME & GROWTH
PORTFOLIO
-----------------------------------------------------------------------------------------------------------------
|
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 Class S shares of 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 $124 $387 $670 $1,477
CAPITALIZATION
PORTFOLIO
ALGER AMERICAN $119 $372 $644 $1,420
MIDCAP GROWTH
PORTFOLIO
ALGER AMERICAN $113 $353 $612 $1,352
GROWTH
PORTFOLIO
ALGER AMERICAN $114 $356 $617 $1,363
BALANCED
PORTFOLIO
ALGER AMERICAN $124 $387 $670 $1,477
LEVERAGED ALLCAP
PORTFOLIO
ALGER AMERICAN $106 $331 $574 $1,271
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
Other securities the portfolios may invest in are discussed in the Fund's Statement of Additional Information (see back cover of this Prospectus).
In times of adverse or unstable market, economic or political conditions, each portfolio may invest up to 100% of its assets in cash, high-grade bonds, or cash equivalents (such as commercial paper or money market instruments) for temporary defensive reasons. 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. A portfolio may also hold these types of securities pending the investment of proceeds from the sale of portfolio securities or to meet anticipated redemptions of portfolio shares. The portfolio may not achieve its objective while in a temporary defensive or interim position.
[GRAPHIC OMITTED]
MANAGEMENT AND ORGANIZATION
MANAGER
Fred Alger Management, Inc.
111 Fifth Avenue
New York, NY 10003
The Manager has been an investment adviser since 1964, and manages investments totaling (at 12/31/04) $8.2 billion in mutual fund assets as well as $1.5 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
Fred M. Alger III is the chief market strategist for the portfolios, overseeing the investments of each portfolio since September 2001. Mr. Alger, who founded Fred Alger Management, Inc., has served as Chairman of the Board since 1964, and co-managed the portfolios prior to 1995. Dan C. Chung, CFA, Jill Greenwald, CFA, Patrick Kelly, CFA, Teresa McRoberts, Kevin Collins, CFA, John A. Curry and Andrew Silverberg are the individuals responsible for the day-to-day management of portfolio investments.
o Mr. Chung, manager of the MidCap Growth Portfolio since September 2001, manager of the Growth Portfolio since September 2004, co-manager of the Growth Portfolio from September 2001 to September 2004, co-manager of the Balanced Portfolio from September 2001 to September 2003, and co-manager of the Income & Growth Portfolio since September 2003 (and manager prior thereto from September 2001), has been employed by the Manager since 1994 as a Vice President and analyst from 1996 to 1999, as a Senior Vice President and senior analyst until 2000, as an Executive Vice President until 2003, as portfolio manager since 2000, as Chief Investment Officer since September 2001 and as President since 2003.
o Ms. Greenwald, manager of the Small Capitalization Portfolio since November 2001, has been employed by the Manager as a Senior Vice President and portfolio manager since November 2001, prior to which she was employed by the Manager as an analyst and later a senior analyst from 1986 to 1992, as a Managing Director and senior portfolio manager at Chase Manhattan Bank from 1994 through 1999 and as a Senior Vice President and Investment Officer at J&W Seligman & Co. from 1999 until November 2001.
o Mr. Kelly, co-manager of the Leveraged AllCap Portfolio since September 2004, has been employed by the Manager as a research associate from July 1999 to February 2001, as an Assistant Vice President and associate analyst from February 2001 to September 2001, as a Vice President and analyst from September 2001 to September 2004, and as a Senior Vice President and portfolio manager since September 2004.
o Ms. McRoberts, co-manager of the Leveraged AllCap Portfolio since September 2004, has been employed by the Manager as a Senior Vice President and portfolio manager since October 2001, prior to which she was a portfolio manager and partner at Maximus Capital from April 2001 until October 2001, a Vice President and portfolio manager at Morgan Stanley Dean Witter from June 1998 to March 2001 and a principal of that firm from December 2000 to March 2001. Ms. McRoberts had previously been employed by the Manager as a Vice President and senior analyst from July 1994 until May 1998.
o Mr. Collins, co-manager of the Balanced and Income & Growth Portfolios since September 2003, has been employed by the Manager as a Senior Vice President, portfolio manager and senior analyst since September 2003, prior to which period he was employed by the Manager as an analyst and later as a Vice President and senior analyst from 1996 until September 2003.
o Mr. Curry, co-manager of Balanced Portfolio since December 2004, has been employed by the Manager as a Vice President and portfolio manager since December 2004. Mr. Curry was previously Vice President at Janney Montgomery Scott, LLC (September 2003 to December 2004), prior to which he was a portfolio manager for Whitehall Asset Management's fixed-income institutional and retail assets (March 1999 to March 2003), and a portfolio manager at UBS Global Asset Management within the firm's institutional fixed-income assets division (July 1995 to February 1999).
o Mr. Silverberg, assistant portfolio manager of the MidCap Growth Portfolio since September 2003, has been employed by the Manager as a Vice President and senior analyst since December 2004, as an analyst from October 2004 to December 2004 and as an Assistant Vice President from September 2002 to December 2004, prior to which period he was a research analyst at Mark Asset Management Corporation from June 1999 until September 2001 and a research intern at MBF Capital Corporation from December 1998 until June 1999.
LEGAL PROCEEDINGS
Alger Management has been responding to inquiries, document requests and/or subpoenas from regulatory authorities, including the United States Securities and Exchange Commission ("SEC"), the Office of the New York State Attorney General, and the Attorney General of New Jersey, in connection with their investigation of practices in the mutual fund industry identified as "market timing" and "late trading." Alger Management has assured the Board of the Fund that if it be determined that improper trading practices in the Fund detrimentally affected its performance, Alger Management will make appropriate restitution.
Certain civil actions have developed out of the regulatory investigations. Several purported class actions and shareholder derivative suits have been filed against various parties; including, depending on the lawsuit, Alger Management, certain of the mutual funds managed by Alger Management (the "Alger Mutual Funds"), and certain current and former Alger Mutual Fund trustees and officers, alleging wrongful market-timing and late-trading activities. These cases have been transferred to the U.S. District Court of Maryland by the Judicial Panel on Multidistrict Litigation for consolidated pre-trial proceedings. On September 29, 2004, consolidated amended complaints involving these cases - a Consolidated Amended Fund Derivative Complaint (the "Derivative Complaint") and two substantially identical Consolidated Amended Class Action Complaints (together, the "Class Action Complaint") - were filed in the Maryland federal district court under the caption number 1:04-MD-15863 (JFM).
The Derivative Complaint, brought on behalf of the Alger Mutual Funds and Castle
Convertible Fund, Inc., a registered closed-end fund managed by Alger
Management, alleges (i) violations, by Alger Management and, depending on the
specific offense alleged, by its immediate parent the Distributor (Fred Alger &
Company, Incorporated) and/or the fund trustee defendants, of Sections 36(a),
36(b), 47, and 48 of the Investment Company Act of 1940 and of Sections 206 and
215 of the Investment Advisers Act of 1940, breach of fiduciary duty, and breach
of contract, (ii) various offenses by other, unrelated, third-party defendants,
and (iii) unjust enrichment by all the named defendants, all by virtue of the
alleged wrongful market-timing and late-trading activities. The complaint seeks,
among other things, removal of the trustee defendants and of Alger Management,
certain rescissory relief, disgorgement of management fees and allegedly
unlawful profits, compensatory and punitive monetary damages, and plaintiffs'
fees and expenses (including attorney and expert fees). The Class Action
Complaint names the Alger-related defendants named in the Derivative Complaint
as well as certain defendants not named in the Derivative Complaint, including
certain entities affiliated with Alger Management, certain Alger Mutual Funds,
including the Fund, and certain additional former trustees and a former officer
of the defendant Alger Mutual Funds. It alleges, on the basis of factual
allegations similar to those of the Derivative Complaint with respect to the
Alger defendants, (i) offenses by the Alger defendants similar to those alleged
in the Derivative Complaint, (ii) violations, by Alger Management, the
Distributor, their affiliates, the funds named as defendants, and the current
and former fund trustees and officers, of Sections 11, 12(a)(2) and 15 of the
Securities Act of 1933, Sections 10(b) (and Rule 10b-5 thereunder) and 20(a) of
the Securities Exchange Act of 1934, and Section 34(b) of the Investment Company
Act of 1940, (iii) breach of contract by the funds named as defendants, and (iv)
unjust enrichment by all of the named defendants. It seeks relief similar to
that sought in the Derivative Complaint.
Alger Management does not believe that the foregoing lawsuits will materially affect its ability to perform its management contracts with any of the funds that it manages, and the management of the Fund believes that the Fund will not be materially adversely affected by the pending lawsuits.
[GRAPHIC OMITTED]
SHAREHOLDER INFORMATION
DISTRIBUTOR
Fred Alger & Company, Incorporated
30 Montgomery Street
Jersey City, NJ 07302
TRANSFER AGENT
State Street Bank and Trust Company
c/o Boston Financial Data Services, Inc.
Attn: The Alger American Fund
P.O. Box 8480
Boston, MA 02266-8480
NET ASSET VALUE
The value 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 reliable or 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.
In determining whether market quotations are reliable and readily available, the Manager monitors information it routinely receives for significant events it believes will affect market prices of portfolio instruments held by the Fund. Significant events may affect a particular company (for example, a trading halt in the company's securities on an exchange during the day) or may affect securities markets (for example, a natural disaster such as an earthquake causes a market to close early). If the Manager is aware of a significant event that has occurred after the close of the market where a portfolio instrument is primarily traded, but before the close of the New York Stock Exchange, and the Manager believes that such event has affected or is likely to affect the price of the instrument, the Manager will use its best judgment to determine a fair value for that portfolio instrument under procedures adopted by the Board of Trustees.
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. Dividends and distributions may differ between classes of shares of a portfolio.
Federal income taxation of separate accounts of insurance companies, variable annuity contracts and variable life insurance contracts is discussed in the prospectuses of participating insurance companies. Generally, distributions by the Fund will not be taxable to holders of variable annuity contracts or variable life insurance policies if the insurance company separate accounts to which those distributions are made meet certain requirements, including certain diversification requirements that the Fund has undertaken to meet, under the Internal Revenue Code. Participants in 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 from their plan accounts. Generally, distributions from plan accounts 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) OF A CLASS OF SHARES IS
COMPUTED BY ADDING TOGETHER THE VALUE ALLOCABLE
TO THE CLASS OF THE PORTFOLIO'S INVESTMENTS PLUS
CASH AND OTHER ASSETS, SUBTRACTING APPLICABLE
LIABILITIES AND THEN DIVIDING THE RESULT BY THE
NUMBER OF OUTSTANDING SHARES OF THE CLASS.
CLASSES OF FUND SHARES
Each portfolio offers two classes of shares: Class O shares and Class S shares. Only Class S shares are offered in this prospectus. Both classes are offered only to separate accounts of insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies and to qualified pension and retirement plans. The classes differ in that, pursuant to a plan adopted under Rule 12b-1 under the Investment Company Act, Class S shares pay a distribution and shareholder servicing fee out of their assets on an ongoing basis to compensate insurance companies and pension and retirement plan service providers for distribution assistance and shareholder services. Over time, these fees will increase the cost of an investment in Class S shares and may cost an investor more than paying other types of sales charges.
PURCHASING AND REDEEMING FUND SHARES
Because 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 Fund or its designated 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 seven days after it accepts a redemption request.
OTHER INFORMATION
The Fund may redeem some of your shares "in kind," which means that some of the proceeds will be paid with securities the applicable portfolio owns instead of cash.
Shares may be worth more or less when you redeem them than they were at the time you bought them.
The Board of Trustees has determined that the Fund may reject purchase orders, on a temporary or permanent basis, from investors that the Manager is able to determine, consistent with its compliance procedures and its reasonable business judgment, are exhibiting a pattern of frequent or short-term trading in Fund shares or shares of other funds sponsored by the Manager.
The Fund might not be able to detect frequent or short-term trading conducted by the underlying owners of shares held in omnibus accounts, and therefore might not be able to effectively prevent frequent or short-term trading in those accounts. There is no guarantee that the Fund's compliance procedures will be successful to identify investors who engage in excessive trading activity or to curtail that activity.
Each portfolio posts its month-end full portfolio with a 60-day lag, on its website, www.alger.com. The Fund reserves the right to change the policy for posting portfolio holdings on the website without further notice to shareholders. Following publication of portfolio holdings information on the Fund's website, it may be sent by the Fund to any party.
The Fund and Transfer Agent have reasonable procedures in place to determine that instructions submitted by telephone are genuine. They include requesting personal identification and recording calls. If the Fund and Transfer Agent follow these procedures, they are not liable for acting in good faith on telephone instructions.
[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 portfolio share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in the portfolio (assuming reinvestment of all dividends and distributions). Because Class S shares have been outstanding only since 2002, information is provided also with respect to Class O shares. Class S shares have higher expense ratios and lower total returns. Information shown from the period ended December 31, 2002 through the year ended December 31, 2004 has been audited by Ernst & Young LLP, the Fund's independent registered public accounting firm, whose report, along with the Fund's financial statements, is included in the Annual Report, which is available upon request. Information for the periods prior thereto has been audited by Arthur Andersen LLP.
Note that the Financial Highlights do 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.
INCOME FROM INVESTMENT OPERATIONS LESS DIVIDENDS AND DISTRIBUTIONS
--------------------------------- --------------------------------
NET
REALIZED
AND DIVIDENDS
NET ASSET NET UNREALIZED TOTAL FROM DISTRIBUTIONS
VALUE INVESTMENT GAIN FROM NET FROM NET
BEGINNING INCOME (LOSS) ON INVESTMENT INVESTMENT REALIZED
OF PERIOD (LOSS) INVESTMENTS OPERATIONS INCOME GAINS
--------- ---------- ------------ ---------- ------------- ------------
ALGER AMERICAN SMALL
CAPITALIZATION PORTFOLIO
CLASS S
Year ended 12/31/04 .................. $17.31 $(0.08) $ 2.90 $ 2.82 $ -- $ --
Year ended 12/31/03 .................. 12.19 (0.15) 5.27 5.12 -- --
Eight months ended 12/31/02(i)(iii) .. 16.02 (0.08) (3.75) (3.83) -- --
CLASS O
Year ended 12/31/04 .................. $17.38 $(0.27) $ 3.15 $ 2.88 $ -- $ --
Year ended 12/31/03 .................. 12.21 (0.15) 5.32 5.17 -- --
Year ended 12/31/02 .................. 16.55 (0.11) (4.23) (4.34) -- --
Year ended 12/31/01 .................. 23.49 (0.03) (6.90) (6.93) (0.01) --
Year ended 12/31/00 .................. 55.15 0.01(ii) (12.80) (12.79) -- (18.87)
ALGER AMERICAN MIDCAP
GROWTH PORTFOLIO
CLASS S
Year ended 12/31/04 .................. $18.33 $(0.15)(ii) $ 2.49 $ 2.34 $ -- $ --
Year ended 12/31/03 .................. 12.43 (0.14) 6.04 5.90 -- --
Eight months ended 12/31/02(i)(iii) .. 16.69 (0.07) (4.19) (4.26) -- --
CLASS O
Year ended 12/31/04 .................. $18.40 $(0.11) $ 2.51 $ 2.40 $ -- $ --
Year ended 12/31/03 .................. 12.45 (0.05) 6.00 5.95 -- --
Year ended 12/31/02 .................. 17.67 (0.10) (5.12) (5.22) -- --
Year ended 12/31/01 .................. 30.62 (0.09)(ii) (1.23) (1.32) -- (11.63)
Year ended 12/31/00 .................. 32.23 (0.03)(ii) 2.79 2.76 -- (4.37)
ALGER AMERICAN GROWTH PORTFOLIO
CLASS S
Year ended 12/31/04 .................. $33.18 $ 0.06 $ 1.68 $ 1.74 $ -- $ --
Year ended 12/31/03 .................. 24.61 (0.05) 8.62 8.57 -- --
Eight months ended 12/31/02(i)(iii) .. 33.28 (0.01) (8.66) (8.67) -- --
CLASS O
Year ended 12/31/04 .................. $33.29 $ 0.07 $ 1.76 $ 1.83 $ -- $ --
Year ended 12/31/03 .................. 24.63 (0.02) 8.68 8.66 -- --
Year ended 12/31/02 .................. 36.77 (0.01) (12.12) (12.13) (0.01) --
Year ended 12/31/01 .................. 47.27 0.01 (4.88) (4.87) (0.10) (5.53)
Year ended 12/31/00 .................. 64.38 0.10 (8.75) (8.65) -- (8.46)
|
RATIOS/SUPPLEMENTAL DATA
------------------------------------
RATIO
RATIO OF OF NET
NET EXPENSES INVESTMENT
ASSETS, TO INCOME
NET ASSET PERIOD AVERAGE (LOSS) TO PORTFOLIO
TOTAL VALUE, END TOTAL 000'S NET AVERAGE TURNOVER
DISTRIBUTIONS OF PERIOD RETURN OMITTED) ASSETS NET ASSETS RATE
------------- ---------- -------- -------- --------- ------------- ---------
ALGER AMERICAN SMALL
CAPITALIZATION PORTFOLIO
CLASS S
Year ended 12/31/04 ................. $ -- $20.13 16.29% $ 21,809 1.22% (0.98)% 135.33%
Year ended 12/31/03 ................. -- 17.31 42.00 4,556 1.23 (1.02) 146.69
Eight months ended 12/31/02(i)(iii) . -- 12.19 (23.91) 7 1.20 (0.87) 111.82
CLASS O
Year ended 12/31/04 ................. $ -- $20.26 16.57% $ 484,760 0.97% (0.72)% 135.33%
Year ended 12/31/03 ................. -- 17.38 42.34 496,076 0.97 (0.70) 146.69
Year ended 12/31/02 ................. -- 12.21 (26.22) 376,550 0.97 (0.69) 111.82
Year ended 12/31/01 ................. (0.01) 16.55 (29.51) 517,364 0.92 (0.27) 181.80
Year ended 12/31/00 .................. (18.87) 23.49 (27.20) 700,370 0.90 0.03 217.69
ALGER AMERICAN MIDCAP
GROWTH PORTFOLIO
CLASS S
Year ended 12/31/04 ................. $ -- $20.67 12.77% $ 4,636 1.17% (0.82)% 229.17%
Year ended 12/31/03 ................. -- 18.33 47.47 43 1.18 (0.94) 196.43
Eight months ended 12/31/02(i)(iii) . -- 12.43 (25.52) 8 1.19 (0.75) 323.83
CLASS O
Year ended 12/31/04 ................. $ -- $20.80 13.04% $ 482,868 0.92% (0.62)% 229.17%
Year ended 12/31/03 ................. -- 18.40 47.79 414,590 0.93 (0.70) 196.43
Year ended 12/31/02 ................. -- 12.45 (29.54) 240,063 0.93 (0.56) 323.83
Year ended 12/31/01 ................. (11.63) 17.67 (6.52) 355,015 0.88 (0.45) 130.11
Year ended 12/31/00 ................. (4.37) 30.62 9.18 332,734 0.84 (0.09) 130.85
ALGER AMERICAN GROWTH PORTFOLIO
CLASS S
Year ended 12/31/04 ................. $ -- $34.92 5.24% $ 9,323 1.11% 0.27% 194.25%
Year ended 12/31/03 ................. -- 33.18 34.82 1,726 1.10 (0.16) 167.53
Eight months ended 12/31/02(i)(iii) ... -- 24.61 (26.05) 19 1.10 (0.13) 238.03
CLASS O
Year ended 12/31/04 ................. $ -- $35.12 5.50% $1,028,652 0.86% 0.21% 194.25%
Year ended 12/31/03 ................. -- 33.29 35.16 1,115,959 0.85 (0.05) 167.53
Year ended 12/31/02 ................. (0.01) 24.63 (32.99) 874,914 0.85 (0.01) 238.03
Year ended 12/31/01 ................. (5.63) 36.77 (11.81) 1,540,327 0.81 0.03 87.79
Year ended 12/31/00 ................. (8.46) 47.27 (14.77) 1,809,937 0.79 0.12 108.27
|
INCOME FROM INVESTMENT OPERATIONS LESS DIVIDENDS AND DISTRIBUTIONS
--------------------------------- --------------------------------
NET
REALIZED
AND DIVIDENDS
NET ASSET NET UNREALIZED TOTAL FROM DISTRIBUTIONS
VALUE INVESTMENT GAIN FROM NET FROM NET
BEGINNING INCOME (LOSS) ON INVESTMENT INVESTMENT REALIZED
OF PERIOD (LOSS) INVESTMENTS OPERATIONS INCOME GAINS
--------- ---------- ------------ ---------- ------------- ------------
ALGER AMERICAN BALANCED PORTFOLIO
CLASS S
Year ended 12/31/04 .................. $13.34 $ 0.17 $ 0.39 $ 0.56 $(0.19) $ --
Year ended 12/31/03 .................. 11.47 0.23 1.90 2.13 (0.26) --
Eight months ended 12/31/02(i)(iii) .. 12.50 0.02 (1.05) (1.03) -- --
CLASS O
Year ended 12/31/04 .................. $13.16 $ 0.19 $ 0.40 $ 0.59 $(0.20) $ --
Year ended 12/31/03 .................. 11.29 0.19 1.94 2.13 (0.26) --
Year ended 12/31/02 .................. 13.08 0.20 (1.79) (1.59) (0.20) --
Year ended 12/31/01 .................. 13.77 0.18 (0.43) (0.25) (0.20) (0.24)
Year ended 12/31/00 .................. 15.57 0.20 (0.61) (0.41) (0.13) (1.26)
ALGER AMERICAN LEVERAGED
ALLCAP PORTFOLIO
CLASS S
Year ended 12/31/04 .................. $27.96 $(0.04) $ 2.25 $ 2.21 $ -- $ --
Year ended 12/31/03 .................. 20.83 (0.16) 7.29 7.13 -- --
Eight months ended 12/31/02(i)(iii) .. 28.46 (0.02) (7.61) (7.63) -- --
CLASS O
Year ended 12/31/04 .................. $28.09 $(0.07) $ 2.37 $ 2.30 $ -- $ --
Year ended 12/31/03 .................. 20.85 (0.07) 7.31 7.24 -- --
Year ended 12/31/02 .................. 31.55 (0.14) (10.56) (10.70) -- --
Year ended 12/31/01 .................. 38.80 0.00(ii) (6.06) (6.06) -- (1.19)
Year ended 12/31/00 .................. 57.97 (0.02)(ii) (13.77) (13.79) -- (5.38)
ALGER AMERICAN INCOME &
GROWTH PORTFOLIO
CLASS S
Year ended 12/31/04 .................. $ 9.41 $ 0.07 $ 0.63 $ 0.70 $(0.03) $ --
Year ended 12/31/03 .................. 7.27 0.03 2.12 2.15 (0.01) --
Eight months ended 12/31/02(i)(iii) .. 9.58 0.01 (2.32) (2.31) -- --
CLASS O
Year ended 12/31/04 .................. $ 9.37 $ 0.10 $ 0.63 $ 0.73 $(0.05) $ --
Year ended 12/31/03 .................. 7.24 0.05 2.11 2.16 (0.03) --
Year ended 12/31/02 .................. 10.57 0.02 (3.29) (3.27) (0.06) --
Year ended 12/31/01 .................. 13.26 0.05 (1.86) (1.81) (0.05) (0.83)
Year ended 12/31/00 .................. 17.58 0.05 (0.44) (0.39) (0.01) (3.92)
|
RATIOS/SUPPLEMENTAL DATA
------------------------------------
RATIO
RATIO OF OF NET
NET EXPENSES INVESTMENT
ASSETS, TO INCOME
NET ASSET PERIOD AVERAGE (LOSS) TO PORTFOLIO
TOTAL VALUE, END TOTAL 000'S NET AVERAGE TURNOVER
DISTRIBUTIONS OF PERIOD RETURN OMITTED) ASSETS NET ASSETS RATE
------------- ---------- -------- -------- --------- ------------- ---------
ALGER AMERICAN BALANCED PORTFOLIO
CLASS S
Year ended 12/31/04 ................. $ (0.19) $13.71 4.27% $ 44,435 1.12% 1.20% 177.66%
Year ended 12/31/03 ................. (0.26) 13.34 18.73 28,680 1.11 1.25 135.67
Eight months ended 12/31/02(i)(iii) . -- 11.47 (8.24) 494 1.17 1.67 188.76
CLASS O
Year ended 12/31/04 ................. $ (0.20) $13.55 4.57% $ 309,744 0.87% 1.41% 177.66%
Year ended 12/31/03 ................. (0.26) 13.16 19.03 308,990 0.87 1.60 135.67
Year ended 12/31/02 ................. (0.20) 11.29 (12.29) 254,290 0.87 2.16 188.76
Year ended 12/31/01 ................. (0.44) 13.08 (1.93) 224,959 0.85 2.53 62.93
Year ended 12/31/00 ................. (1.39) 13.77 (2.76) 115,894 0.88 2.40 63.37
ALGER AMERICAN LEVERAGED
ALLCAP PORTFOLIO
CLASS S
Year ended 12/31/04 ................. $ -- $30.17 7.90% $ 13,772 1.22% (0.31)% 182.41%
Year ended 12/31/03 ................. -- 27.96 34.23 7,328 1.21 (0.63) 161.71
Eight months ended 12/31/02(i)(iii) . -- 20.83 (26.81) 281 1.32 (0.92) 203.05
CLASS O
Year ended 12/31/04 ................. $ -- $30.39 8.19% $ 380,336 0.97% (0.14)% 182.41%
Year ended 12/31/03 ................. -- 28.09 34.72 382,289 0.97 (0.36) 161.71
Year ended 12/31/02 ................. -- 20.85 (33.91) 271,373 0.96 (0.49) 203.05
Year ended 12/31/01 ................. (1.19) 31.55 (15.93) 443,209 0.92 0.00 103.03
Year ended 12/31/00 ................. (5.38) 38.80 (24.83) 476,517 0.90 (0.03) 132.28
ALGER AMERICAN INCOME &
GROWTH PORTFOLIO
CLASS S
Year ended 12/31/04 ................. $ (0.03) $10.08 7.47%$ 11 1.04% 0.76% 96.49%
Year ended 12/31/03 ................. (0.01) 9.41 29.63 10 1.01 0.35 175.67
Eight months ended 12/31/02(i)(iii) . -- 7.27 (24.11) 7 1.05 0.16 276.12
CLASS O
Year ended 12/31/04 ................. $ (0.05) $10.05 7.85% $ 93,554 0.78% 0.97% 96.49%
Year ended 12/31/03 ................. (0.03) 9.37 29.84 101,255 0.78 0.60 175.67
Year ended 12/31/02 ................. (0.06) 7.24 (31.10) 85,066 0.79 0.25 276.12
Year ended 12/31/01 ................. (0.88) 10.57 (14.32) 144,006 0.72 0.52 110.04
Year ended 12/31/00 ................. (3.93) 13.26 (1.27) 150,783 0.70 0.43 142.43
|
FOR FUND INFORMATION:
By telephone: (800) 992-3863
By mail: Boston Financial Data Services, Inc.
Attn: The Alger American Fund
P.O. Box 8480
Boston, MA 02266-8480
|
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, at the Fund's website at http://www. alger.com 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 of the Fund, by calling the Fund's toll-free number, at the Fund's website at http://www. alger.com or by writing to the address above.
Another way you can review and copy Fund documents is by visiting the SEC's Public Reference Room in Washington, DC. Copies can also be obtained, for a duplicating fee, by E-mail request to publicinfo@sec.gov or by writing to the SEC's Public Reference Section, Washington, DC 20549-0102. Information on the operation of the Public Reference Room is available by calling (202) 942-8090. Fund documents are also available on the EDGAR database on the SEC's internet site at http://www.sec.gov.
QUARTERLY FUND HOLDINGS
The portfolios file their complete schedule of portfolio holdings with the SEC for the first and third quarter of each fiscal year on Form N-Q. Forms N-Q are available online on the Fund's website at http://www.alger.com or on the SEC's website at http://www.sec.gov. The Fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330. A copy of the most recent quarterly holdings may also be obtained from the Fund by calling (800) 992-3863.
DISTRIBUTOR: FRED ALGER & COMPANY, INCORPORATED
THE ALGER AMERICAN FUND
SEC FILE #811-5550
FRED ALGER & COMPANY, INCORPORATED PRIVACY POLICY
YOUR PRIVACY IS OUR PRIORITY
At Fred Alger & Company, Incorporated ("Alger") we value the confidence you have
placed in us. In trusting us with your assets, you provide us with personal and
financial data. Alger is committed to maintaining the confidentiality of the
personal nonpublic information ("personal information") entrusted to us by our
customers. Your privacy is very important to us, and we are dedicated to
safeguarding your personal information as we serve your financial needs.
OUR PRIVACY POLICY
We believe you should know about Alger's Privacy Policy and how we collect and protect your personal information. This Privacy Policy ("Policy") describes our practices and policy for collecting, sharing and protecting the personal information of our prospective, current and former customers. The Policy is applicable to Alger and its affiliates, Fred Alger Management, Inc., Alger National Trust Company and Alger Shareholder Services, Inc. as well as the following funds: The Alger Funds, The Alger Institutional Funds, The Alger American Fund, The China-U.S. Growth Fund, Spectra Fund and Castle Convertible Fund, Inc. We are proud of our Policy and hope you will take a moment to read about it.
INFORMATION WE COLLECT
The type of personal information we collect and use varies depending on the Alger products or services you select. We collect personal information that enables us to serve your financial needs, develop and offer new products and services, and fulfill legal and regulatory requirements. Depending on the products or services you request, we obtain personal information about you from the following sources:
o Information, such as your name, address and social security number, provided on applications and other forms we receive from you or your representative;
o Information from your communications with Alger employees or from your representative, which may be provided to us by telephone, in writing or through Internet transactions; and
o Information about your transactions, such as the purchase and redemption of fund shares, account balances and parties to the transactions, which we receive from our affiliates or other third parties.
SHARING OF PERSONAL INFORMATION
We may share your personal information with our affiliates so that they may process and service your transactions.
However, Alger never sells customer lists to any third party. Further, we do not disclose personal information to nonaffiliated third parties, except as required by law or as permitted by law to service your account, such as follows:
o To third-party service providers that assist us in servicing your accounts (e.g. securities clearinghouses);
o To governmental agencies and law enforcement officials (e.g. valid subpoenas, court orders); and
o To financial institutions that perform marketing services on our behalf or with whom we have joint marketing agreements that provide for the confidentiality of personal information.
OUR SECURITY PRACTICES
We protect your personal information by maintaining physical, electronic and procedural safeguards. When you visit Alger's Internet sites your information is protected by our systems that utilize 128-bit data encryption, Secure Socket Layer (SSL) protocol, user names, passwords and other precautions. We have implemented safeguards to ensure that access to customer information is limited to employees, such as customer service representatives, who require such information to carry out their job responsibilities. Our employees are aware of their strict responsibility to respect the confidentiality of your personal information.
Thank you for choosing to invest with Alger. We value your relationship with us and assure you we will abide by our policy to protect your information.
THIS POLICY STATEMENT IS NOT PART OF THE PROSPECTUS.
THE ALGER AMERICAN FUND
CLASS O SHARES
A POOLED FUNDING VEHICLE FOR:
o VARIABLE ANNUITY CONTRACTS
o VARIABLE LIFE INSURANCE POLICIES
o QUALIFIED PENSION PLANS
o QUALIFIED RETIREMENT PLANS
PROSPECTUS
MAY 1, 2005
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.
[ALGER LOGO]
THE ALGER
AMERICAN FUND
CLASS O SHARES
PROSPECTUS
MAY 1, 2005
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 and Organization
8 ............Shareholder Information
Distributor .......................8
Transfer Agent ....................8
Net Asset Value ...................8
Dividends and Distributions .......8
Classes of Fund Shares ............8
Purchasing and Redeeming
Fund Shares ....................8
Other Information .................9
10 ...........Financial Highlights
|
Back Cover: How to obtain more information
[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.
Some portfolios must take into account a company's market capitalization when considering it for investment. 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 at least 80% of its net assets in the equity securities of companies that, at the time of purchase of the securities, have a total market capitalization within the range of the companies included in the Russell 2000 Growth Index or the S&P SmallCap 600 Index, updated quarterly. Both indexes are broad indexes of small capitalization stocks.
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
GOAL
The Alger American MidCap Growth Portfolio seeks long-term capital appreciation.
APPROACH
It focuses on midsized companies with promising growth potential. Under normal circumstances, the portfolio invests at least 80% of its net assets in the equity securities of companies that, at the time of purchase of the securities, have a market capitalization within the range of companies included in the Russell Midcap Growth Index or the S&P MidCap 400 Index, updated quarterly. Both indexes are designed to track the performance of medium capitalization stocks.
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 companies that 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 that 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.
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 fluctuate 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. 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 investments' values.
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 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 and thereby adversely affect portfolio performance.
There may be additional risks applicable to a specific portfolio because of its investment approach.
To the extent that a portfolio invests in securities other than those that are its primary focus, the principal risks associated with such other investments, described in the Fund's Prospectus and Statement of Addition Information, are pertinent.
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 product lines or 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 product lines or 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
LEVERAGED ALLCAP PORTFOLIO
Additional risks of investing in the portfolio are:
o smaller issuers in which the portfolio invests may have limited product lines or financial resources or lack management depth.
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 and the tables beneath them give you some indication of the risks of an investment in a portfolio by showing changes in each portfolio's performance from year to year and by showing how the portfolio's average annual returns for the indicated periods compare with those of an appropriate benchmark index. They 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. Investors cannot invest directly in any index.
o Russell 1000 Growth Index: An index of common stocks designed to track performance of large capitalization companies with greater than average growth orientation.
o Russell 2000 Growth Index: An index of common stocks designed to track performance of small capitalization companies with greater than average growth orientation.
o Russell 3000 Growth Index: An index of common stocks designed to track performance of companies with greater than average growth orientation in general.
o Russell Midcap Growth Index: An index of common stocks designed to track performance of medium-capitalization companies with greater than average growth orientation.
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
[THE DATA BELOW REPRESENTS A GRAPH IN THE PRINTED PIECE]
44.31 4.18 11.39 15.53 43.42 -27.2 -29.51 -26.22 42.34 16.57 ----- ---- ----- ----- ----- ----- ------ ------ ----- ----- 95 96 97 98 99 00 01 02 03 04 |
Best Quarter: 31.06% Q4 1999 Worst Quarter: -26.52% Q1 2001
Average Annual Total Return as of December 31, 2004
Class O Since
Inception
1 Year 5 Years 10 Years (9/21/88)
----------------------------------------------------------------
American Small
Capitalization 16.57% -8.88% 5.71% 10.82%
Russell 2000
Growth Index 14.31% -3.58% 7.11% 8.10%
--------------------------------------------------------------------------------
|
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
[THE DATA BELOW REPRESENTS A GRAPH IN THE PRINTED PIECE]
44.45 11.9 15.01 30.3 31.85 9.18 -6.52 -29.54 47.79 13.04 ----- ---- ----- ---- ----- ---- ----- ------ ----- ----- 95 96 97 98 99 00 01 02 03 04 |
Best Quarter: 27.07% Q4 1998 Worst Quarter: -18.60% Q3 2002
Average Annual Total Return as of December 31, 2004
Class O
Since
Inception
1 Year 5 Years 10 Years (5/3/93)
----------------------------------------------------------------
American MidCap
Growth 13.04% 3.74% 14.39% 15.24%
Russell Midcap
Growth Index 15.48% -3.36% 11.23% 10.61%
--------------------------------------------------------------------------------
|
ALGER AMERICAN GROWTH PORTFOLIO
[THE DATA BELOW REPRESENTS A GRAPH IN THE PRINTED PIECE]
36.37 13.35 25.75 48.07 33.74 -14.77 -11.81 -32.99 35.16 5.5 ----- ----- ----- ----- ----- ------ ------ ------ ----- --- 95 96 97 98 99 00 01 02 03 04 |
Best Quarter: 25.93% Q4 1998 Worst Quarter: -20.20% Q3 2002
Average Annual Total Return as of December 31, 2004
Class O
Since
Inception
1 Year 5 Years 10 Years (1/9/89)
----------------------------------------------------------------
American Growth 5.50% -6.41% 10.70% 12.95%
Russell 1000
Growth Index 6.30% -9.29% 9.60% 10.89%
--------------------------------------------------------------------------------
|
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
[THE DATA BELOW REPRESENTS A GRAPH IN THE PRINTED PIECE]
12.04 19.68 57.83 78.06 -24.83 -15.93 -33.91 34.72 8.19 ----- ----- ----- ----- ------ ------ ------ ----- ---- 96 97 98 99 00 01 02 03 04 |
Best Quarter: 40.16% Q4 1999 Worst Quarter: -21.93% Q4 2000
Average Annual Total Return as of December 31, 2004
Class O
Since
Inception
1 Year 5 Years (1/25/95)
-----------------------------------------------------
American Leveraged
AllCap 8.19% -9.45% 14.97%
Russell 3000
Growth Index 6.93% -8.88% 9.20%
--------------------------------------------------------------------------------
4
|
ALGER AMERICAN INCOME & GROWTH PORTFOLIO
[THE DATA BELOW REPRESENTS A GRAPH IN THE PRINTED PIECE]
35.13 19.68 36.29 32.39 42.45 -1.27 -14.32 -31.1 29.84 7.85 ----- ----- ----- ----- ----- ----- ------ ----- ----- ---- 95 96 97 98 99 00 01 02 03 04 |
Best Quarter: 35.96% Q4 1999 Worst Quarter: -19.33% Q3 2002
Average Annual Total Return as of December 31, 2004
Class O
Since
Inception
1 Year 5 Years 10 Years (11/15/88)
-----------------------------------------------------------------
American
Income & Growth 7.85% -3.98% 12.99% 10.50%
Russell 1000
Growth Index 6.30% -9.29% 9.60% 11.02%
--------------------------------------------------------------------------------
|
The Fund also offers Class S shares. Class S and Class O shares differ only in that Class S shares are subject to a distribution and shareholder servicing fee, whereas Class O shares are not. Because of the distribution and shareholder servicing fee, returns will be lower for Class S shares.
[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 Class O shares of the portfolios. The numbers shown below are based on each portfolio's expenses during its fiscal year ended December 31, 2004.
------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING
EXPENSES
(expenses that are deducted
from Fund assets)
---------------------------------------------------
SHAREHOLDER FEES TOTAL ANNUAL
(fees paid directly Management Distribution Other FUND OPERATING
from your investment) Fees (12b-1) Fees Expenses EXPENSES
===================== ====================== =========== ============= ========= ===============
ALGER AMERICAN SMALL None .85% None .12% .97%
CAPITALIZATION
PORTFOLIO
------------------------------------------------------------------------------------------------
ALGER AMERICAN None .80% None .12% .92%
MIDCAP GROWTH
PORTFOLIO
------------------------------------------------------------------------------------------------
ALGER AMERICAN None .75% None .11% .86%
GROWTH
PORTFOLIO
------------------------------------------------------------------------------------------------
ALGER AMERICAN None .85% None .12% .97%
LEVERAGED ALLCAP
PORTFOLIO
------------------------------------------------------------------------------------------------
ALGER AMERICAN None .625% None .155% .78%
INCOME & GROWTH
PORTFOLIO
------------------------------------------------------------------------------------------------
|
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 Class O shares of 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 $99 $309 $536 $1,190
CAPITALIZATION
PORTFOLIO
------------------------------------------------------------------------
ALGER AMERICAN $94 $293 $509 $1,131
MIDCAP GROWTH
PORTFOLIO
------------------------------------------------------------------------
ALGER AMERICAN $88 $274 $477 $1,061
GROWTH
PORTFOLIO
------------------------------------------------------------------------
ALGER AMERICAN $99 $309 $536 $1,190
LEVERAGED ALLCAP
PORTFOLIO
------------------------------------------------------------------------
ALGER AMERICAN $80 $249 $433 $966
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
Other securities the portfolios may invest in are discussed in the Fund's Statement of Additional Information (see back cover of this prospectus).
In times of adverse or unstable market or economic conditions, each portfolio may invest up to 100% of its assets in cash, high-grade bonds, or cash equivalents (such as commercial paper or paper market instruments) for temporary defensive reasons. 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. A portfolio may also hold these types of securities pending the investment of proceeds from the sale of portfolio securities or to meet anticipated redemptions of portfolio shares. The portfolio may not achieve its objective while in a temporary defensive or interim position.
[GRAPHIC OMITTED]
MANAGEMENT AND ORGANIZATION
MANAGER
Fred Alger Management, Inc.
111 Fifth Avenue
New York, NY 10003
The Manager has been an investment adviser since 1964, and manages investments totaling (at 12/31/04) $8.2 billion in mutual fund assets as well as $1.5 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
Fred M. Alger III is the chief market strategist for the portfolios, overseeing the investments of each portfolio since September 2001. Mr. Alger, who founded Fred Alger Management, Inc., has served as Chairman of the Board since 1964, and co-managed the portfolios prior to 1995. Dan C. Chung, CFA, Jill Greenwald, CFA, Patrick Kelly, CFA, Teresa McRoberts, Kevin Collins, CFA, and Andrew Silverberg are the individuals responsible for the day-to-day management of portfolio investments.
o Mr. Chung, manager of the MidCap Growth Portfolio since September 2001, manager of the Growth Portfolio since September 2004, co-manager of the Growth Portfolio from September 2001 to September 2004, and co-manager of the Income & Growth Portfolio since September 2003 (and manager prior thereto from September 2001), has been employed by the Manager since 1994 as a Vice President and analyst from 1996 to 1999, as a Senior Vice President and senior analyst until 2000, as an Executive Vice President until 2003, as portfolio manager since 2000, as Chief Investment Officer since September 2001 and as President since 2003.
o Ms. Greenwald, manager of the Small Capitalization Portfolio since November 2001, has been employed by the Manager as a Senior Vice President and portfolio manager since November 2001, prior to which she was employed by the Manager as an analyst and later a senior analyst from 1986 to 1992, as a Managing Director and senior portfolio manager at Chase Manhattan Bank from 1994 through 1999 and as a Senior Vice
President and Investment Officer at J&W Seligman & Co. from 1999 until November 2001.
o Mr. Kelly, co-manager of the Leveraged AllCap Portfolio since September 2004, has been employed by the Manager as a research associate from July 1999 to February 2001, as an Assistant Vice President and associate analyst from February 2001 to September 2001, as a Vice President and analyst from September 2001 to September 2004, and as a Senior Vice President and portfolio manager since September 2004.
o Ms. McRoberts, co-manager of the Leveraged AllCap Portfolio since September 2004, has been employed by the Manager as a Senior Vice President and portfolio manager since October 2001, prior to which she was a portfolio manager and partner at Maximus Capital from April 2001 until October 2001, a Vice President and portfolio manager at Morgan Stanley Dean Witter from June 1998 to March 2001 and a principal of that firm from December 2000 to March 2001. Ms. McRoberts had previously been employed by the Manager as a Vice President and senior analyst from July 1994 until May 1998.
o Mr. Collins, co-manager of the Income & Growth Portfolio since September 2003, has been employed by the Manager as a Senior Vice President, portfolio manager and senior analyst since September 2003, prior to which period he was employed by the Manager as an analyst and later as a Vice President and senior analyst from 1996 until September 2003.
o Mr. Silverberg, assistant portfolio manager of the MidCap Growth Portfolio since September 2003, has been employed by the Manager as a Vice President and senior analyst since September 2004, as an analyst from October 2001 to December 2004, and as an Assistant Vice President and analyst from September 2002 to December 2004, prior to which period he was a research analyst at Mark Asset Management Corporation from June 1999 until September 2001 and a research intern at MBF Capital Corporation from December 1998 until June 1999.
LEGAL PROCEEDINGS
Alger Management has been responding to inquiries, document requests and/or subpoenas from regulatory authorities, including the United States Securities and Exchange Commission ("SEC"), the Office of the New York State Attorney General, and the Attorney General of New Jersey, in connection with their investigation of practices in the mutual fund industry identified as "market timing" and "late trading." Alger Management has assured the Board of the Fund that if it be determined that improper trading practices in the Fund detrimentally affected its performance, Alger Management will make appropriate restitution.
Certain civil actions have developed out of the regulatory investigations. Several purported class actions and shareholder derivative suits have been filed against various parties; including, depending on the lawsuit, Alger Management, certain of the mutual funds managed by Alger Management (the "Alger Mutual Funds"), and certain current and former Alger Mutual Fund trustees and officers, alleging wrongful market-timing and late-trading activities. These cases have been transferred to the U.S. District Court of Maryland by the Judicial Panel on Multidistrict Litigation for consolidated pre-trial proceedings. On September 29, 2004, consolidated amended complaints involving these cases - a Consolidated Amended Fund Derivative Complaint (the "Derivative Complaint") and two substantially identical Consolidated Amended Class Action Complaints (together, the "Class Action Complaint") - were filed in the Maryland federal district court under the caption number 1:04-MD-15863 (JFM).
The Derivative Complaint, brought on behalf of the Alger Mutual Funds and Castle
Convertible Fund, Inc., a registered closed-end fund managed by Alger
Management, alleges (i) violations, by Alger Management and, depending on the
specific offense alleged, by its immediate parent the Distributor (Fred Alger &
Company, Incorporated) and/or the fund trustee defendants, of Sections 36(a),
36(b), 47, and 48 of the Investment Company Act of 1940 and of Sections 206 and
215 of the Investment Advisers Act of 1940, breach of fiduciary duty, and breach
of contract, (ii) various offenses by other, unrelated, third-party defendants,
and (iii) unjust enrichment by all the named defendants, all by virtue of the
alleged wrongful market-timing and late-trading activities. The complaint seeks,
among other things, removal of the trustee defendants and of Alger Management,
certain rescissory relief, disgorgement of management fees and allegedly
unlawful profits, compensatory and punitive monetary damages, and plaintiffs'
fees and expenses (including attorney and expert fees). The Class Action
Complaint names the Alger-related defendants named in the Derivative Complaint
as well as certain defendants not named in the Derivative Complaint, including
certain entities affiliated with Alger Management, certain Alger Mutual Funds,
including the Fund, and certain additional former trustees and a former officer
of the defendant Alger Mutual Funds. It alleges, on the basis of factual
allegations similar to those of the Derivative Complaint with respect to the
Alger defendants, (i) offenses by the Alger defendants similar to those alleged
in the Derivative Complaint, (ii) violations, by Alger Management, the
Distributor, their affiliates, the funds named as defendants, and the current
and former fund trustees and officers, of Sections 11, 12(a)(2) and 15 of the
Securities Act of 1933, Sections 10(b) (and Rule 10b-5 thereunder) and 20(a) of
the Securities Exchange Act of 1934, and Section 34(b) of the Investment Company
Act of 1940, (iii) breach of contract by the funds named as defendants, and (iv)
unjust enrichment by all of the named defendants. It seeks relief similar to
that sought in the Derivative Complaint.
Alger Management does not believe that the foregoing lawsuits will materially affect its ability to perform its management contracts with any of the funds that it manages, and the management of the Fund believes that the Fund will not be materially adversely affected by the pending lawsuits.
[GRAPHIC OMITTED]
SHAREHOLDER INFORMATION
DISTRIBUTOR
Fred Alger & Company, Incorporated
30 Montgomery Street
Jersey City, NJ 07302
TRANSFER AGENT
State Street Bank and Trust Company
c/o Boston Financial Data Services, Inc.
Attn: The Alger American Fund
P.O. Box 8480
Boston, MA 02266-8480
NET ASSET VALUE
The value 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 reliable or 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.
In determining whether market quotations are reliable and readily available, the Manager monitors information it routinely receives for significant events it believes will affect market prices of portfolio instruments held by the Fund. Significant events may affect a particular company (for example, a trading halt in the company's securities on an exchange during the day) or may affect securities markets (for example, a natural disaster such as an earthquake causes a market to close early). If the Manager is aware of a significant event that has occurred after the close of the market where a portfolio instrument is primarily traded, but before the close of the New York Stock Exchange, and the Manager believes that such event has affected or is likely to affect the price of the instrument, the Manager will use its best judgment to determine a fair value for that portfolio instrument under procedures adopted by the Board of Trustees.
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. Dividends and distributions may differ between classes of shares of a portfolio.
Federal income taxation of separate accounts of insurance companies, variable annuity contracts and variable life insurance contracts is discussed in the prospectuses of participating insurance companies. Generally, distributions by the Fund will not be taxable to holders of variable annuity contracts or variable life insurance policies if the insurance company separate accounts to which those distributions are made meet certain requirements, including certain diversification requirements that the Fund has undertaken to meet, under the Internal Revenue Code. Participants in 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 from their plan accounts. Generally, distributions from plan accounts 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.
CLASSES OF FUND SHARES
Each portfolio offers two classes of shares: Class O shares and Class S shares. Only Class O shares are offered in this prospectus. Both classes are offered only to separate accounts of insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies and to qualified pension and retirement plans. The classes differ only in that Class S shares are subject to a distribution and shareholder servicing fee, while Class O shares are not.
PURCHASING AND REDEEMING FUND SHARES
Because 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 Fund or its designated 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 seven days after it accepts a redemption request.
OTHER INFORMATION
The Fund may redeem some of your shares "in kind," which means that some of the proceeds will be paid with securities the applicable portfolio owns instead of cash.
Shares may be worth more or less when you redeem them than they were at the time you bought them.
The Board of Trustees has determined that the Fund may reject purchase orders, on a temporary or permanent basis, from investors that the Manager is able to determine, consistent with its compliance procedures and its reasonable business judgment, are exhibiting a pattern of frequent or short-term trading in Fund shares or shares of other funds sponsored by the Manager.
The Fund might not be able to detect frequent or short-term trading conducted by the underlying owners of shares held in omnibus accounts, and therefore might not be able to effectively prevent frequent or short-term trading in those accounts. There is no guarantee that the Fund's compliance procedures will be successful to identify investors who engage in excessive trading activity or to curtail that activity.
Each portfolio posts its month-end full portfolio with a 60-day lag, on its website, www.alger.com. The Fund reserves the right to change the policy for posting portfolio holdings on the website without further notice to shareholders. Following publication of portfolio holdings information on the Fund's website, it may be sent by the Fund to any party.
The Fund and Transfer Agent have reasonable procedures in place to determine that instructions submitted by telephone are genuine. They include requesting personal identification and recording calls. If the Fund and Transfer Agent follow these procedures, they are not liable for acting in good faith on telephone instructions.
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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 portfolio share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in the portfolio (assuming reinvestment of all dividends and distributions). Information for the periods shown from the year ended December 31, 2002 through the year ended December 31, 2004 has been audited by Ernst & Young LLP, the Fund's independent registered public accounting firm, whose report, along with the Fund's financial statements, is included in the Annual Report, which is available upon request. Information for the periods prior thereto has been audited by Arthur Andersen LLP.
Note that the Financial Highlights do 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.
INCOME FROM INVESTMENT OPERATIONS LESS DIVIDENDS AND DISTRIBUTIONS
--------------------------------- --------------------------------
NET ASSET NET REALIZED DISTRIBUTIONS
VALUE AND UNREALIZED TOTAL FROM DIVIDENDS FROM FROM NET
BEGINNING NET INVESTMENT GAIN (LOSS) INVESTMENT NET INVESTMENT REALIZED
OF PERIOD INCOME (LOSS) ON INVESTMENTS OPERATIONS INCOME GAINS
----------- -------------- --------------- ------------ -------------- -------------
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
CLASS O
Year ended 12/31/04 ............. $18.40 $(0.11) $ 2.51 $ 2.40 $ -- $ --
Year ended 12/31/03 ............. 12.45 (0.05) 6.00 5.95 -- --
Year ended 12/31/02 ............. 17.67 (0.10) (5.12) (5.22) -- --
Year ended 12/31/01 ............. 30.62 (0.09)(i) (1.23) (1.32) -- (11.63)
Year ended 12/31/00 ............. 32.23 (0.03)(i) 2.79 2.76 -- (4.37)
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
CLASS O
Year ended 12/31/04 ............. $17.38 $(0.27) $ 3.15 $ 2.88 $ -- $ --
Year ended 12/31/03 ............. 12.21 (0.15) 5.32 5.17 -- --
Year ended 12/31/02 ............. 16.55 (0.11) (4.23) (4.34) -- --
Year ended 12/31/01 ............. 23.49 (0.03) (6.90) (6.93) (0.01) --
Year ended 12/31/00 ............. 55.15 0.01(i) (12.80) (12.79) -- (18.87)
ALGER AMERICAN GROWTH PORTFOLIO
CLASS O
Year ended 12/31/04 ............. $33.29 $0.07 $ 1.76 $ 1.83 $ -- $ --
Year ended 12/31/03 ............. 24.63 (0.02) 8.68 8.66 -- --
Year ended 12/31/02 ............. 36.77 (0.01) (12.12) (12.13) (0.01) --
Year ended 12/31/01 ............. 47.27 0.01 (4.88) (4.87) (0.10) (5.53)
Year ended 12/31/00 ............. 64.38 0.10 (8.75) (8.65) -- (8.46)
ALGER AMERICAN INCOME & GROWTH PORTFOLIO
CLASS O
Year ended 12/31/04 ............. $ 9.37 $0.10 $ 0.63 $ 0.73 $(0.05) $ --
Year ended 12/31/03 ............. 7.24 0.05 2.11 2.16 (0.03) --
Year ended 12/31/02 ............. 10.57 0.02 (3.29) (3.27) (0.06) --
Year ended 12/31/01 ............. 13.26 0.05 (1.86) (1.81) (0.05) (0.83)
Year ended 12/31/00 ............. 17.58 0.05 (0.44) (0.39) (0.01) (3.92)
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
CLASS O
Year ended 12/31/04 ............. $28.09 $(0.07) $ 2.37 $ 2.30 $ -- $ --
Year ended 12/31/03 ............. 20.85 (0.07) 7.31 7.24 -- --
Year ended 12/31/02 ............. 31.55 (0.14) (10.56) (10.70) -- --
Year ended 12/31/01 ............. 38.80 0.00(i) (6.06) (6.06) -- (1.19)
Year ended 12/31/00 ............. 57.97 (0.02)(i) (13.77) (13.79) -- (5.38)
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(i) Amount was computed based on average shares outstanding during the year.
RATIOS/SUPPLEMENTAL DATA
-------------------------------------
RATIO OF
NET
RATIO OF INVESTMENT
NET ASSET NET ASSETS, EXPENSES INCOME (LOSS) PORTFOLIO
TOTAL VALUE, END END OF PERIOD TO AVERAGE TO AVERAGE TURNOVER
DISTRIBUTIONS OF PERIOD TOTAL RETURN (000'S OMITTED) NET ASSETS NET ASSETS RATE
------------- ---------- ------------ --------------- ----------- ------------- ---------
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
CLASS O
Year ended 12/31/04 ............. $ -- $20.80 13.04% $ 482,868 0.92% (0.62)% 229.17%
Year ended 12/31/03 ............. -- 18.40 47.79 414,590 0.93 (0.70) 196.43
Year ended 12/31/02 ............. -- 12.45 (29.54) 240,063 0.93 (0.56) 323.83
Year ended 12/31/01 ............. (11.63) 17.67 (6.52) 355,015 0.88 (0.45) 130.11
Year ended 12/31/00 ............. (4.37) 30.62 9.18 332,734 0.84 (0.09) 130.85
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
CLASS O
Year ended 12/31/04 ............. $ -- $20.26 16.57% $ 484,760 0.97% (0.72)% 135.33%
Year ended 12/31/03 ............. -- 17.38 42.34 496,076 0.97 (0.70) 146.69
Year ended 12/31/02 ............. -- 12.21 (26.22) 376,550 0.97 (0.69) 111.82
Year ended 12/31/01 ............. (0.01) 16.55 (29.51) 517,364 0.92 (0.27) 181.80
Year ended 12/31/00 ............. (18.87) 23.49 (27.20) 700,370 0.90 0.03 217.69
ALGER AMERICAN GROWTH PORTFOLIO
CLASS O
Year ended 12/31/04 ............. $ -- $35.12 5.50% $1,028,652 0.86% 0.21% 194.25%
Year ended 12/31/03 ............. -- 33.29 35.16 1,115,959 0.85 (0.05) 167.53
Year ended 12/31/02 ............. (0.01) 24.63 (32.99) 874,914 0.85 (0.01) 238.03
Year ended 12/31/01 ............. (5.63) 36.77 (11.81) 1,540,327 0.81 0.03 87.79
Year ended 12/31/00 ............. (8.46) 47.27 (14.77) 1,809,937 0.79 0.12 108.27
ALGER AMERICAN INCOME & GROWTH PORTFOLIO
CLASS O
Year ended 12/31/04 ............. $ (0.05) $10.05 7.85% $ 93,554 0.78% 0.97% 96.49%
Year ended 12/31/03 ............. (0.03) 9.37 29.84 101,255 0.78 0.60 175.67
Year ended 12/31/02 ............. (0.06) 7.24 (31.10) 85,066 0.79 0.25 276.12
Year ended 12/31/01 ............. (0.88) 10.57 (14.32) 144,006 0.72 0.52 110.04
Year ended 12/31/00 ............. (3.93) 13.26 (1.27) 150,783 0.70 0.43 142.43
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
CLASS O
Year ended 12/31/04 ............. $ -- $30.39 8.19% $ 380,336 0.97% (0.14)% 182.41%
Year ended 12/31/03 ............. -- 28.09 34.72 382,289 0.97 (0.36) 161.71
Year ended 12/31/02 ............. -- 20.85 (33.91) 271,373 0.96 (0.49) 203.05
Year ended 12/31/01 ............. (1.19) 31.55 (15.93) 443,209 0.92 0.00 103.03
Year ended 12/31/00 ............. (5.38) 38.80 (24.83) 476,517 0.90 (0.03) 132.28
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FOR FUND INFORMATION:
By telephone: (800) 992-3863
By mail: Boston Financial Data Services, Inc.
Attn: The Alger American Fund
P.O. Box 8480
Boston, MA 02266-8480
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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, at the Fund's website at http://www. alger.com 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 of the Fund, by calling the Fund's toll-free number, at the Fund's website at http://www. alger.com or by writing to the address above.
Another way you can review and copy Fund documents is by visiting the SEC's Public Reference Room in Washington, DC. Copies can also be obtained, for a duplicating fee, by E-mail request to publicinfo@sec.gov or by writing to the SEC's Public Reference Section, Washington, DC 20549-0102. Information on the operation of the Public Reference Room is available by calling (202) 942-8090. Fund documents are also available on the EDGAR database on the SEC's internet site at http://www.sec.gov.
QUARTERLY FUND HOLDINGS
The portfolios file their complete schedule of portfolio holdings with the SEC for the first and third quarter of each fiscal year on Form N-Q. Forms N-Q are available online on the Fund's website at http://www.alger.com or on the SEC's website at http://www.sec.gov. The Fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330. A copy of the most recent quarterly holdings may also be obtained from the Fund by calling (800) 992-3863.
DISTRIBUTOR: FRED ALGER & COMPANY, INCORPORATED
THE ALGER AMERICAN FUND
SEC FILE #811-5550
FRED ALGER & COMPANY, INCORPORATED PRIVACY POLICY
YOUR PRIVACY IS OUR PRIORITY
At Fred Alger & Company, Incorporated ("Alger") we value the confidence you have placed in us. In trusting us with your assets, you provide us with personal and financial data. Alger is committed to maintaining the confidentiality of the personal nonpublic information ("personal information") entrusted to us by our customers. Your privacy is very important to us, and we are dedicated to safeguarding your personal information as we serve your financial needs.
OUR PRIVACY POLICY
We believe you should know about Alger's Privacy Policy and how we collect and protect your personal information. This Privacy Policy ("Policy") describes our practices and policy for collecting, sharing and protecting the personal information of our prospective, current and former customers. The Policy is applicable to Alger and its affiliates, Fred Alger Management, Inc., Alger National Trust Company and Alger Shareholder Services, Inc. as well as the following funds: The Alger Funds, The Alger Institutional Funds, The Alger American Fund, The China-U.S. Growth Fund, Spectra Fund and Castle Convertible Fund, Inc. We are proud of our Policy and hope you will take a moment to read about it.
INFORMATION WE COLLECT
The type of personal information we collect and use varies depending on the Alger products or services you select.
We collect personal information that enables us to serve your financial needs, develop and offer new products and services, and fulfill legal and regulatory requirements. Depending on the products or services you request, we obtain personal information about you from the following sources:
o Information, such as your name, address and social security number, provided on applications and other forms we receive from you or your representative;
o Information from your communications with Alger employees or from your representative, which may be provided to us by telephone, in writing or through Internet transactions; and
o Information about your transactions, such as the purchase and redemption of fund shares, account balances and parties to the transactions, which we receive from our affiliates or other third parties.
SHARING OF PERSONAL INFORMATION
We may share your personal information with our affiliates so that they may process and service your transactions.
However, Alger never sells customer lists to any third party. Further, we do not disclose personal information to nonaffiliated third parties, except as required by law or as permitted by law to service your account, such as follows:
o To third-party service providers that assist us in servicing your accounts (e.g. securities clearinghouses);
o To governmental agencies and law enforcement officials (e.g. valid subpoenas, court orders); and
o To financial institutions that perform marketing services on our behalf or with whom we have joint marketing agreements that provide for the confidentiality of personal information.
OUR SECURITY PRACTICES
We protect your personal information by maintaining physical, electronic and procedural safeguards. When you visit Alger's Internet sites your information is protected by our systems that utilize 128-bit data encryption, Secure Socket Layer (SSL) protocol, user names, passwords and other precautions. We have implemented safeguards to ensure that access to customer information is limited to employees, such as customer service representatives, who require such information to carry out their job responsibilities. Our employees are aware of their strict responsibility to respect the confidentiality of your personal information.
Thank you for choosing to invest with Alger. We value your relationship with us and assure you we will abide by our policy to protect your information.
THIS POLICY STATEMENT IS NOT PART OF THE PROSPECTUS.
THE ALGER AMERICAN FUND
CLASS O SHARES
A POOLED FUNDING VEHICLE FOR:
o VARIABLE ANNUITY CONTRACTS
o VARIABLE LIFE INSURANCE POLICIES
o QUALIFIED PENSION PLANS
o QUALIFIED RETIREMENT PLANS
PROSPECTUS
MAY 1, 2005
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.
[LOGO OMITTED]
THE ALGER
AMERICAN FUND
CLASS O SHARES
PROSPECTUS
MAY 1, 2005
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 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 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 Income &
Growth Portfolio ..........................................4
5 ............Fees and Expenses
6 ............Management and Organization
7 ............Shareholder Information
Distributor .................................................7
Transfer Agent ..............................................7
Net Asset Value .............................................7
Dividends and Distributions .................................8
Classes of Fund Shares ......................................8
Purchasing and Redeeming
Fund Shares ...............................................8
8 ............Other Information
10 ...........Financial Highlights
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Back Cover: How to obtain more information
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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.
Some portfolios must take into account a company's market capitalization when considering it for investment. 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 at least 80% of its net assets in the equity securities of companies that, at the time of purchase of the securities, have a total market capitalization within the range of the companies included in the Russell 2000 Growth Index or the S&P SmallCap 600 Index, updated quarterly. Both indexes are broad indexes of small capitalization stocks.
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
GOAL
The Alger American MidCap Growth Portfolio seeks long-term capital appreciation.
APPROACH
It focuses on midsized companies with promising growth potential. Under normal circumstances, the portfolio invests at least 80% of its net assets in the equity securities of companies that, at the time of purchase of the securities, have a market capitalization within the range of companies included in the Russell Midcap Growth Index or the S&P MidCap 400 Index, updated quarterly. Both indexes are designed to track the performance of medium capitalization stocks.
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 companies that 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 EQUITY PORTFOLIOS
As with any fund that invests in stocks, your investment will fluctuate 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. 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 investments' values.
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 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 and thereby adversely affect portfolio performance.
There may be additional risks applicable to a specific portfolio because of its investment approach.
To the extent that a portfolio invests in securities other than those that are its primary focus, the principal risks associated with such other investments, described in the Fund's Prospectus and Statement of Addition Information, are pertinent.
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 product lines or 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 product lines or 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
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 and the tables beneath them give you some indication of the risks of an investment in a portfolio by showing changes in each portfolio's performance from year to year and by showing how the portfolio's average annual returns for the indicated periods compare with those of an appropriate benchmark index. They 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. Investors cannot invest directly in any index.
o Russell 1000 Growth Index: An index of common stocks designed to track performance of large capitalization companies with greater than average growth orientation.
o Russell 2000 Growth Index: An index of common stocks designed to track performance of small capitalization companies with greater than average growth orientation.
o Russell Midcap Growth Index: An index of common stocks designed to track performance of medium-capitalization companies with greater than average growth orientation.
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
Annual Total Return as of December 31 each year (%) Class O
[THE DATA BELOW REPRESENTS A GRAPH IN THE PRINTED PIECE]
44.31 4.18 11.39 15.53 43.42 -27.2 -29.51 -26.22 42.34 16.57
95 96 97 98 99 00 01 02 03 04
Best Quarter: 31.06% Q4 1999 Worst Quarter: -26.52% Q1 2001
Average Annual Total Return as of December 31, 2004
Class O Since
Inception
1 Year 5 Years 10 Years (9/21/88)
--------------------------------------------------------------------------------
American Small
Capitalization 16.57% -8.88% 5.71% 10.82%
Russell 2000
Growth Index 14.31% -3.58% 7.11% 8.10%
|
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
Annual Total Return as of December 31 each year (%) Class O
[THE DATA BELOW REPRESENTS A GRAPH IN THE PRINTED PIECE]
44.45 11.9 15.01 30.3 31.85 9.18 -6.52 -29.54 47.79 13.04
95 96 97 98 99 00 01 02 03 04
Best Quarter: 27.07% Q4 1998 Worst Quarter: -18.60% Q3 2002 Average Annual Total Return as of December 31, 2004
Class O
Since
Inception
1 Year 5 Years 10 Years (5/3/93)
--------------------------------------------------------------------------------
American MidCap
Growth 13.04% 3.74% 14.39% 15.24%
Russell Midcap
Growth Index 15.48% -3.36% 11.23% 10.61%
|
ALGER AMERICAN GROWTH PORTFOLIO
Annual Total Return as of December 31 each year (%) Class O
[THE DATA BELOW REPRESENTS A GRAPH IN THE PRINTED PIECE]
36.37 13.35 25.75 48.07 33.74 -14.77 -11.81 -32.99 35.16 5.5
95 96 97 98 99 00 01 02 03 04
Best Quarter: 25.93% Q4 1998 Worst Quarter: -20.20% Q3 2002
Average Annual Total Return as of December 31, 2004
Class O
Since
Inception
1 Year 5 Years 10 Years (1/9/89)
--------------------------------------------------------------------------------
American Growth 5.50% -6.41% 10.70% 12.95%
Russell 1000
Growth Index 6.30% -9.29% 9.60% 10.89%
|
ALGER AMERICAN INCOME & GROWTH PORTFOLIO
Annual Total Return as of December 31 each year (%) Class O
[THE DATA BELOW REPRESENTS A GRAPH IN THE PRINTED PIECE]
35.13 19.68 36.29 32.39 42.45 -1.27 -14.32 -31.1 29.84 7.85
95 96 97 98 99 00 01 02 03 04
Best Quarter: 35.96% Q4 1999 Worst Quarter: -19.33% Q3 2002
Average Annual Total Return as of December 31, 2004
Class O
Since
Inception
1 Year 5 Years 10 Years (11/15/88)
--------------------------------------------------------------------------------
American
Income & Growth 7.85% -3.98% 12.99% 10.50%
Russell 1000
Growth Index 6.30% -9.29% 9.60% 11.02%
|
The Fund also offers Class S shares. Class S and Class O shares differ only in that Class S shares are subject to a distribution and shareholder servicing fee, whereas Class O shares are not. Because of the distribution and shareholder servicing fee, returns will be lower for Class S shares.
[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 Class O shares of the portfolios. The numbers shown below are
based on each portfolio's expenses during its fiscal year ended December 31,
2004.
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted
from Fund assets)
SHAREHOLDER FEES TOTAL ANNUAL
(fees paid directly from Management Distribution Other FUND OPERATING
your investment) Fees (12b-1) Fees Expenses EXPENSES
------------------------------------------------------------------------------------------------------------------------------------
ALGER AMERICAN SMALL None .85% None .12% .97%
CAPITALIZATION
PORTFOLIO
ALGER AMERICAN None .80% None .12% .92%
MIDCAP GROWTH
PORTFOLIO
ALGER AMERICAN None .75% None .11% .86%
GROWTH
PORTFOLIO
ALGER AMERICAN None .625% None .155% .78%
INCOME & GROWTH
PORTFOLIO
|
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 Class O shares of 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 $ 99 $ 309 $ 536 $1,190
CAPITALIZATION
PORTFOLIO
ALGER AMERICAN $ 94 $ 293 $ 509 $1,131
MIDCAP GROWTH
PORTFOLIO
ALGER AMERICAN $ 88 $ 274 $ 477 $1,061
GROWTH
PORTFOLIO
ALGER AMERICAN $ 80 $ 249 $ 433 $ 966
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
Other securities the portfolios may invest in are discussed in the Fund's Statement of Additional Information (see back cover of this prospectus).
In times of adverse or unstable market or economic conditions, each portfolio may invest up to 100% of its assets in cash, high-grade bonds, or cash equivalents (such as commercial paper or paper market instruments) for temporary defensive reasons. 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. A portfolio may also hold these types of securities pending the investment of proceeds from the sale of portfolio securities or to meet anticipated redemptions of portfolio shares. The portfolio may not achieve its objective while in a temporary defensive or interim position.
[GRAPHIC OMITTED]
MANAGEMENT AND ORGANIZATION
MANAGER
Fred Alger Management, Inc.
111 Fifth Avenue
New York, NY 10003
The Manager has been an investment adviser since 1964, and manages investments totaling (at 12/31/04) $8.2 billion in mutual fund assets as well as $1.5 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%; Income & Growth Portfolio--.625%.
PORTFOLIO MANAGERS
Fred M. Alger III is the chief market strategist for the portfolios, overseeing the investments of each portfolio since September 2001. Mr. Alger, who founded Fred Alger Management, Inc., has served as Chairman of the Board since 1964, and co-managed the portfolios prior to 1995. Dan C. Chung, CFA, Jill Greenwald, CFA, Kevin Collins, CFA and Andrew Silverberg are the individuals responsible for the day-to-day management of portfolio investments.
o Mr. Chung, manager of the MidCap Growth Portfolio since September 2001, manager of the Growth Portfolio since September 2004, co-manager of the Growth Portfolio from September 2001 to September 2004, and co-manager of the Income & Growth Portfolio since September 2003 (and manager prior thereto from September 2001), has been employed by the Manager since 1994 as a Vice President and analyst from 1996 to 1999, as a Senior Vice President and senior analyst until 2000, as an Executive Vice President until 2003, as portfolio manager since 2000, as Chief Investment Officer since September 2001 and as President since 2003.
o Ms. Greenwald, manager of the Small Capitalization Portfolio since November 2001, has been employed by the Manager as a Senior Vice President and portfolio manager since November 2001, prior to which she was employed by the Manager as an analyst and later a senior analyst from 1986 to 1992, as a Managing Director and senior portfolio manager at Chase Manhattan Bank from 1994 through 1999 and as a Senior Vice President and Investment Officer at J&W Seligman & Co. from 1999 until November 2001.
o Mr. Collins, co-manager of the Income & Growth Portfolio since September 2003, has been employed by the Manager as a Senior Vice President, portfolio manager and senior analyst since September 2003, prior to which period he was employed by the Manager as an analyst and later as a Vice President and senior analyst from 1996 until September 2003.
o Mr. Silverberg, assistant portfolio manager of the MidCap Growth Portfolio since September 2003, has been employed by the Manager as a Vice President and senior analyst since September 2004, as an analyst from October 2001 to December 2004, and as an Assistant Vice President and analyst from September 2002 to December 2004, prior to which period he was a research analyst at Mark Asset Management Corporation from June 1999 until September 2001 and a research intern at MBF Capital Corporation from December 1998 until June 1999.
LEGAL PROCEEDINGS
Alger Management has been responding to inquiries, document requests and/or subpoenas from regulatory authorities, including the United States Securities and Exchange Commission ("SEC"), the Office of the New York State Attorney General, and the Attorney General of New Jersey, in connection with their investigation of practices in the mutual fund industry identified as "market timing" and "late trading." Alger Management has assured the Board of the Fund that if it be determined that improper trading practices in the Fund detrimentally affected its performance, Alger Management will make appropriate restitution.
Certain civil actions have developed out of the regulatory investigations. Several purported class actions and shareholder derivative suits have been filed against various parties; including, depending on the lawsuit, Alger Management, certain of the mutual funds managed by Alger Management (the "Alger Mutual Funds"), and certain current and former Alger Mutual Fund trustees and officers, alleging wrongful market-timing and late-trading activities. These cases have been transferred to the U.S. District Court of Maryland by the Judicial Panel on Multidistrict Litigation for consolidated pre-trial proceedings. On September 29, 2004, consolidated amended complaints involving these cases - a Consolidated Amended Fund Derivative Complaint (the "Derivative Complaint") and two substantially identical Consolidated Amended Class Action Complaints (together, the "Class Action Complaint") - were filed in the Maryland federal district court under the caption number 1:04-MD-15863 (JFM).
The Derivative Complaint, brought on behalf of the Alger Mutual Funds and Castle
Convertible Fund, Inc., a registered closed-end fund managed by Alger
Management, alleges (i) violations, by Alger Management and, depending on the
specific offense alleged, by its immediate parent the Distributor (Fred Alger &
Company, Incorporated) and/or the fund trustee defendants, of Sections 36(a),
36(b), 47, and 48 of the Investment Company Act of 1940 and of Sections 206 and
215 of the Investment Advisers Act of 1940, breach of fiduciary duty, and breach
of contract, (ii) various offenses by other, unrelated, third-party defendants,
and (iii) unjust enrichment by all the # named defendants, all by virtue of the
alleged wrongful market-timing and
late-trading activities. The complaint seeks, among other things, removal of the
trustee defendants and of Alger Management, certain rescissory relief,
disgorgement of management fees and allegedly unlawful profits, compensatory and
punitive monetary damages, and plaintiffs' fees and expenses (including attorney
and expert fees). The Class Action Complaint names the Alger-related defendants
named in the Derivative Complaint as well as certain defendants not named in the
Derivative Complaint, including certain entities affiliated with Alger
Management, certain Alger Mutual Funds, including the Fund, and certain
additional former trustees and a former officer of the defendant Alger Mutual
Funds. It alleges, on the basis of factual allegations similar to those of the
Derivative Complaint with respect to the Alger defendants, (i) offenses by the
Alger defendants similar to those alleged in the Derivative Complaint, (ii)
violations, by Alger Management, the Distributor, their affiliates, the funds
named as defendants, and the current and former fund trustees and officers, of
Sections 11, 12(a)(2) and 15 of the Securities Act of 1933, Sections 10(b) (and
Rule 10b-5 thereunder) and 20(a) of the Securities Exchange Act of 1934, and
Section 34(b) of the Investment Company Act of 1940, (iii) breach of contract by
the funds named as defendants, and (iv) unjust enrichment by all of the named
defendants. It seeks relief similar to that sought in the Derivative Complaint.
Alger Management does not believe that the foregoing lawsuits will materially affect its ability to perform its management contracts with any of the funds that it manages, and the management of the Fund believes that the Fund will not be materially adversely affected by the pending lawsuits.
[GRAPHIC OMITTED]
SHAREHOLDER INFORMATION
DISTRIBUTOR
Fred Alger & Company, Incorporated
30 Montgomery Street
Jersey City, NJ 07302
TRANSFER AGENT
State Street Bank and Trust Company
c/o Boston Financial Data Services, Inc.
Attn: The Alger American Fund
P.O. Box 8480
Boston, MA 02266-8480
NET ASSET VALUE
The value 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 reliable or 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.
In determining whether market quotations are reliable and readily available, the Manager monitors information it routinely receives for significant events it believes will affect market prices of portfolio instruments held by the Fund. Significant events may affect a particular company (for example, a trading halt in the company's securities on an exchange during the day) or may affect securities markets (for example, a natural disaster such as an earthquake causes a market to close early). If the Manager is aware of a significant event that has occurred after the close of the market where a portfolio instrument is primarily traded, but before the close of the New York Stock Exchange, and the Manager believes that such event has affected or is likely to affect the price of the instrument, the Manager will use its best judgment to determine a fair value for that portfolio instrument under procedures adopted by the Board of Trustees.
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. Dividends and distributions may differ between classes of shares of a portfolio.
Federal income taxation of separate accounts of insurance companies, variable annuity contracts and variable life insurance contracts is discussed in the prospectuses of participating insurance companies. Generally, distributions by the Fund will not be taxable to holders of variable annuity contracts or variable life insurance policies if the insurance company separate accounts to which those distributions are made meet certain requirements, including certain diversification requirements that the Fund has undertaken to meet, under the Internal Revenue Code. Participants in 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 from their plan accounts. Generally, distributions from plan accounts 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) OF A CLASS OF SHARES IS COMPUTED BY ADDING TOGETHER THE VALUE ALLOCABLE TO THE CLASS OF THE PORTFOLIO'S INVESTMENTS PLUS CASH AND OTHER ASSETS, SUBTRACTING THE APPLICABLE LIABILITIES AND THEN DIVIDING THE RESULT BY THE NUMBER OF OUTSTANDING SHARES OF THE CLASS.
CLASSES OF FUND SHARES
Each portfolio offers two classes of shares: Class O shares and Class S shares. Only Class O shares are offered in this prospectus. Both classes are offered only to separate accounts of insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies and to qualified pension and retirement plans. The classes differ only in that Class S shares are subject to a distribution and shareholder servicing fee, while Class O shares are not.
PURCHASING AND REDEEMING FUND SHARES
Because 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 Fund or its designated 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 seven days after it accepts a redemption request.
OTHER INFORMATION
The Fund may redeem some of your shares "in kind," which means that some of the proceeds will be paid with securities the applicable portfolio owns instead of cash.
Shares may be worth more or less when you redeem them than they were at the time you bought them.
The Board of Trustees has determined that the Fund may reject purchase orders, on a temporary or permanent basis, from investors that the Manager is able to determine, consistent with its compliance procedures and its reasonable business judgment, are exhibiting a pattern of frequent or short-term trading in Fund shares or shares of other funds sponsored by the Manager.
The Fund might not be able to detect frequent or short-term trading conducted by the underlying owners of shares held in omnibus accounts, and therefore might not be able to effectively prevent frequent or short-term trading in those accounts. There is no guarantee that the Fund's compliance procedures will be successful to identify investors who engage in excessive trading activity or to curtail that activity.
Each portfolio posts its month-end full portfolio with a 60-day lag, on its website, www.alger.com. The Fund reserves the right to change the policy for posting portfolio holdings on the website without further notice to shareholders. Following publication of portfolio holdings information on the Fund's website, it may be sent by the Fund to any party.
The Fund and Transfer Agent have reasonable procedures in place to determine that instructions submitted by telephone are genuine. They include requesting personal identification and recording calls. If the Fund and Transfer Agent follow these procedures, they are not liable for acting in good faith on telephone instructions.
[This page intentionally left blank]
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 portfolio share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in the portfolio (assuming reinvestment of all dividends and distributions). Information for the periods shown from the year ended December 31, 2002 through the year ended December 31, 2004 has been audited by Ernst & Young LLP, the Fund's independent registered public accounting firm, whose report, along with the Fund's financial statements, is included in the Annual Report, which is available upon request. Information for the periods prior thereto has been audited by Arthur Andersen LLP.
Note that the Financial Highlights do 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.
INCOME FROM INVESTMENT OPERATIONS LESS DIVIDENDS AND DISTRIBUTIONS
--------------------------------- ------------------------------
NET ASSET NET REALIZED DISTRIBUTIONS
VALUE AND UNREALIZED TOTAL FROM DIVIDENDS FROM FROM NET
BEGINNING NET INVESTMENT GAIN (LOSS) INVESTMENT NET INVESTMENT REALIZED
OF PERIOD INCOME (LOSS) ON INVESTMENTS OPERATIONS INCOME GAINS
----------- -------------- --------------- ------------ -------------- -----------
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
CLASS O
Year ended 12/31/04 ............. $18.40 $(0.11) $ 2.51 $ 2.40 $ -- $ --
Year ended 12/31/03 ............. 12.45 (0.05) 6.00 5.95 -- --
Year ended 12/31/02 ............. 17.67 (0.10) (5.12) (5.22) -- --
Year ended 12/31/01 ............. 30.62 (0.09)(i) (1.23) (1.32) -- (11.63)
Year ended 12/31/00 ............. 32.23 (0.03)(i) 2.79 2.76 -- (4.37)
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
CLASS O
Year ended 12/31/04 ............. $17.38 $(0.27) $ 3.15 $ 2.88 $ -- $ --
Year ended 12/31/03 ............. 12.21 (0.15) 5.32 5.17 -- --
Year ended 12/31/02 ............. 16.55 (0.11) (4.23) (4.34) -- --
Year ended 12/31/01 ............. 23.49 (0.03) (6.90) (6.93) (0.01) --
Year ended 12/31/00 ............. 55.15 0.01(i) (12.80) (12.79) -- (18.87)
ALGER AMERICAN GROWTH PORTFOLIO
CLASS O
YEAR ENDED 12/31/04 ............. $33.29 $ 0.07 $ 1.76 $ 1.83 $ -- $ --
Year ended 12/31/03 ............. 24.63 (0.02) 8.68 8.66 -- --
Year ended 12/31/02 ............. 36.77 (0.01) (12.12) (12.13) (0.01) --
Year ended 12/31/01 ............. 47.27 0.01 (4.88) (4.87) (0.10) (5.53)
Year ended 12/31/00 ............. 64.38 0.10 (8.75) (8.65) -- (8.46)
ALGER AMERICAN INCOME & GROWTH PORTFOLIO
CLASS O
Year ended 12/31/04 ............. $ 9.37 $ 0.10 $ 0.63 $ 0.73 $ (0.05) $ --
YEAR ENDED 12/31/03 ............. 7.24 0.05 2.11 2.16 (0.03) --
Year ended 12/31/02 ............. 10.57 0.02 (3.29) (3.27) (0.06) --
Year ended 12/31/01 ............. 13.26 0.05 (1.86) (1.81) (0.05) (0.83)
Year ended 12/31/00 ............. 17.58 0.05 (0.44) (0.39) (0.01) (3.92)
|
NET ASSET
TOTAL VALUE, END
DISTRIBUTIONS OF PERIOD TOTAL RETURN
------------ --------- ------------
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
CLASS O
Year ended 12/31/04 ............. $ -- $20.80 13.04%
Year ended 12/31/03 ............. -- 18.40 47.79
Year ended 12/31/02 ............. -- 12.45 (29.54)
Year ended 12/31/01 ............. (11.63) 17.67 (6.52)
Year ended 12/31/00 ............. (4.37) 30.62 9.18
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
CLASS O
Year ended 12/31/04 ............. $ -- $20.26 16.57%
Year ended 12/31/03 ............. -- 17.38 42.34
Year ended 12/31/02 ............. -- 12.21 (26.22)
Year ended 12/31/01 ............. (0.01) 16.55 (29.51)
Year ended 12/31/00 ............. (18.87) 23.49 (27.20)
ALGER AMERICAN GROWTH PORTFOLIO
CLASS O
YEAR ENDED 12/31/04 ............. $ -- $35.12 5.50%
Year ended 12/31/03 ............. -- 33.29 35.16
Year ended 12/31/02 ............. (0.01) 24.63 (32.99)
Year ended 12/31/01 ............. (5.63) 36.77 (11.81)
Year ended 12/31/00 ............. (8.46) 47.27 (14.77)
ALGER AMERICAN INCOME & GROWTH PORTFOLIO
CLASS O
Year ended 12/31/04 ............. $ (0.05) $10.05 7.85%
YEAR ENDED 12/31/03 ............. (0.03) 9.37 29.84
Year ended 12/31/02 ............. (0.06) 7.24 (31.10)
Year ended 12/31/01 ............. (0.88) 10.57 (14.32)
Year ended 12/31/00 ............. (3.93) 13.26 (1.27)
|
RATIOS/SUPPLEMENTAL DATA
-----------------------------------------------------
RATIO OF NET
NET ASSETS, RATIO OF EXPENSES INVESTMENT PORTFOLIO
END OF PERIOD TO AVERAGE INCOME (LOSS) TO TURNOVER
(000'S OMITTED) NET ASSETS AVERAGE NET ASSETS RATE
--------------- ----------------- ------------------ ---------
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
CLASS O
Year ended 12/31/04 ............. $ 482,868 0.92% (0.62)% 229.17%
Year ended 12/31/03 ............. 414,590 0.93 (0.70) 196.43
Year ended 12/31/02 ............. 240,063 0.93 (0.56) 323.83
Year ended 12/31/01 ............. 355,015 0.88 (0.45) 130.11
Year ended 12/31/00 ............. 332,734 0.84 (0.09) 130.85
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
CLASS O
Year ended 12/31/04 ............. $ 484,760 0.97% (0.72)% 135.33%
Year ended 12/31/03 ............. 496,076 0.97 (0.70) 146.69
Year ended 12/31/02 ............. 376,550 0.97 (0.69) 111.82
Year ended 12/31/01 ............. 517,364 0.92 (0.27) 181.80
Year ended 12/31/00 ............. 700,370 0.90 0.03 217.69
ALGER AMERICAN GROWTH PORTFOLIO
CLASS O
YEAR ENDED 12/31/04 ............. $1,028,652 0.86% 0.21% 194.25%
Year ended 12/31/03 ............. 1,115,959 0.85 (0.05) 167.53
Year ended 12/31/02 ............. 874,914 0.85 (0.01) 238.03
Year ended 12/31/01 ............. 1,540,327 0.81 0.03 87.79
Year ended 12/31/00 ............. 1,809,937 0.79 0.12 108.27
ALGER AMERICAN INCOME & GROWTH PORTFOLIO
CLASS O
Year ended 12/31/04 ............. $ 93,554 0.78% 0.97% 96.49%
YEAR ENDED 12/31/03 ............. 101,255 0.78 0.60 175.67
Year ended 12/31/02 ............. 85,066 0.79 0.25 276.12
Year ended 12/31/01 ............. 144,006 0.72 0.52 110.04
Year ended 12/31/00 ............. 150,783 0.70 0.43 142.43
|
FOR FUND INFORMATION:
By telephone: (800) 992-3863
By mail: Boston Financial Data Services, Inc.
Attn: The Alger American Fund
P.O. Box 8480
Boston, MA 02266-8480
|
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, at the Fund's website at http://www. alger.com 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 of the Fund, by calling the Fund's toll-free number, at the Fund's website at http://www. alger.com or by writing to the address above.
Another way you can review and copy Fund documents is by visiting the SEC's Public Reference Room in Washington, DC. Copies can also be obtained, for a duplicating fee, by E-mail request to publicinfo@sec.gov or by writing to the SEC's Public Reference Section, Washington, DC 20549-0102. Information on the operation of the Public Reference Room is available by calling (202) 942-8090. Fund documents are also available on the EDGAR database on the SEC's internet site at http://www.sec.gov.
QUARTERLY FUND HOLDINGS
The portfolios file their complete schedule of portfolio holdings with the SEC for the first and third quarter of each fiscal year on Form N-Q. Forms N-Q are available online on the Fund's website at http://www.alger.com or on the SEC's website at http://www.sec.gov. The Fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330. A copy of the most recent quarterly holdings may also be obtained from the Fund by calling (800) 992-3863.
DISTRIBUTOR: FRED ALGER & COMPANY, INCORPORATED
THE ALGER AMERICAN FUND
SEC FILE #811-5550
FRED ALGER & COMPANY, INCORPORATED PRIVACY POLICY
YOUR PRIVACY IS OUR PRIORITY
At Fred Alger & Company, Incorporated ("Alger") we value the confidence you have
placed in us. In trusting us with your assets, you provide us with personal and
financial data. Alger is committed to maintaining the confidentiality of the
personal nonpublic information ("personal information") entrusted to us by our
customers. Your privacy is very important to us, and we are dedicated to
safeguarding your personal information as we serve your financial needs.
OUR PRIVACY POLICY
We believe you should know about Alger's Privacy Policy and how we collect and
protect your personal information. This Privacy Policy ("Policy") describes our
practices and policy for collecting, sharing and protecting the personal
information of our prospective, current and former customers. The Policy is
applicable to Alger and its affiliates, Fred Alger Management, Inc., Alger
National Trust Company and Alger Shareholder Services, Inc. as well as the
following funds: The Alger Funds, The Alger Institutional Funds, The Alger
American Fund, The China-U.S. Growth Fund, Spectra Fund and Castle Convertible
Fund, Inc. We are proud of our Policy and hope you will take a moment to read
about it.
INFORMATION WE COLLECT
The type of personal information we collect and use varies depending on the
Alger products or services you select.
We collect personal information that enables us to serve your financial needs, develop and offer new products and services, and fulfill legal and regulatory requirements. Depending on the products or services you request, we obtain personal information about you from the following sources:
o Information, such as your name, address and social security number, provided on applications and other forms we receive from you or your representative;
o Information from your communications with Alger employees or from your representative, which may be provided to us by telephone, in writing or through Internet transactions; and
o Information about your transactions, such as the purchase and redemption of fund shares, account balances and parties to the transactions, which we receive from our affiliates or other third parties.
SHARING OF PERSONAL INFORMATION
We may share your personal information with our affiliates so that they may
process and service your transactions.
However, Alger never sells customer lists to any third party. Further, we do not disclose personal information to nonaffiliated third parties, except as required by law or as permitted by law to service your account, such as follows:
o To third-party service providers that assist us in servicing your accounts (e.g. securities clearinghouses);
o To governmental agencies and law enforcement officials (e.g. valid subpoenas, court orders); and
o To financial institutions that perform marketing services on our behalf or with whom we have joint marketing agreements that provide for the confidentiality of personal information.
OUR SECURITY PRACTICES
We protect your personal information by maintaining physical, electronic and
procedural safeguards. When you visit Alger's Internet sites your information is
protected by our systems that utilize 128-bit data encryption, Secure Socket
Layer (SSL) protocol, user names, passwords and other precautions. We have
implemented safeguards to ensure that access to customer information is limited
to employees, such as customer service representatives, who require such
information to carry out their job responsibilities. Our employees are aware of
their strict responsibility to respect the confidentiality of your personal
information.
Thank you for choosing to invest with Alger. We value your relationship with us and assure you we will abide by our policy to protect your information.
THIS POLICY STATEMENT IS NOT PART OF THE PROSPECTUS.
THE ALGER AMERICAN FUND
CLASS O SHARES
A POOLED FUNDING VEHICLE FOR:
o VARIABLE ANNUITY CONTRACTS
o VARIABLE LIFE INSURANCE POLICIES
o QUALIFIED PENSION PLANS
o QUALIFIED RETIREMENT PLANS
PROSPECTUS
MAY 1, 2005
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 any other government agency.
[graphic omitted]
THE ALGER
AMERICAN FUND
CLASS O SHARES
PROSPECTUS
MAY 1, 2005
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
2 ............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
6 ............Management and Organization
7 ............Shareholder Information
Distributor .......................7
Transfer Agent ....................7
Net Asset Value ...................7
Dividends and Distributions .......7
Classes of Fund Shares ............8
Purchasing and Redeeming
Fund Shares .....................8
Other Information .................8
10 ...........Financial Highlights
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Back Cover: How to obtain more information
[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.
Some portfolios must take into account a company's market capitalization when considering it for investment. 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 at least 80% of its net assets in the equity securities of companies that, at the time of purchase of the securities, have a total market capitalization within the range of the companies included in the Russell 2000 Growth Index or the S&P SmallCap 600 Index, updated quarterly. Both indexes are broad indexes of small capitalization stocks.
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
GOAL
The Alger American MidCap Growth Portfolio seeks long-term capital appreciation.
APPROACH
It focuses on midsized companies with promising growth potential. Under normal circumstances, the portfolio invests at least 80% of its net assets in the equity securities of companies that, at the time of purchase of the securities, have a market capitalization within the range of companies included in the Russell Midcap Growth Index or the S&P MidCap 400 Index, updated quarterly. Both indexes are designed to track the performance of medium capitalization stocks.
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 companies that 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 that 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.
[graphic omitted]
PRINCIPAL RISKS
RISKS APPLICABLE TO ALL EQUITY PORTFOLIOS
As with any fund that invests in stocks, your investment will fluctuate 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. 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 investments' values.
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 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 and thereby adversely affect portfolio performance.
There may be additional risks applicable to a specific portfolio because of its investment approach.
To the extent that a portfolio invests in securities other than those that are its primary focus, the principal risks associated with such other investments, described in the Fund's Prospectus and Statement of Addition Information, are pertinent.
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 product lines or 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 product lines or 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
LEVERAGED ALLCAP PORTFOLIO
Additional risks of investing in the portfolio are:
o smaller issuers in which the portfolio invests may have limited product lines or financial resources or lack management depth.
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 and the tables beneath them give you some indication of the risks of an investment in a portfolio by showing the changes in each portfolio's performance from year to year and by showing how the portfolio's average annual returns for the indicated periods compare with those of an appropriate benchmark index. They 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. Investors cannot invest directly in any index.
o Russell 1000 Growth Index: An index of common stocks designed to track performance of large capitalization companies with greater than average growth orientation.
o Russell 2000 Growth Index: An index of common stocks designed to track performance of small capitalization companies with greater than average growth orientation.
o Russell 3000 Growth Index: An index of common stocks designed to track performance of companies with greater than average growth orientation in general.
o Russell Midcap Growth Index: An index of common stocks designed to track performance of medium-capitalization companies with greater than average growth orientation.
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
[the data below represents a graph in the printed piece]
44.31 4.18 11.39 15.53 43.42 -27.20 -29.51 -26.22 42.34 16.57
95 96 97 98 99 00 01 02 03 04
Best Quarter: 31.06% Q4 1999 Worst Quarter: -26.52% Q1 2001
Average Annual Total Return as of December 31, 2004
Class O
Since
Inception
1 Year 5 Years 10 Years (9/21/88)
--------------------------------------------------------------------------------
American Small
Capitalization 16.57% -8.88% 5.71% 10.82%
Russell 2000
Growth Index 14.31% -3.58% 7.11% 8.10%
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ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
[the data below represents a graph in the printed piece]
44.45 11.90 15.01 30.30 31.85 9.18 -6.52 -29.54 47.79 13.04
95 96 97 98 99 00 01 02 03 04
Best Quarter: 27.07% Q4 1998 Worst Quarter: -18.60% Q3 2002
Average Annual Total Return as of December 31, 2004
Class O
Since
Inception
1 Year 5 Years 10 Years (5/3/93)
--------------------------------------------------------------------------------
American MidCap
Growth 13.04% 3.74% 14.39% 15.24%
Russell Midcap
Growth Index 15.48% -3.36% 11.23% 10.61%
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ALGER AMERICAN GROWTH PORTFOLIO
[the data below represents a graph in the printed piece]
36.37 13.35 25.75 48.07 33.74 -14.77 -11.81 -32.99 35.16 5.50
95 96 97 98 99 00 01 02 03 04
Best Quarter: 25.93% Q4 1998 Worst Quarter: -20.20% Q3 2002
Average Annual Total Return as of December 31, 2004
Class O
Since
Inception
1 Year 5 Years 10 Years (1/9/89)
--------------------------------------------------------------------------------
American Growth 5.50% -6.41% 10.70% 12.95%
Russell 1000
Growth Index 6.30% -9.29% 9.60% 10.89%
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ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
[the data below represents a graph in the printed piece]
12.04 19.68 57.83 78.06 -24.83 -15.93 -33.91 34.72 8.19
96 97 98 99 00 01 02 03 04
Best Quarter: 40.16% Q4 1999 Worst Quarter: -21.93% Q4 2000
Average Annual Total Return as of December 31, 2004
Class O
Since
Inception
1 Year 5 Years (1/25/95)
--------------------------------------------------------------------------------
American Leveraged
AllCap 8.19% -9.45% 14.97%
Russell 3000
Growth Index 6.93% -8.88% 9.20%
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The Fund also offers Class S shares. Class S and Class O shares differ only in that Class S shares are subject to a distribution and shareholder servicing fee, whereas Class O shares are not. Because of the distribution and shareholder servicing fee, returns will be lower for Class S shares.
[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 Class O shares of the portfolios. The numbers shown below are based on each portfolio's expenses during its fiscal year ended December 31, 2004.
ANNUAL FUND OPERATING
EXPENSES
(expenses that are deducted
SHAREHOLDER from Fund assets)
FEES
(fees paid TOTAL ANNUAL
directly from Management Distribution Other FUND OPERATING
your investment) Fees (12b-1) Fees Expenses EXPENSES
--------------------------------- -----------------------------------------------------
ALGER AMERICAN SMALL None .85% None .12% .97%
CAPITALIZATION
PORTFOLIO
----------------------------------------------------------------------------------------
ALGER AMERICAN None .80% None .12% .92%
MIDCAP GROWTH
PORTFOLIO
----------------------------------------------------------------------------------------
ALGER AMERICAN None .75% None .11% .86%
GROWTH
PORTFOLIO
----------------------------------------------------------------------------------------
ALGER AMERICAN None .85% None .12% .97%
LEVERAGED ALLCAP
PORTFOLIO
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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 Class O shares of 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 $99 $309 $536 $1,190
CAPITALIZATION
PORTFOLIO
--------------------------------------------------------------------------------
ALGER AMERICAN $94 $293 $509 $1,131
MIDCAP GROWTH
PORTFOLIO
--------------------------------------------------------------------------------
ALGER AMERICAN $88 $274 $477 $1,061
GROWTH
PORTFOLIO
--------------------------------------------------------------------------------
ALGER AMERICAN $99 $309 $536 $1,190
LEVERAGED ALLCAP
PORTFOLIO
--------------------------------------------------------------------------------
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The example above does not reflect charges and deductions which are, or may be, imposed under variable annuity contracts, variable life insurance policies, or pension or retirement plans. Such charges and deductions are described in the prospectus for the contract or policy accompanying this prospectus or in the plan documents.
ADDITIONAL INFORMATION ABOUT
THE FUND'S INVESTMENTS
Other securities the portfolios may invest in are discussed in the Fund's Statement of Additional Information (see back cover of this prospectus).
In times of adverse or unstable market or economic conditions, each portfolio may invest up to 100% of its assets in cash, high-grade bonds, or cash equivalents (such as commercial paper or paper market instruments) for temporary defensive reasons. 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. A portfolio may also hold these types of securities pending the investment of proceeds from the sale of portfolio securities or to meet anticipated redemptions of portfolio shares. The portfolio may not achieve its objective while in a temporary defensive or interim position.
[graphic omitted]
MANAGEMENT AND ORGANIZATION
MANAGER
Fred Alger Management, Inc.
111 Fifth Avenue
New York, NY 10003
The Manager has been an investment adviser since 1964, and manages investments totaling (at 12/31/04) $8.2 billion in mutual fund assets as well as $1.5 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
Fred M. Alger III is the chief market strategist for the portfolios, overseeing the investments of each portfolio since September 2001. Mr. Alger, who founded Fred Alger Management, Inc., has served as Chairman of the Board since 1964, and co-managed the portfolios prior to 1995. Dan C. Chung, CFA, Jill Greenwald, CFA, Patrick Kelly, CFA, Teresa McRoberts and Andrew Silverberg are the individuals responsible for the day-to-day management of portfolio investments.
o Mr. Chung, manager of the MidCap Growth Portfolio since September 2001, manager of the Growth Portfolio since September 2004, and co-manager of the Growth Portfolio from September 2001 to September 2004, has been employed by the Manager since 1994 as a Vice President and analyst from 1996 to 1999, as a Senior Vice President and senior analyst until 2000, as an Executive Vice President until 2003, as portfolio manager since 2000, as Chief Investment Officer since September 2001 and as President since 2003.
o Ms. Greenwald, manager of the Small Capitalization Portfolio since November 2001, has been employed by the Manager as a Senior Vice President and portfolio manager since November 2001, prior to which she was employed by the Manager as an analyst and later a senior analyst from 1986 to 1992, as a Managing Director and senior portfolio manager at Chase Manhattan Bank from 1994 through 1999 and as a Senior Vice President and Investment Officer at J&W Seligman & Co. from 1999 until November 2001.
o Mr. Kelly, co-manager of the Leveraged AllCap Portfolio since September 2004, has been employed by the Manager as a research associate from July 1999 to February 2001, as an Assistant Vice President and associate analyst from February 2001 to September 2001, as a Vice President and analyst from September 2001 to September 2004, and as a Senior Vice President and portfolio manager since September 2004.
o Ms. McRoberts, co-manager of the Leveraged AllCap Portfolio since September 2004, has been employed by the Manager as a Senior Vice President and portfolio manager since October 2001, prior to which she was a portfolio manager and partner at Maximus Capital from April 2001 until October 2001, a Vice President and portfolio manager at Morgan Stanley Dean Witter from June 1998 to March 2001 and a principal of that firm from December 2000 to March 2001. Ms. McRoberts had previously been employed by the Manager as a Vice President and senior analyst from July 1994 until May 1998.
o Mr. Silverberg, assistant portfolio manager of the MidCap Growth Portfolio since September 2003, has been employed by the Manager as a Vice President and senior analyst since September 2004, as an analyst from October 2001 to December 2004, and as an Assistant Vice President and analyst from September 2002 to December 2004, prior to which period he was a research analyst at Mark Asset Management Corporation from June 1999 until September 2001 and a research intern at MBF Capital Corporation from December 1998 until June 1999.
LEGAL PROCEEDINGS
Alger Management has been responding to inquiries, document requests and/or subpoenas from regulatory authorities, including the United States Securities and Exchange Commission ("SEC"), the Office of the New York State Attorney General, and the Attorney General of New Jersey, in connection with their investigation of practices in the mutual fund industry identified as "market timing" and "late trading." Alger Management has assured the Board of the Fund that if it be determined that improper trading practices in the Fund detrimentally affected its performance, Alger Management will make appropriate restitution.
Certain civil actions have developed out of the regulatory investigations. Several purported class actions and shareholder derivative suits have been filed against various parties; including, depending on the lawsuit, Alger Management, certain of the mutual funds managed by Alger Management (the "Alger Mutual Funds"), and certain current and former Alger Mutual Fund trustees and officers, alleging wrongful market-timing and late-trading activities. These cases have been transferred to the U.S. District Court of Maryland by the Judicial Panel on Multidistrict Litigation for consolidated pre-trial proceedings. On September 29, 2004, consolidated amended complaints involving these cases - a Consolidated Amended Fund Derivative Complaint (the "Derivative Complaint") and two substantially identical Consolidated Amended Class Action Complaints (together, the "Class
Action Complaint") - were filed in the Maryland federal district court under the caption number 1:04-MD-15863 (JFM).
The Derivative Complaint, brought on behalf of the Alger Mutual Funds and Castle
Convertible Fund, Inc., a registered closed-end fund managed by Alger
Management, alleges (i) violations, by Alger Management and, depending on the
specific offense alleged, by its immediate parent the Distributor (Fred Alger &
Company, Incorporated) and/or the fund trustee defendants, of Sections 36(a),
36(b), 47, and 48 of the Investment Company Act of 1940 and of Sections 206 and
215 of the Investment Advisers Act of 1940, breach of fiduciary duty, and breach
of contract, (ii) various offenses by other, unrelated, third-party defendants,
and (iii) unjust enrichment by all the named defendants, all by virtue of the
alleged wrongful market-timing and late-trading activities. The complaint seeks,
among other things, removal of the trustee defendants and of Alger Management,
certain rescissory relief, disgorgement of management fees and allegedly
unlawful profits, compensatory and punitive monetary damages, and plaintiffs'
fees and expenses (including attorney and expert fees). The Class Action
Complaint names the Alger-related defendants named in the Derivative Complaint
as well as certain defendants not named in the Derivative Complaint, including
certain entities affiliated with Alger Management, certain Alger Mutual Funds,
including the Fund, and certain additional former trustees and a former officer
of the defendant Alger Mutual Funds. It alleges, on the basis of factual
allegations similar to those of the Derivative Complaint with respect to the
Alger defendants, (i) offenses by the Alger defendants similar to those alleged
in the Derivative Complaint, (ii) violations, by Alger Management, the
Distributor, their affiliates, the funds named as defendants, and the current
and former fund trustees and officers, of Sections 11, 12(a)(2) and 15 of the
Securities Act of 1933, Sections 10(b) (and Rule 10b-5 thereunder) and 20(a) of
the Securities Exchange Act of 1934, and Section 34(b) of the Investment Company
Act of 1940, (iii) breach of contract by the funds named as defendants, and (iv)
unjust enrichment by all of the named defendants. It seeks relief similar to
that sought in the Derivative Complaint.
Alger Management does not believe that the foregoing lawsuits will materially affect its ability to perform its management contracts with any of the funds that it manages, and the management of the Fund believes that the Fund will not be materially adversely affected by the pending lawsuits.
[graphic omitted]
SHAREHOLDER INFORMATION
DISTRIBUTOR
Fred Alger & Company, Incorporated
30 Montgomery Street
Jersey City, NJ 07302
TRANSFER AGENT
State Street Bank and Trust Company
c/o Boston Financial Data Services, Inc.
Attn: The Alger American Fund
P.O. Box 8480
Boston, MA 02266-8480
NET ASSET VALUE
The value 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 reliable or 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.
In determining whether market quotations are reliable and readily available, the Manager monitors information it routinely receives for significant events it believes will affect market prices of portfolio instruments held by the Fund. Significant events may affect a particular company (for example, a trading halt in the company's securities on an exchange during the day) or may affect securities markets (for example, a natural disaster such as an earthquake causes a market to close early). If the Manager is aware of a significant event that has occurred after the close of the market where a portfolio instrument is primarily traded, but before the close of the New York Stock Exchange, and the Manager believes that such event has affected or is likely to affect the price of the instrument, the Manager will use its best judgment to determine a fair value for that portfolio instrument under procedures adopted by the Board of Trustees.
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. Dividends and distributions may differ between classes of shares of a portfolio.
Federal income taxation of separate accounts of insurance companies, variable annuity contracts and variable life insurance contracts is discussed in the prospectuses of participating insurance companies. Generally, distributions by the Fund will not be taxable to holders of variable annuity contracts or variable life insurance policies if the insurance company separate accounts to which those distributions are made meet certain requirements, including certain diversification requirements that the Fund has undertaken to meet, under the Internal Revenue Code. Participants in 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 from their plan accounts. Generally, distributions from plan accounts 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.
CLASSES OF FUND SHARES
Each portfolio offers two classes of shares: Class O shares and Class S shares. Only Class O shares are offered in this prospectus. Both classes are offered only to separate accounts of insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies and to qualified pension and retirement plans. The classes differ only in that Class S shares are subject to a distribution and shareholder servicing fee, while Class O shares are not.
PURCHASING AND REDEEMING FUND SHARES
Because 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 Fund or its designated 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 seven days after it accepts a redemption request.
OTHER INFORMATION
The Fund may redeem some of your shares "in kind," which means that some of the proceeds will be paid with securities the applicable portfolio owns instead of cash.
Shares may be worth more or less when you redeem them than they were at the time you bought them.
The Board of Trustees has determined that the Fund may reject purchase orders, on a temporary or permanent basis, from investors that the Manager is able to determine, consistent with its compliance procedures and its reasonable business judgment, are exhibiting a pattern of frequent or short-term trading in Fund shares or shares of other funds sponsored by the Manager.
The Fund might not be able to detect frequent or short-term trading conducted by the underlying owners of shares held in omnibus accounts, and therefore might not be able to effectively prevent frequent or short-term trading in those accounts. There is no guarantee that the Fund's compliance procedures will be successful to identify investors who engage in excessive trading activity or to curtail that activity.
Each portfolio posts its month-end full portfolio with a 60-day lag, on its website, www.alger.com. The Fund reserves the right to change the policy for posting portfolio holdings on the website without further notice to shareholders. Following publication of portfolio holdings information on the Fund's website, it may be sent by the Fund to any party.
The Fund and Transfer Agent have reasonable procedures in place to determine that instructions submitted by telephone are genuine. They include requesting personal identification and recording calls. If the Fund and Transfer Agent follow these procedures, they are not liable for acting in good faith on telephone instructions.
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[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 portfolio share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in the portfolio (assuming reinvestment of all dividends and distributions). Information for the periods shown from the year ended December 31, 2002 through the year ended December 31, 2004 has been audited by Ernst & Young LLP, the Fund's independent registered public accounting firm, whose report, along with the Fund's financial statements, is included in the Annual Report, which is available upon request. Information for the periods prior thereto has been audited by Arthur Andersen LLP.
Note that the Financial Highlights do 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.
INCOME FROM INVESTMENT OPERATIONS LESS DIVIDENDS AND DISTRIBUTIONS
--------------------------------- ------------------------------
NET ASSET NET REALIZED DISTRIBUTIONS
VALUE AND UNREALIZED TOTAL FROM DIVIDENDS FROM FROM NET
BEGINNING NET INVESTMENT GAIN (LOSS) INVESTMENT NET INVESTMENT REALIZED
OF PERIOD INCOME (LOSS) ON INVESTMENTS OPERATIONS INCOME GAINS
----------- -------------- --------------- ------------ -------------- -----------
ALGER AMERICAN MIDCAP
GROWTH PORTFOLIO
CLASS O
Year ended 12/31/04 ........ $18.40 $(0.11) $ 2.51 $ 2.40 $ -- $ --
Year ended 12/31/03 ........ 12.45 (0.05) 6.00 5.95 -- --
Year ended 12/31/02 ........ 17.67 (0.10) (5.12) (5.22) -- --
Year ended 12/31/01 ........ 30.62 (0.09)(i) (1.23) (1.32) -- (11.63)
Year ended 12/31/00 ........ 32.23 (0.03)(i) 2.79 2.76 -- (4.37)
ALGER AMERICAN SMALL
CAPITALIZATION PORTFOLIO
CLASS O
Year ended 12/31/04 ........ $17.38 $(0.27) $ 3.15 $ 2.88 $ -- $ --
Year ended 12/31/03 ........ 12.21 (0.15) 5.32 5.17 -- --
Year ended 12/31/02 ........ 16.55 (0.11) (4.23) (4.34) -- --
Year ended 12/31/01 ........ 23.49 (0.03) (6.90) (6.93) (0.01) --
Year ended 12/31/00 ........ 55.15 0.01(i) (12.80) (12.79) -- (18.87)
ALGER AMERICAN GROWTH PORTFOLIO
CLASS O
Year ended 12/31/04 ........ $33.29 $ 0.07 $ 1.76 $ 1.83 $ -- $ --
Year ended 12/31/03 ........ 24.63 (0.02) 8.68 8.66 -- --
Year ended 12/31/02 ........ 36.77 (0.01) (12.12) (12.13) (0.01) --
Year ended 12/31/01 ........ 47.27 0.01 (4.88) (4.87) (0.10) (5.53)
Year ended 12/31/00 ........ 64.38 0.10 (8.75) (8.65) -- (8.46)
ALGER AMERICAN LEVERAGED
ALLCAP PORTFOLIO
CLASS O
Year ended 12/31/04 ........ $28.09 $(0.07) $ 2.37 $ 2.30 $ -- $ --
Year ended 12/31/03 ........ 20.85 (0.07) 7.31 7.24 -- --
Year ended 12/31/02 ........ 31.55 (0.14) (10.56) (10.70) -- --
Year ended 12/31/01 ........ 38.80 0.00(i) (6.06) (6.06) -- (1.19)
Year ended 12/31/00 ........ 57.97 (0.02)(i) (13.77) (13.79) -- (5.38)
--------------------------------------------------------------------------------
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(i) Amount was computed based on average shares outstanding during the year.
RATIOS/SUPPLEMENTAL DATA
---------------------------------------------
RATIO OF RATIO OF NET
NET ASSET NET ASSETS, EXPENSES INVESTMENT PORTFOLIO
TOTAL VALUE, END END OF PERIOD TO AVERAGE INCOME (LOSS) TO TURNOVER
DISTRIBUTIONS OF PERIOD TOTAL RETURN (000'S OMITTED) NET ASSETS AVERAGE NET ASSETS RATE
------------ --------- ------------ --------------- ------------- ------------------- -------
ALGER AMERICAN MIDCAP
GROWTH PORTFOLIO
CLASS O
Year ended 12/31/04 ......... $ -- $20.80 13.04% $ 482,868 0.92% (0.62)% 229.17%
Year ended 12/31/03 ......... -- 18.40 47.79 414,590 0.93 (0.70) 196.43
Year ended 12/31/02 ......... -- 12.45 (29.54) 240,063 0.93 (0.56) 323.83
Year ended 12/31/01 ......... (11.63) 17.67 (6.52) 355,015 0.88 (0.45) 130.11
Year ended 12/31/00 ......... (4.37) 30.62 9.18 332,734 0.84 (0.09) 130.85
ALGER AMERICAN SMALL
CAPITALIZATION PORTFOLIO
CLASS O
Year ended 12/31/04 ......... $ -- $20.26 16.57% $ 484,760 0.97% (0.72)% 135.33%
Year ended 12/31/03 ......... -- 17.38 42.34 496,076 0.97 (0.70) 146.69
Year ended 12/31/02 ......... -- 12.21 (26.22) 376,550 0.97 (0.69) 111.82
Year ended 12/31/01 ......... (0.01) 16.55 (29.51) 517,364 0.92 (0.27) 181.80
Year ended 12/31/00 ......... (18.87) 23.49 (27.20) 700,370 0.90 0.03 217.69
ALGER AMERICAN GROWTH PORTFOLIO
CLASS O
Year ended 12/31/04 ......... $ -- $35.12 5.50% $1,028,652 0.86% 0.21% 194.25%
Year ended 12/31/03 ......... -- 33.29 35.16 1,115,959 0.85 (0.05) 167.53
Year ended 12/31/02 ......... (0.01) 24.63 (32.99) 874,914 0.85 (0.01) 238.03
Year ended 12/31/01 ......... (5.63) 36.77 (11.81) 1,540,327 0.81 0.03 87.79
Year ended 12/31/00 ......... (8.46) 47.27 (14.77) 1,809,937 0.79 0.12 108.27
ALGER AMERICAN LEVERAGED
ALLCAP PORTFOLIO
CLASS O
Year ended 12/31/04 ......... $ -- $30.39 8.19% $ 380,336 0.97% (0.14)% 182.41%
Year ended 12/31/03 ......... -- 28.09 34.72 382,289 0.97 (0.36) 161.71
Year ended 12/31/02 ......... -- 20.85 (33.91) 271,373 0.96 (0.49) 203.05
Year ended 12/31/01 ......... (1.19) 31.55 (15.93) 443,209 0.92 0.00 103.03
Year ended 12/31/00 ......... (5.38) 38.80 (24.83) 476,517 0.90 (0.03) 132.28
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FOR FUND INFORMATION:
By telephone: (800) 992-3863
By mail: Boston Financial Data Services, Inc.
Attn: The Alger American Fund
P.O. Box 8480
Boston, MA 02266-8480
|
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, at the Fund's website at http://www. alger.com 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 of the Fund, by calling the Fund's toll-free number, at the Fund's website at http://www. alger.com or by writing to the address above.
Another way you can review and copy Fund documents is by visiting the SEC's Public Reference Room in Washington, DC. Copies can also be obtained, for a duplicating fee, by E-mail request to publicinfo@sec.gov or by writing to the SEC's Public Reference Section, Washington, DC 20549-0102. Information on the operation of the Public Reference Room is available by calling (202) 942-8090. Fund documents are also available on the EDGAR database on the SEC's internet site at http://www.sec.gov.
QUARTERLY FUND HOLDINGS
The portfolios file their complete schedule of portfolio holdings with the SEC for the first and third quarter of each fiscal year on Form N-Q. Forms N-Q are available online on the Fund's website at http://www.alger.com or on the SEC's website at http://www.sec.gov. The Fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330. A copy of the most recent quarterly holdings may also be obtained from the Fund by calling (800) 992-3863.
DISTRIBUTOR: FRED ALGER & COMPANY, INCORPORATED
THE ALGER AMERICAN FUND
SEC FILE #811-5550
FRED ALGER & COMPANY, INCORPORATED PRIVACY POLICY
YOUR PRIVACY IS OUR PRIORITY
At Fred Alger & Company, Incorporated ("Alger") we value the confidence you have
placed in us. In trusting us with your assets, you provide us with personal and
financial data. Alger is committed to maintaining the confidentiality of the
personal nonpublic information ("personal information") entrusted to us by our
customers. Your privacy is very important to us, and we are dedicated to
safeguarding your personal information as we serve your financial needs.
OUR PRIVACY POLICY
We believe you should know about Alger's Privacy Policy and how we collect and
protect your personal information. This Privacy Policy ("Policy") describes our
practices and policy for collecting, sharing and protecting the personal
information of our prospective, current and former customers. The Policy is
applicable to Alger and its affiliates, Fred Alger Management, Inc., Alger
National Trust Company and Alger Shareholder Services, Inc. as well as the
following funds: The Alger Funds, The Alger Institutional Funds, The Alger
American Fund, The China-U.S. Growth Fund, Spectra Fund and Castle Convertible
Fund, Inc. We are proud of our Policy and hope you will take a moment to read
about it.
INFORMATION WE COLLECT
The type of personal information we collect and use varies depending on the
Alger products or services you select.
We collect personal information that enables us to serve your financial needs, develop and offer new products and services, and fulfill legal and regulatory requirements. Depending on the products or services you request, we obtain personal information about you from the following sources:
o Information, such as your name, address and social security number, provided on applications and other forms we receive from you or your representative;
o Information from your communications with Alger employees or from your representative, which may be provided to us by telephone, in writing or through Internet transactions; and
o Information about your transactions, such as the purchase and redemption of fund shares, account balances and parties to the transactions, which we receive from our affiliates or other third parties.
SHARING OF PERSONAL INFORMATION
We may share your personal information with our affiliates so that they may
process and service your transactions.
However, Alger never sells customer lists to any third party. Further, we do not disclose personal information to nonaffiliated third parties, except as required by law or as permitted by law to service your account, such as follows:
o To third-party service providers that assist us in servicing your accounts (e.g. securities clearinghouses);
o To governmental agencies and law enforcement officials (e.g. valid subpoenas, court orders); and
o To financial institutions that perform marketing services on our behalf or with whom we have joint marketing agreements that provide for the confidentiality of personal information.
OUR SECURITY PRACTICES
We protect your personal information by maintaining physical, electronic and
procedural safeguards. When you visit Alger's Internet sites your information is
protected by our systems that utilize 128-bit data encryption, Secure Socket
Layer (SSL) protocol, user names, passwords and other precautions. We have
implemented safeguards to ensure that access to customer information is limited
to employees, such as customer service representatives, who require such
information to carry out their job responsibilities. Our employees are aware of
their strict responsibility to respect the confidentiality of your personal
information.
Thank you for choosing to invest with Alger. We value your relationship with us and assure you we will abide by our policy to protect your information.
THIS POLICY STATEMENT IS NOT PART OF THE PROSPECTUS.
THE ALGER AMERICAN FUND
CLASS O SHARES
A POOLED FUNDING VEHICLE FOR:
o VARIABLE ANNUITY CONTRACTS
o VARIABLE LIFE INSURANCE POLICIES
o QUALIFIED PENSION PLANS
o QUALIFIED RETIREMENT PLANS
PROSPECTUS
MAY 1, 2005
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.
[LOGO OMITTED]
THE ALGER
AMERICAN FUND
CLASS O SHARES
PROSPECTUS
MAY 1, 2005
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
2 ............ Principal Risks
Alger American Small
Capitalization Portfolio ......................3
Alger American MidCap
Growth Portfolio ..............................3
Alger American Growth Portfolio .................3
3 ............Performance
Alger American Small
Capitalization Portfolio ......................3
Alger American MidCap
Growth Portfolio ..............................3
Alger American Growth Portfolio .................4
4 ............Fees and Expenses
5 ............Management and Organization
6 ............Shareholder Information
Distributor .....................................6
Transfer Agent ..................................6
Net Asset Value .................................6
Dividends and Distributions .....................7
Classes of Fund Shares ..........................7
Purchasing and Redeeming
Fund Shares ...................................7
Other Information ...............................7
8 ............Financial Highlights
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Back Cover: How to obtain more information
[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.
Some portfolios must take into account a company's market capitalization when considering it for investment. 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 at least 80% of its net assets in the equity securities of companies that, at the time of purchase of the securities, have a total market capitalization within the range of the companies included in the Russell 2000 Growth Index or the S&P SmallCap 600 Index, updated quarterly. Both indexes are broad indexes of small capitalization stocks.
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
GOAL
The Alger American MidCap Growth Portfolio seeks long-term capital appreciation.
APPROACH
It focuses on midsized companies with promising growth potential. Under normal circumstances, the portfolio invests at least 80% of its net assets in the equity securities of companies that, at the time of purchase of the securities, have a market capitalization within the range of companies included in the Russell Midcap Growth Index or the S&P MidCap 400 Index, updated quarterly. Both indexes are designed to track the performance of medium capitalization stocks.
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 companies that have a market capitalization of $1 billion or greater.
[GRAPHIC OMITTED]
PRINCIPAL RISKS
RISKS APPLICABLE TO ALL EQUITY PORTFOLIOS
As with any fund that invests in stocks, your investment will fluctuate 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. 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 investments' values.
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 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 and thereby adversely affect portfolio performance.
There may be additional risks applicable to a specific portfolio because of its investment approach.
To the extent that a portfolio invests in securities other than those that are its primary focus, the principal risks associated with such other investments, described in the Fund's Prospectus and Statement of Addition Information, are pertinent.
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 product lines or 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 product lines or 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."
[GRAPHIC OMITTED]
PERFORMANCE
The following bar charts and the tables beneath them give you some indication of the risks of an investment in a portfolio by showing the changes in each portfolio's performance from year to year and by showing how the portfolio's average annual returns for the indicated periods compare with those of an appropriate benchmark index. They 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. Investors cannot invest directly in any index.
o Russell 1000 Growth Index: An index of common stocks designed to track performance of large capitalization companies with greater than average growth orientation.
o Russell 2000 Growth Index: An index of common stocks designed to track performance of small capitalization companies with greater than average growth orientation.
o Russell Midcap Growth Index: An index of common stocks designed to track performance of medium capitalization companies with greater than average growth orientation.
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
Annual Total Return as of December 31 each year (%) Class O
[THE DATA BELOW REPRESENTS A GRAPH IN THE PRINTED PIECE]
44.31 4.18 11.39 15.53 43.42 -27.2 -29.51 -26.22 42.34 16.57
95 96 97 98 99 00 01 02 03 04
Best Quarter: 31.06% Q4 1999 Worst Quarter: -26.52% Q1 2001
Average Annual Total Return as of December 31, 2004
Class O Since
Inception
1 Year 5 Years 10 Years (9/21/88)
--------------------------------------------------------------------------------
American Small
Capitalization 16.57% -8.88% 5.71% 10.82%
Russell 2000
Growth Index 14.31% -3.58% 7.11% 8.10%
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ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
Annual Total Return as of December 31 each year (%) Class O
[THE DATA BELOW REPRESENTS A GRAPH IN THE PRINTED PIECE]
44.45 11.90 15.01 30.30 31.85 9.18 -6.52 -29.54 47.79 13.04
95 96 97 98 99 00 01 02 03 04
Best Quarter: 27.07% Q4 1998 Worst Quarter: -18.60% Q3 2002 Average Annual Total Return as of December 31, 2004
Class O
Since
Inception
1 Year 5 Years 10 Years (5/3/93)
--------------------------------------------------------------------------------
American MidCap
Growth 13.04% 3.74% 14.39% 15.24%
Russell Midcap
Growth Index 15.48% -3.36% 11.23% 10.61%
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ALGER AMERICAN GROWTH PORTFOLIO
Annual Total Return as of December 31 each year (%) Class O
[THE DATA BELOW REPRESENTS A GRAPH IN THE PRINTED PIECE]
36.37 13.35 25.75 48.07 33.74 -14.77 -11.81 -32.99 35.16 5.5
95 96 97 98 99 00 01 02 03 04
Best Quarter: 25.93% Q4 1998 Worst Quarter: -20.20% Q3 2002
Average Annual Total Return as of December 31, 2004
Class O
Since
Inception
1 Year 5 Years 10 Years (1/9/89)
--------------------------------------------------------------------------------
American Growth 5.50% -6.41% 10.70% 12.95%
Russell 1000
Growth Index 6.30% -9.29% 9.60% 10.89%
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The Fund also offers Class S shares. Class S and Class O shares differ only in that Class S shares are subject to a distribution and shareholder servicing fee, whereas Class O shares are not. Because of the distribution and shareholder servicing fee, returns will be lower for Class S shares.
[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 Class O shares of the portfolios. The numbers shown below are
based on each portfolio's expenses during its fiscal year ended December 31,
2004.
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted
from Fund assets)
SHAREHOLDER FEES TOTAL ANNUAL
(fees paid directly from Management Distribution Other FUND OPERATING
your investment) Fees (12b-1) Fees Expenses EXPENSES
------------------------------------------------------------------------------------------------------------------------------------
ALGER AMERICAN SMALL None .85% None .12% .97%
CAPITALIZATION
PORTFOLIO
ALGER AMERICAN None .80% None .12% .92%
MIDCAP GROWTH
PORTFOLIO
ALGER AMERICAN None .75% None .11% .86%
GROWTH
PORTFOLIO
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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 Class O shares of 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 $ 99 $ 309 $ 536 $1,190
CAPITALIZATION
PORTFOLIO
ALGER AMERICAN $ 94 $ 293 $ 509 $1,131
MIDCAP GROWTH
PORTFOLIO
ALGER AMERICAN $ 88 $ 274 $ 477 $1,061
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
Other securities the portfolios may invest in are discussed in the Fund's Statement of Additional Information (see back cover of this prospectus).
In times of adverse or unstable market or economic conditions, each portfolio may invest up to 100% of its assets in cash, high-grade bonds, or cash equivalents (such as commercial paper or paper market instruments) for temporary defensive reasons. 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. A portfolio may also hold these types of securities pending the investment of proceeds from the sale of portfolio securities or to meet anticipated redemptions of portfolio shares. The portfolio may not achieve its objective while in a temporary defensive or interim position.
[GRAPHIC OMITTED]
MANAGEMENT AND ORGANIZATION
MANAGER
Fred Alger Management, Inc.
111 Fifth Avenue
New York, NY 10003
The Manager has been an investment adviser since 1964, and manages investments totaling (at 12/31/04) $8.2 billion in mutual fund assets as well as $1.5 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
Fred M. Alger III is the chief market strategist for the portfolios, overseeing the investments of each portfolio since September 2001. Mr. Alger, who founded Fred Alger Management, Inc., has served as Chairman of the Board since 1964, and co-managed the portfolios prior to 1995. Dan C. Chung, CFA, Jill Greenwald, CFA, and Andrew Silverberg are the individuals responsible for the day-to-day management of portfolio investments.
o Mr. Chung, manager of the MidCap Growth Portfolio since September 2001, manager of the Growth Portfolio since September 2004, and co-manager of the Growth Portfolio from September 2001 to September 2004, has been employed by the Manager since 1994 as a Vice President and analyst from 1996 to 1999, as a Senior Vice President and senior analyst until 2000, as an Executive Vice President until 2003, as portfolio manager since 2000, as Chief Investment Officer since September 2001 and as President since 2003.
o Ms. Greenwald, manager of the Small Capitalization Portfolio since November 2001, has been employed by the Manager as a Senior Vice President and portfolio manager since November 2001, prior to which she was employed by the Manager as an analyst and later a senior analyst from 1986 to 1992, as a Managing Director and senior portfolio manager at Chase Manhattan Bank from 1994 through 1999 and as a Senior Vice President and Investment Officer at J&W Seligman & Co. from 1999 until November 2001.
o Mr. Silverberg, assistant portfolio manager of the MidCap Growth Portfolio since September 2003, has been employed by the Manager as a Vice President and senior analyst since September 2004, as an analyst from October 2001 to
December 2004, and as an Assistant Vice President and analyst from September 2002 to December 2004, prior to which period he was a research analyst at Mark Asset Management Corporation from June 1999 until September 2001 and a research intern at MBF Capital Corporation from December 1998 until June 1999.
LEGAL PROCEEDINGS
Alger Management has been responding to inquiries, document requests and/or subpoenas from regulatory authorities, including the United States Securities and Exchange Commission ("SEC"), the Office of the New York State Attorney General, and the Attorney General of New Jersey, in connection with their investigation of practices in the mutual fund industry identified as "market timing" and "late trading." Alger Management has assured the Board of the Fund that if it be determined that improper trading practices in the Fund detrimentally affected its performance, Alger Management will make appropriate restitution.
Certain civil actions have developed out of the regulatory investigations. Several purported class actions and shareholder derivative suits have been filed against various parties; including, depending on the lawsuit, Alger Management, certain of the mutual funds managed by Alger Management (the "Alger Mutual Funds"), and certain current and former Alger Mutual Fund trustees and officers, alleging wrongful market-timing and late-trading activities. These cases have been transferred to the U.S. District Court of Maryland by the Judicial Panel on Multidistrict Litigation for consolidated pre-trial proceedings. On September 29, 2004, consolidated amended complaints involving these cases--a Consolidated Amended Fund Derivative Complaint (the "Derivative Complaint") and two substantially identical Consolidated Amended Class Action Complaints (together, the "Class Action Complaint")--were filed in the Maryland federal district court under the caption number 1:04-MD-15863 (JFM).
The Derivative Complaint, brought on behalf of the Alger Mutual Funds and Castle
Convertible Fund, Inc., a registered closed-end fund managed by Alger
Management, alleges (i) violations, by Alger Management and, depending on the
specific offense alleged, by its immediate parent the Distributor (Fred Alger &
Company, Incorporated) and/or the fund trustee defendants, of Sections 36(a),
36(b), 47, and 48 of the Investment Company Act of 1940 and of Sections 206 and
215 of the Investment Advisers Act of 1940, breach of fiduciary duty, and breach
of contract, (ii) various offenses by other, unrelated, third-party defendants,
and (iii) unjust enrichment by all the named defendants, all by virtue of the
alleged wrongful market-timing and late-trading activities. The complaint seeks,
among other things, removal of the trustee defendants and of Alger Management,
certain rescissory relief, disgorgement of management fees and allegedly
unlawful profits, compensatory and punitive monetary damages, and plaintiffs'
fees and expenses (including attorney and expert fees). The Class Action
Complaint names the Alger-related defendants named in the Derivative Complaint
as well as certain defendants not named in the Derivative Complaint, including
certain entities affiliated with Alger Management, certain Alger Mutual Funds,
including the Fund, and certain additional former trustees and a former officer
of the defendant Alger Mutual Funds. It alleges, on the basis of factual
allegations similar to those of the Derivative Complaint with respect to the
Alger defendants, (i) offenses by the Alger defendants similar to those alleged
in the Derivative Complaint, (ii) violations, by Alger Management, the
Distributor, their affiliates, the funds named as defendants, and the current
and former fund trustees and officers, of Sections 11, 12(a)(2) and 15 of the
Securities Act of 1933, Sections 10(b) (and Rule 10b-5 thereunder) and 20(a) of
the Securities Exchange Act of 1934, and Section 34(b) of the Investment Company
Act of 1940, (iii) breach of contract by the funds named as defendants, and (iv)
unjust enrichment by all of the named defendants. It seeks relief similar to
that sought in the Derivative Complaint.
Alger Management does not believe that the foregoing lawsuits will materially affect its ability to perform its management contracts with any of the funds that it manages, and the management of the Fund believes that the Fund will not be materially adversely affected by the pending lawsuits.
[GRAPHIC OMITTED]
SHAREHOLDER INFORMATION
DISTRIBUTOR
Fred Alger & Company, Incorporated
30 Montgomery Street
Jersey City, NJ 07302
TRANSFER AGENT
State Street Bank and Trust Company
c/o Boston Financial Data Services, Inc.
Attn: The Alger American Fund
P.O. Box 8480
Boston, MA 02266-8480
NET ASSET VALUE
The value 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 reliable or 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.
In determining whether market quotations are reliable and readily available, the Manager monitors information it routinely receives for significant events it believes will affect market prices of portfolio instruments held by the Fund. Significant
events may affect a particular company (for example, a trading halt in the company's securities on an exchange during the day) or may affect securities markets (for example, a natural disaster such as an earthquake causes a market to close early). If the Manager is aware of a significant event that has occurred after the close of the market where a portfolio instrument is primarily traded, but before the close of the New York Stock Exchange, and the Manager believes that such event has affected or is likely to affect the price of the instrument, the Manager will use its best judgment to determine a fair value for that portfolio instrument under procedures adopted by the Board of Trustees.
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. Dividends and distributions may differ between classes of shares of a portfolio.
Federal income taxation of separate accounts of insurance companies, variable annuity contracts and variable life insurance contracts is discussed in the prospectuses of participating insurance companies. Generally, distributions by the Fund will not be taxable to holders of variable annuity contracts or variable life insurance policies if the insurance company separate accounts to which those distributions are made meet certain requirements, including certain diversification requirements that the Fund has undertaken to meet, under the Internal Revenue Code. Participants in 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 from their plan accounts. Generally, distributions from plan accounts 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) OF A CLASS OF SHARES IS COMPUTED BY ADDING TOGETHER THE VALUE ALLOCABLE TO THE CLASS OF THE PORTFOLIO'S INVESTMENTS PLUS CASH AND OTHER ASSETS, SUBTRACTING THE APPLICABLE LIABILITIES AND THEN DIVIDING THE RESULT BY THE NUMBER OF OUTSTANDING SHARES OF THE CLASS.
CLASSES OF FUND SHARES
Each portfolio offers two classes of shares: Class O shares and Class S shares. Only Class O shares are offered in this prospectus. Both classes are offered only to separate accounts of insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies and to qualified pension and retirement plans. The classes differ only in that Class S shares are subject to a distribution and shareholder servicing fee, while Class O shares are not.
PURCHASING AND REDEEMING FUND SHARES
Because 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 Fund or its designated 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 seven days after it accepts a redemption request.
OTHER INFORMATION
The Fund may redeem some of your shares "in kind," which means that some of the proceeds will be paid with securities the applicable portfolio owns instead of cash.
Shares may be worth more or less when you redeem them than they were at the time you bought them.
The Board of Trustees has determined that the Fund may reject purchase orders, on a temporary or permanent basis, from investors that the Manager is able to determine, consistent with its compliance procedures and its reasonable business judgment, are exhibiting a pattern of frequent or short-term trading in Fund shares or shares of other funds sponsored by the Manager.
The Fund might not be able to detect frequent or short-term trading conducted by the underlying owners of shares held in omnibus accounts, and therefore might not be able to effectively prevent frequent or short-term trading in those accounts. There is no guarantee that the Fund's compliance procedures will be successful to identify investors who engage in excessive trading activity or to curtail that activity.
Each portfolio posts its month-end full portfolio with a 60-day lag, on its website, www.alger.com. The Fund reserves the right to change the policy for posting portfolio holdings on the website without further notice to shareholders. Following publication of portfolio holdings information on the Fund's website, it may be sent by the Fund to any party.
The Fund and Transfer Agent have reasonable procedures in place to determine that instructions submitted by telephone are genuine. They include requesting personal identification and recording calls. If the Fund and Transfer Agent follow these procedures, they are not liable for acting in good faith on telephone instructions.
[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 portfolio share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in the portfolio (assuming reinvestment of all dividends and distributions). Information shown from the period ended December 31, 2002 through the year ended December 31, 2004 has been audited by Ernst & Young LLP, the Fund's independent registered public accounting firm, whose report, along with the Fund's financial statements, is included in the Annual Report, which is available upon request. Information for the periods prior thereto has been audited by Arthur Andersen LLP.
Note that the Financial Highlights do 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.
INCOME FROM INVESTMENT OPERATIONS LESS DIVIDENDS AND DISTRIBUTIONS
--------------------------------- ------------------------------
NET ASSET NET REALIZED DISTRIBUTIONS
VALUE AND UNREALIZED TOTAL FROM DIVIDENDS FROM FROM NET
BEGINNING NET INVESTMENT GAIN (LOSS) INVESTMENT NET INVESTMENT REALIZED
OF PERIOD INCOME (LOSS) ON INVESTMENTS OPERATIONS INCOME GAINS
----------- -------------- --------------- ------------ -------------- -----------
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
CLASS O
Year ended 12/31/04 ............. $18.40 $(0.11) $2.51 $2.40 $ -- $ --
Year ended 12/31/03 12.45 (0.05) 6.00 5.95 -- --
Year ended 12/31/02 17.67 (0.10) (5.12) (5.22) -- --
Year ended 12/31/01 30.62 (0.09)(i) (1.23) (1.32) -- (11.63)
Year ended 12/31/00 32.23 (0.03)(i) 2.79 2.76 -- (4.37)
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
CLASS O
Year ended 12/31/04 ............. $17.38 $(0.27) $3.15 $2.88 $ -- $ --
Year ended 12/31/03 ............. 12.21 (0.15) 5.32 5.17 -- --
Year ended 12/31/02 ............. 16.55 (0.11) (4.23) (4.34) -- --
Year ended 12/31/01 ............. 23.49 (0.03) (6.90) (6.93) (0.01) --
Year ended 12/31/00 ............. 55.15 0.01(i) (12.80) (12.79) -- (18.87)
ALGER AMERICAN GROWTH PORTFOLIO
CLASS O
YEAR ENDED 12/31/04 ............. $33.29 $0.07 $1.76 $1.83 $ -- $ --
Year ended 12/31/03 ............. 24.63 (0.02) 8.68 8.66 -- --
Year ended 12/31/02 ............. 36.77 (0.01) (12.12) (12.13) (0.01) --
Year ended 12/31/01 ............. 47.27 0.01 (4.88) (4.87) (0.10) (5.53)
Year ended 12/31/00 ............. 64.38 0.10 (8.75) (8.65) -- (8.46)
|
(i) Amount was computed based on average shares outstanding during the year.
NET ASSET
TOTAL VALUE, END
DISTRIBUTIONS OF PERIOD TOTAL RETURN
------------ --------- ------------
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
CLASS O
Year ended 12/31/04 ............. $ -- $20.80 13.04%
Year ended 12/31/03 ............. -- 18.40 47.79
Year ended 12/31/02 ............. -- 12.45 (29.54)
Year ended 12/31/01 ............. (11.63) 17.67 (6.52)
Year ended 12/31/00 ............. (4.37) 30.62 9.18
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
CLASS O
Year ended 12/31/04 ............. $ -- $20.26 16.57%
Year ended 12/31/03 ............. -- 17.38 42.34
Year ended 12/31/02 ............. -- 12.21 (26.22)
Year ended 12/31/01 ............. (0.01) 16.55 (29.51)
Year ended 12/31/00 ............. (18.87) 23.49 (27.20)
ALGER AMERICAN GROWTH PORTFOLIO
CLASS O
YEAR ENDED 12/31/04 ............. $ -- $35.12 5.50%
Year ended 12/31/03 ............. -- 33.29 35.16
Year ended 12/31/02 ............. (0.01) 24.63 (32.99)
Year ended 12/31/01 ............. (5.63) 36.77 (11.81)
Year ended 12/31/00 ............. (8.46) 47.27 (14.77)
|
RATIOS/SUPPLEMENTAL DATA
-----------------------------------------------------
RATIO OF NET
NET ASSETS, RATIO OF EXPENSES INVESTMENT PORTFOLIO
END OF PERIOD TO AVERAGE INCOME (LOSS) TO TURNOVER
(000'S OMITTED) NET ASSETS AVERAGE NET ASSETS RATE
--------------- ----------------- ------------------ ---------
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
CLASS O
Year ended 12/31/04 ............. $ 482,868 0.92% (0.62)% 229.17%
Year ended 12/31/03 ............. 414,590 0.93 (0.70) 196.43
Year ended 12/31/02 ............. 240,063 0.93 (0.56) 323.83
Year ended 12/31/01 ............. 355,015 0.88 (0.45) 130.11
Year ended 12/31/00 ............. 332,734 0.84 (0.09) 130.85
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
CLASS O
Year ended 12/31/04 ............. $ 484,760 0.97% (0.72)% 135.33%
Year ended 12/31/03 ............. 496,076 0.97 (0.70) 146.69
Year ended 12/31/02 ............. 376,550 0.97 (0.69) 111.82
Year ended 12/31/01 ............. 517,364 0.92 (0.27) 181.80
Year ended 12/31/00 ............. 700,370 0.90 0.03 217.69
ALGER AMERICAN GROWTH PORTFOLIO
CLASS O
YEAR ENDED 12/31/04 ............. $1,028,652 0.86% 0.21% 194.25%
Year ended 12/31/03 ............. 1,115,959 0.85 (0.05) 167.53
Year ended 12/31/02 ............. 874,914 0.85 (0.01) 238.03
Year ended 12/31/01 ............. 1,540,327 0.81 0.03 87.79
Year ended 12/31/00 ............. 1,809,937 0.79 0.12 108.27
|
FOR FUND INFORMATION:
By telephone: (800) 992-3863
By mail: Boston Financial Data Services, Inc.
Attn: The Alger American Fund
P.O. Box 8480
Boston, MA 02266-8480
|
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, at the Fund's website at http://www. alger.com 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 of the Fund, by calling the Fund's toll-free number, at the Fund's website at http://www. alger.com or by writing to the address above.
Another way you can review and copy Fund documents is by visiting the SEC's Public Reference Room in Washington, DC. Copies can also be obtained, for a duplicating fee, by E-mail request to publicinfo@sec.gov or by writing to the SEC's Public Reference Section, Washington, DC 20549-0102. Information on the operation of the Public Reference Room is available by calling (202) 942-8090. Fund documents are also available on the EDGAR database on the SEC's internet site at http://www.sec.gov.
QUARTERLY FUND HOLDINGS
The portfolios file their complete schedule of portfolio holdings with the SEC for the first and third quarter of each fiscal year on Form N-Q. Forms N-Q are available online on the Fund's website at http://www.alger.com or on the SEC's website at http://www.sec.gov. The Fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330. A copy of the most recent quarterly holdings may also be obtained from the Fund by calling (800) 992-3863.
DISTRIBUTOR: FRED ALGER & COMPANY, INCORPORATED
THE ALGER AMERICAN FUND
SEC FILE #811-5550
FRED ALGER & COMPANY, INCORPORATED PRIVACY POLICY
YOUR PRIVACY IS OUR PRIORITY
At Fred Alger & Company, Incorporated ("Alger") we value the confidence you have
placed in us. In trusting us with your assets, you provide us with personal and
financial data. Alger is committed to maintaining the confidentiality of the
personal nonpublic information ("personal information") entrusted to us by our
customers. Your privacy is very important to us, and we are dedicated to
safeguarding your personal information as we serve your financial needs.
OUR PRIVACY POLICY
We believe you should know about Alger's Privacy Policy and how we collect and
protect your personal information. This Privacy Policy ("Policy") describes our
practices and policy for collecting, sharing and protecting the personal
information of our prospective, current and former customers. The Policy is
applicable to Alger and its affiliates, Fred Alger Management, Inc., Alger
National Trust Company and Alger Shareholder Services, Inc. as well as the
following funds: The Alger Funds, The Alger Institutional Funds, The Alger
American Fund, The China-U.S. Growth Fund, Spectra Fund and Castle Convertible
Fund, Inc. We are proud of our Policy and hope you will take a moment to read
about it.
INFORMATION WE COLLECT
The type of personal information we collect and use varies depending on the
Alger products or services you select. We collect personal information that
enables us to serve your financial needs, develop and offer new products and
services, and fulfill legal and regulatory requirements. Depending on the
products or services you request, we obtain personal information about you from
the following sources:
o Information, such as your name, address and social security number, provided on applications and other forms we receive from you or your representative;
o Information from your communications with Alger employees or from your representative, which may be provided to us by telephone, in writing or through Internet transactions; and
o Information about your transactions, such as the purchase and redemption of fund shares, account balances and parties to the transactions, which we receive from our affiliates or other third parties.
SHARING OF PERSONAL INFORMATION
We may share your personal information with our affiliates so that they may process and service your transactions. However, Alger never sells customer lists to any third party. Further, we do not disclose personal information to nonaffiliated third parties, except as required by law or as permitted by law to service your account, such as follows:
o To third-party service providers that assist us in servicing your accounts (e.g. securities clearinghouses);
o To governmental agencies and law enforcement officials (e.g. valid subpoenas, court orders); and
o To financial institutions that perform marketing services on our behalf or with whom we have joint marketing agreements that provide for the confidentiality of personal information.
OUR SECURITY PRACTICES
We protect your personal information by maintaining physical, electronic and
procedural safeguards. When you visit Alger's Internet sites your information is
protected by our systems that utilize 128-bit data encryption, Secure Socket
Layer (SSL) protocol, user names, passwords and other precautions. We have
implemented safeguards to ensure that access to customer information is limited
to employees, such as customer service representatives, who require such
information to carry out their job responsibilities. Our employees are aware of
their strict responsibility to respect the confidentiality of your personal
information.
Thank you for choosing to invest with Alger. We value your relationship with us and assure you we will abide by our policy to protect your information.
THIS POLICY STATEMENT IS NOT PART OF THE PROSPECTUS.
THE ALGER AMERICAN FUND
CLASS O SHARES
A POOLED FUNDING VEHICLE FOR:
o VARIABLE ANNUITY CONTRACTS
o VARIABLE LIFE INSURANCE POLICIES
o QUALIFIED PENSION PLANS
o QUALIFIED RETIREMENT PLANS
PROSPECTUS
MAY 1, 2005
ALGER AMERICAN SMALL CAPITALIZATION 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.
[graphic omitted]
THE ALGER
AMERICAN FUND
CLASS O SHARES
PROSPECTUS
MAY 1, 2005
2 ............Risk/Return Summary: Investments,
Risks & Performance
2 ......Investments
Alger American Small
Capitalization Portfolio ........2
Alger American Growth Portfolio ...2
2 Principal Risks
Alger American Small
Capitalization Portfolio ........2
Alger American Growth Portfolio ...2
3 Performance
Alger American Small
Capitalization Portfolio ........3
Alger American Growth Portfolio ...3
4 ............Fees and Expenses
5 ............Management and Organization
6 ............Shareholder Information
Distributor .......................6
Transfer Agent ....................6
Net Asset Value ...................6
Dividends and Distributions .......6
Classes of Fund Shares ............6
Purchasing and Redeeming
Fund Shares .....................6
Other Information .................7
8 ............Financial Highlights
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Back Cover: How to obtain more information
[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. Both 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 Alger American Small Capitalization Portfolio must take into account a company's market capitalization when considering it for investment. 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 at least 80% of its net assets in the equity securities of companies that, at the time of purchase of the securities, have a total market capitalization within the range of the companies included in the Russell 2000 Growth Index or the S&P SmallCap 600 Index, updated quarterly. Both indexes are broad indexes of small capitalization stocks.
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 companies that have a market capitalization of $1 billion or greater.
[graphic omitted]
PRINCIPAL RISKS
RISKS APPLICABLE TO ALL EQUITY PORTFOLIOS
As with any fund that invests in stocks, your investment will fluctuate 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. 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 investments' values.
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 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 and thereby adversely affect portfolio performance.
There may be additional risks applicable to a specific portfolio because of its investment approach.
To the extent that a portfolio invests in securities other than those that are its primary focus, the principal risks associated with such other investments, described in the Fund's Prospectus and Statement of Addition Information, are pertinent.
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 product lines or 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."
[graphic omitted]
PERFORMANCE
The following bar charts and the tables beneath them give you some indication of the risks of an investment in a portfolio by showing the changes in each portfolio's performance from year to year and by showing how the portfolio's average annual returns for the indicated periods compare with those of an appropriate benchmark index. They 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. Investors cannot invest directly in any index.
o Russell 1000 Growth Index: An index of common stocks designed to track performance of large capitalization companies with greater than average growth orientation.
o Russell 2000 Growth Index: An index of common stocks designed to track performance of small capitalization companies with greater than average growth orientation.
[the data below represents a graph in the printed piece]
44.31 4.18 11.39 15.53 43.42 -27.20 -29.51 -26.22 42.34 16.57
95 96 97 98 99 00 01 02 03 04
Best Quarter: 31.06% Q4 1999 Worst Quarter: -26.52% Q1 2001
Average Annual Total Return as of December 31, 2004
Class O
Since
Inception
1 Year 5 Years 10 Years (9/21/88)
--------------------------------------------------------------------------------
American Small
Capitalization 16.57% -8.88% 5.71% 10.82%
Russell 2000
Growth Index 14.31% -3.58% 7.11% 8.10%
--------------------------------------------------------------------------------
|
ALGER AMERICAN GROWTH PORTFOLIO
Annual Total Return as of December 31 each year (%) Class O
[the data below represents a graph in the printed piece]
36.37 13.35 25.75 48.07 33.74 -14.77 -11.81 -32.99 35.16 5.50
95 96 97 98 99 00 01 02 03 04
Best Quarter: 25.93% Q4 1998 Worst Quarter: -20.20% Q3 2002
Average Annual Total Return as of December 31, 2004 Class O
American Growth 5.50% -6.41% 10.70% 12.95% Russell 1000 Growth Index 6.30% -9.29% 9.60% 10.89% -------------------------------------------------------------------------------- |
The Fund also offers Class S shares. Class S and Class O shares differ only in that Class S shares are subject to a distribution and shareholder servicing fee, whereas Class O shares are not. Because of the distribution and shareholder servicing fee, returns will be lower for Class S shares.
[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 Class O shares of the portfolios. The numbers shown below are based on each portfolio's expenses during its fiscal year ended December 31, 2004.
ANNUAL FUND OPERATING
EXPENSES
(expenses that are deducted
SHAREHOLDER from Fund assets)
FEES
(fees paid TOTAL ANNUAL
directly from Management Distribution Other FUND OPERATING
your investment) Fees (12b-1) Fees Expenses EXPENSES
--------------------------------- -----------------------------------------------------
ALGER AMERICAN SMALL None .85% None .12% .97%
CAPITALIZATION
PORTFOLIO
----------------------------------------------------------------------------------------
ALGER AMERICAN None .75% None .11% .86%
GROWTH
PORTFOLIO
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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 Class O shares of 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 $99 $309 $536 $1,190
CAPITALIZATION
PORTFOLIO
--------------------------------------------------------------------------------
ALGER AMERICAN $88 $274 $477 $1,061
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
Other securities the portfolios may invest in are discussed in the Fund's Statement of Additional Information (see back cover of this prospectus).
In times of adverse or unstable market or economic conditions, each portfolio may invest up to 100% of its assets in cash, high-grade bonds, or cash equivalents (such as commercial paper or paper market instruments) for temporary defensive reasons. 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. A portfolio may also hold these types of securities pending the investment of proceeds from the sale of portfolio securities or to meet anticipated redemptions of portfolio shares. The portfolio may not achieve its objective while in a temporary defensive or interim position.
[graphic omitted]
MANAGEMENT AND ORGANIZATION
MANAGER
Fred Alger Management, Inc.
111 Fifth Avenue
New York, NY 10003
The Manager has been an investment adviser since 1964, and manages investments totaling (at 12/31/04) $8.2 billion in mutual fund assets as well as $1.5 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%; Growth Portfolio--.75%.
PORTFOLIO MANAGERS
Fred M. Alger III is the chief market strategist for the portfolios, overseeing the investments of each portfolio since September 2001. Mr. Alger, who founded Fred Alger Management, Inc., has served as Chairman of the Board since 1964, and co-managed the portfolios prior to 1995. Dan C. Chung, CFA and Jill Greenwald, CFA, are the individuals responsible for the day-to-day management of portfolio investments.
o Mr. Chung, manager of the Growth Portfolio since September 2004 and co-manager of the Growth Portfolio from September 2001 to September 2004, has been employed by the Manager since 1994 as a Vice President and analyst from 1996 to 1999, as a Senior Vice President and senior analyst until 2000, as an Executive Vice President until 2003, as portfolio manager since 2000, as Chief Investment Officer since September 2001 and as President since 2003.
o Ms. Greenwald, manager of the Small Capitalization Portfolio since November 2001, has been employed by the Manager as a Senior Vice President and portfolio manager since November 2001, prior to which she was employed by the Manager as an analyst and later a senior analyst from 1986 to 1992, as a Managing Director and senior portfolio manager at Chase Manhattan Bank from 1994 through 1999 and as a Senior Vice President and Investment Officer at J&W Seligman & Co. from 1999 until November 2001.
LEGAL PROCEEDINGS
Alger Management has been responding to inquiries, document requests and/or subpoenas from regulatory authorities, including the United States Securities and Exchange Commission ("SEC"), the Office of the New York State Attorney General, and the Attorney General of New Jersey, in connection with their investigation of practices in the mutual fund industry identified as "market timing" and "late trading." Alger Management has assured the Board of the Fund that if it be determined that improper trading practices in the Fund detrimentally affected its performance, Alger Management will make appropriate restitution.
Certain civil actions have developed out of the regulatory investigations. Several purported class actions and shareholder derivative suits have been filed against various parties; including, depending on the lawsuit, Alger Management, certain of the mutual funds managed by Alger Management (the "Alger Mutual Funds"), and certain current and former Alger Mutual Fund trustees and officers, alleging wrongful market-timing and late-trading activities. These cases have been transferred to the U.S. District Court of Maryland by the Judicial Panel on Multidistrict Litigation for consolidated pre-trial proceedings. On September 29, 2004, consolidated amended complaints involving these cases - a Consolidated Amended Fund Derivative Complaint (the "Derivative Complaint") and two substantially identical Consolidated Amended Class Action Complaints (together, the "Class Action Complaint") - were filed in the Maryland federal district court under the caption number 1:04-MD-15863 (JFM).
The Derivative Complaint, brought on behalf of the Alger Mutual Funds and Castle
Convertible Fund, Inc., a registered closed-end fund managed by Alger
Management, alleges (i) violations, by Alger Management and, depending on the
specific offense alleged, by its immediate parent the Distributor (Fred Alger &
Company, Incorporated) and/or the fund trustee defendants, of Sections 36(a),
36(b), 47, and 48 of the Investment Company Act of 1940 and of Sections 206 and
215 of the Investment Advisers Act of 1940, breach of fiduciary duty, and breach
of contract, (ii) various offenses by other, unrelated, third-party defendants,
and (iii) unjust enrichment by all the named defendants, all by virtue of the
alleged wrongful market-timing and late-trading activities. The complaint seeks,
among other things, removal of the trustee defendants and of Alger Management,
certain rescissory relief, disgorgement of management fees and allegedly
unlawful profits, compensatory and punitive monetary damages, and plaintiffs'
fees and expenses (including attorney and expert fees). The Class Action
Complaint names the Alger-related defendants named in the Derivative Complaint
as well as certain defendants not named in the Derivative Complaint, including
certain entities affiliated with Alger Management, certain Alger Mutual Funds,
including the Fund, and certain additional former trustees and a former officer
of the defendant Alger Mutual Funds. It alleges, on the basis of factual
allegations similar to those of the Derivative Complaint with respect to the
Alger defendants, (i) offenses by the Alger defendants similar to those alleged
in the Derivative Complaint, (ii) violations, by Alger Management, the
Distributor, their affiliates, the funds named as defendants, and the current
and former fund trustees and officers, of Sections 11, 12(a)(2) and 15 of the
Securities Act of 1933, Sections 10(b) (and Rule 10b-5 thereunder) and 20(a) of
the Securities Exchange Act of 1934, and Section 34(b) of the Investment Company
Act of 1940, (iii)
breach of contract by the funds named as defendants, and (iv) unjust enrichment by all of the named defendants. It seeks relief similar to that sought in the Derivative Complaint.
Alger Management does not believe that the foregoing lawsuits will materially affect its ability to perform its management contracts with any of the funds that it manages, and the management of the Fund believes that the Fund will not be materially adversely affected by the pending lawsuits.
[graphic omitted]
SHAREHOLDER INFORMATION
DISTRIBUTOR
Fred Alger & Company, Incorporated
30 Montgomery Street
Jersey City, NJ 07302
TRANSFER AGENT
State Street Bank and Trust Company
c/o Boston Financial Data Services, Inc.
Attn: The Alger American Fund
P.O. Box 8480
Boston, MA 02266-8480
NET ASSET VALUE
The value 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 reliable or 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.
In determining whether market quotations are reliable and readily available, the Manager monitors information it routinely receives for significant events it believes will affect market prices of portfolio instruments held by the Fund. Significant events may affect a particular company (for example, a trading halt in the company's securities on an exchange during the day) or may affect securities markets (for example, a natural disaster such as an earthquake causes a market to close early). If the Manager is aware of a significant event that has occurred after the close of the market where a portfolio instrument is primarily traded, but before the close of the New York Stock Exchange, and the Manager believes that such event has affect ed or is likely to affect the price of the instrument, the Manager will use its best judgment to determine a fair value for that portfolio instrument under procedures adopted by the Board of Trustees.
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. Dividends and distributions may differ between classes of shares of a portfolio.
Federal income taxation of separate accounts of insurance companies, variable annuity contracts and variable life insurance contracts is discussed in the prospectuses of participating insurance companies. Generally, distributions by the Fund will not be taxable to holders of variable annuity contracts or variable life insurance policies if the insurance company separate accounts to which those distributions are made meet certain requirements, including certain diversification requirements that the Fund has undertaken to meet, under the Internal Revenue Code. Participants in 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 from their plan accounts. Generally, distributions from plan accounts 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.
CLASSES OF FUND SHARES
Each portfolio offers two classes of shares: Class O shares and Class S shares. Only Class O shares are offered in this prospectus. Both classes are offered only to separate accounts of insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies and to qualified pension and retirement plans. The classes differ only in that Class S shares are subject to a distribution and shareholder servicing fee, while Class O shares are not.
PURCHASING AND REDEEMING FUND SHARES
Because 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 Fund or its designated 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 seven days after it accepts a redemption request.
OTHER INFORMATION
The Fund may redeem some of your shares "in kind," which means that some of the proceeds will be paid with securities the applicable portfolio owns instead of cash.
Shares may be worth more or less when you redeem them than they were at the time you bought them.
The Board of Trustees has determined that the Fund may reject purchase orders, on a temporary or permanent basis, from investors that the Manager is able to determine, consistent with its compliance procedures and its reasonable business judgment, are exhibiting a pattern of frequent or short-term trading in Fund shares or shares of other funds sponsored by the Manager.
The Fund might not be able to detect frequent or short-term trading conducted by the underlying owners of shares held in omnibus accounts, and therefore might not be able to effectively prevent frequent or short-term trading in those accounts. There is no guarantee that the Fund's compliance procedures will be successful to identify investors who engage in excessive trading activity or to curtail that activity.
Each portfolio posts its month-end full portfolio with a 60-day lag, on its website, www.alger.com. The Fund reserves the right to change the policy for posting portfolio holdings on the website without further notice to shareholders. Following publication of portfolio holdings information on the Fund's website, it may be sent by the Fund to any party.
The Fund and Transfer Agent have reasonable procedures in place to determine that instructions submitted by telephone are genuine. They include requesting personal identification and recording calls. If the Fund and Transfer Agent follow these procedures, they are not liable for acting in good faith on telephone instructions.
[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 portfolio share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in the portfolio (assuming reinvestment of all dividends and distributions). Information for the periods shown from the year ended December 31, 2002 through the year ended December 31, 2004 has been audited by Ernst & Young LLP, the Fund's independent registered public accounting firm, whose report, along with the Fund's financial statements, is included in the Annual Report, which is available upon request. Information for the periods prior thereto has been audited by Arthur Andersen LLP.
Note that the Financial Highlights do 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.
INCOME FROM INVESTMENT OPERATIONS LESS DIVIDENDS AND DISTRIBUTIONS
--------------------------------- ------------------------------
NET ASSET NET REALIZED DISTRIBUTIONS
VALUE AND UNREALIZED TOTAL FROM DIVIDENDS FROM FROM NET
BEGINNING NET INVESTMENT GAIN (LOSS) INVESTMENT NET INVESTMENT REALIZED
OF PERIOD INCOME (LOSS) ON INVESTMENTS OPERATIONS INCOME GAINS
----------- -------------- --------------- ------------ -------------- -----------
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
CLASS O
Year ended 12/31/04 $17.38 $(0.27) $ 3.15 $ 2.88 $ -- $ --
Year ended 12/31/03 12.21 (0.15) 5.32 5.17 -- --
Year ended 12/31/02 16.55 (0.11) (4.23) (4.34) -- --
Year ended 12/31/01 23.49 (0.03) (6.90) (6.93) (0.01) --
Year ended 12/31/00 55.15 0.01(i) (12.80) (12.79) -- (18.87)
ALGER AMERICAN GROWTH PORTFOLIO
CLASS O
Year ended 12/31/04 $33.29 $ 0.07 $ 1.76 $ 1.83 $ -- $ --
Year ended 12/31/03 24.63 (0.02) 8.68 8.66 -- --
Year ended 12/31/02 36.77 (0.01) (12.12) (12.13) (0.01) --
Year ended 12/31/01 47.27 0.01 (4.88) (4.87) (0.10) (5.53)
Year ended 12/31/00 64.38 0.10 (8.75) (8.65) -- (8.46)
|
RATIOS/SUPPLEMENTAL DATA
------------------------------------------
RATIO OF RATIO OF NET
NET ASSET NET ASSETS, EXPENSES INVESTMENT PORTFOLIO
TOTAL VALUE, END END OF PERIOD TO AVERAGE INCOME (LOSS) TO TURNOVER
DISTRIBUTIONS OF PERIOD TOTAL RETURN (000'S OMITTED) NET ASSETS AVERAGE NET ASSETS RATE
------------ --------- ------------ --------------- ------------ ------------------ ---------
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
CLASS O
Year ended 12/31/04 $ -- $20.26 16.57% $ 484,760 0.97% (0.72)% 135.33%
Year ended 12/31/03 -- 17.38 42.34 496,076 0.97 (0.70) 146.69
Year ended 12/31/02 -- 12.21 (26.22) 376,550 0.97 (0.69) 111.82
Year ended 12/31/01 (0.01) 16.55 (29.51) 517,364 0.92 (0.27) 181.80
Year ended 12/31/00 (18.87) 23.49 (27.20) 700,370 0.90 0.03 217.69
ALGER AMERICAN GROWTH PORTFOLIO
CLASS O
Year ended 12/31/04 $ -- $35.12 5.50% $1,028,652 0.86% 0.21% 194.25%
Year ended 12/31/03 -- 33.29 35.16 1,115,959 0.85 (0.05) 167.53
Year ended 12/31/02 (0.01) 24.63 (32.99) 874,914 0.85 (0.01) 238.03
Year ended 12/31/01 (5.63) 36.77 (11.81) 1,540,327 0.81 0.03 87.79
Year ended 12/31/00 (8.46) 47.27 (14.77) 1,809,937 0.79 0.12 108.27
|
FOR FUND INFORMATION:
By telephone: (800) 992-3863
By mail: Boston Financial Data Services, Inc.
Attn: The Alger American Fund
P.O. Box 8480
Boston, MA 02266-8480
|
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, at the Fund's website at http://www.alger.com 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 of the Fund, by calling the Fund's toll-free number, at the Fund's website at http://www.alger.com or by writing to the address above.
Another way you can review and copy Fund documents is by visiting the SEC's Public Reference Room in Washington, DC. Copies can also be obtained, for a duplicating fee, by E-mail request to publicinfo@sec.gov or by writing to the SEC's Public Reference Section, Washington, DC 20549-0102. Information on the operation of the Public Reference Room is available by calling (202) 942-8090. Fund documents are also available on the EDGAR database on the SEC's internet site at http://www.sec.gov.
QUARTERLY FUND HOLDINGS
The portfolios file their complete schedule of portfolio holdings with the SEC for the first and third quarter of each fiscal year on Form N-Q. Forms N-Q are available online on the Fund's website at http://www.alger.com or on the SEC's website at http://www.sec.gov. The Fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330. A copy of the most recent quarterly holdings may also be obtained from the Fund by calling (800) 992-3863.
DISTRIBUTOR: FRED ALGER & COMPANY, INCORPORATED
THE ALGER AMERICAN FUND
SEC FILE #811-5550
FRED ALGER & COMPANY, INCORPORATED PRIVACY POLICY
YOUR PRIVACY IS OUR PRIORITY
At Fred Alger & Company, Incorporated ("Alger") we value the confidence you have
placed in us. In trusting us with your assets, you provide us with personal and
financial data. Alger is committed to maintaining the confidentiality of the
personal nonpublic information ("personal information") entrusted to us by our
customers. Your privacy is very important to us, and we are dedicated to
safeguarding your personal information as we serve your financial needs.
OUR PRIVACY POLICY
We believe you should know about Alger's Privacy Policy and how we collect and
protect your personal information. This Privacy Policy ("Policy") describes our
practices and policy for collecting, sharing and protecting the personal
information of our prospective, current and former customers. The Policy is
applicable to Alger and its affiliates, Fred Alger Management, Inc., Alger
National Trust Company and Alger Shareholder Services, Inc. as well as the
following funds: The Alger Funds, The Alger Institutional Funds, The Alger
American Fund, The China-U.S. Growth Fund, Spectra Fund and Castle Convertible
Fund, Inc. We are proud of our Policy and hope you will take a moment to read
about it.
INFORMATION WE COLLECT
The type of personal information we collect and use varies depending on the
Alger products or services you select.
We collect personal information that enables us to serve your financial needs, develop and offer new products and services, and fulfill legal and regulatory requirements. Depending on the products or services you request, we obtain personal information about you from the following sources:
o Information, such as your name, address and social security number, provided on applications and other forms we receive from you or your representative;
o Information from your communications with Alger employees or from your representative, which may be provided to us by telephone, in writing or through Internet transactions; and
o Information about your transactions, such as the purchase and redemption of fund shares, account balances and parties to the transactions, which we receive from our affiliates or other third parties.
SHARING OF PERSONAL INFORMATION
We may share your personal information with our affiliates so that they may process and service your transactions.
However, Alger never sells customer lists to any third party. Further, we do not disclose personal information to nonaffiliated third parties, except as required by law or as permitted by law to service your account, such as follows:
o To third-party service providers that assist us in servicing your accounts (e.g. securities clearinghouses);
o To governmental agencies and law enforcement officials (e.g. valid subpoenas, court orders); and
o To financial institutions that perform marketing services on our behalf or with whom we have joint marketing agreements that provide for the confidentiality of personal information.
OUR SECURITY PRACTICES
We protect your personal information by maintaining physical, electronic and procedural safeguards. When you visit Alger's Internet sites your information is protected by our systems that utilize 128-bit data encryption, Secure Socket Layer (SSL) protocol, user names, passwords and other precautions. We have implemented safeguards to ensure that access to customer information is limited to employees, such as customer service representatives, who require such information to carry out their job responsibilities. Our employees are aware of their strict responsibility to respect the confidentiality of your personal information.
Thank you for choosing to invest with Alger. We value your relationship with us and assure you we will abide by our policy to protect your information.
THIS POLICY STATEMENT IS NOT PART OF THE PROSPECTUS.
THE ALGER AMERICAN FUND
CLASS O SHARES
A POOLED FUNDING VEHICLE FOR:
o VARIABLE ANNUITY CONTRACTS
o VARIABLE LIFE INSURANCE POLICIES
o QUALIFIED PENSION PLANS
o QUALIFIED RETIREMENT PLANS
PROSPECTUS
MAY 1, 2005
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 any other government agency.
[ALGER LOGO OMITTED]
THE ALGER
AMERICAN FUND
ALGER AMERICAN
MIDCAP GROWTH
PORTFOLIO
CLASS O SHARES
PROSPECTUS
2 ............Risk/Return Summary: Investments,
.............Risks & Performance
4 ............Fees and Expenses
4 ............Management and Organization
6 ............Shareholder Information
Distributor .......................6
Transfer Agent ....................6
Net Asset Value ...................6
Dividends and Distributions .......6
Classes of Fund Shares ............6
Purchasing and Redeeming
Fund Shares .....................6
Other Information .................7
8 ............Financial Highlights
Back Cover: How to obtain more information
|
[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.
The portfolio invests primarily in equity securities, such as common or preferred stocks, which are listed on U.S. exchanges or in the over-the-counter market. The portfolio invests primarily in "growth" stocks. The portfolio's Manager, Fred Alger Management, Inc., believes that these companies tend to fall into one of two categories:
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 must take into account a company's market capitalization when considering it for investment. The market capitalization of a company is its price per share multiplied by its number of outstanding shares.
The portfolio focuses on midsized companies with promising growth potential. Under normal circumstances, the portfolio invests at least 80% of its net assets in the equity securities of companies that, at the time of purchase of the securities, have a market capitalization within the range of companies included in the Russell Midcap Growth Index or the S&P MidCap 400 Index, updated quarterly. Both indexes are designed to track the performance of medium capitalization stocks.
[GRAPHIC OMITTED]
PRINCIPAL RISKS
As with any fund that invests in stocks, your investment will fluctuate 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. 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 investments' values.
The portfolio's trading in some stocks may be relatively short-term, meaning the portfolio may buy a security and sell it a short time later 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 and thereby adversely affect portfolio performance.
There may be additional risks applicable to the portfolio because of its investment approach.
To the extent that the portfolio invests in securities other than those that are its primary focus, the principal risks associated with such other investments, described in the Fund's Prospectus and Statement of Addition Information, are pertinent.
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 product lines or financial resources.
[GRAPHIC OMITTED]
PERFORMANCE
The following bar chart and the table beneath it give you some indication of the risks of an investment in the portfolio by showing changes in the portfolio's performance from year to year and by showing how the portfolio's average annual returns for the indicated periods compare with those of an appropriate benchmark index. They 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 the chart does not reflect separate account charges which, if reflected, would lower returns.
The index used in the table is a broad index designed to track a particular market or market segment. No expenses or fees are reflected in the returns for the index, which is unmanaged. All returns for the index assume reinvestment of dividends and interest on the underlying securities that make up the index. Investors cannot invest directly in the index.
o Russell Midcap Growth Index: An index of common stocks designed to track performance of medium-capitalization companies with greater than average growth orientation.
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
[THE DATA BELOW REPRESENTS A GRAPH IN THE PRINTED PIECE]
44.45 11.90 15.01 30.30 31.85 9.18 -6.52 -29.54 47.79 13.04 ----- ----- ----- ----- ----- ---- ----- ------ ----- ----- 95 96 97 98 99 00 01 02 03 04 |
Best Quarter: 27.07% Q4 1998 Worst Quarter: -18.60% Q3 2002
Average Annual Total Return as of December 31, 2004
Class O
Since
Inception
1 Year 5 Years 10 Years (5/3/93)
------------------------------------------------------------------
American MidCap
Growth 13.04% 3.74% 14.39% 15.24%
Russell Midcap
Growth Index 15.48% -3.36% 11.23% 10.61%
|
The portfolio also offers Class S shares. Class S and Class O shares differ only in that Class S shares are subject to a distribution and shareholder servicing fee, whereas Class O shares are not. Because of the distribution and shareholder servicing fee, returns will be lower for Class S shares.
[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 Class O shares of the portfolio. The numbers shown below are based on the portfolio's expenses during its fiscal year ended December 31, 2004.
------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING
EXPENSES
(expenses that are deducted
from Fund assets)
---------------------------------------------------
SHAREHOLDER FEES TOTAL ANNUAL
(fees paid directly Management Distribution Other FUND OPERATING
from your investment) Fees (12b-1) Fees Expenses EXPENSES
===================== ====================== =========== ============= ========= ===============
ALGER AMERICAN None .80% None .12% .92%
MIDCAP GROWTH
PORTFOLIO
------------------------------------------------------------------------------------------------
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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 portfolio with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in Class O shares of 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 $94 $293 $509 $1,131
MIDCAP GROWTH
PORTFOLIO
------------------------------------------------------------------------
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The example above does not reflect charges and deductions which are, or may be, imposed under variable annuity contracts, variable life insurance policies, or pension or retirement plans. Such charges and deductions are described in the prospectus for the contract or policy accompanying this prospectus or in the plan documents.
ADDITIONAL INFORMATION ABOUT
THE FUND'S INVESTMENTS
Other securities the portfolio may invest in are discussed in the Fund's Statement of Additional Information (see back cover of this prospectus).
In times of adverse or unstable market or economic conditions, the portfolio may invest up to 100% of its assets in cash, high-grade bonds, or cash equivalents (such as commercial paper or paper market instruments) for temporary defensive reasons. 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 also hold these types of securities pending the investment of proceeds from the sale of portfolio securities or to meet anticipated redemptions of portfolio shares. The portfolio may not achieve its objective while in a temporary defensive or interim position.
[GRAPHIC OMITTED]
MANAGEMENT AND ORGANIZATION
MANAGER
Fred Alger Management, Inc.
111 Fifth Avenue
New York, NY 10003
The Manager has been an investment adviser since 1964, and manages investments totaling (at 12/31/04) $8.2 billion in mutual fund assets as well as $1.5 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 an annual rate based on a percentage of average daily net assets of .80%.
PORTFOLIO MANAGERS
Fred M. Alger III is the chief market strategist for the portfolio, overseeing the investments of the portfolio since September 2001. Mr. Alger, who founded Fred Alger Management, Inc., has served as Chairman of the Board since 1964, and co-managed the portfolio prior to 1995. Dan C. Chung, CFA and Andrew Silverberg are the individuals responsible for the day-to-day management of portfolio investments.
o Mr. Chung, manager of the portfolio since September 2001, has been employed by the Manager since 1994 as a Vice President and analyst from 1996 to 1999, as a Senior Vice President and senior analyst until 2000, as an Executive Vice President until
2003, as portfolio manager since 2000, as Chief Investment Officer since September 2001 and as President since 2003.
o Mr. Silverberg, assistant portfolio manager of the portfolio since September 2003, has been employed by the Manager as a Vice President and senior analyst since September 2004, as an analyst from October 2001 to December 2004, and as an Assistant Vice President and analyst from September 2002 to December 2004, prior to which period he was a research analyst at Mark Asset Management Corporation from June 1999 until September 2001 and a research intern at MBF Capital Corporation from December 1998 until June 1999.
LEGAL PROCEEDINGS
Alger Management has been responding to inquiries, document requests and/or subpoenas from regulatory authorities, including the United States Securities and Exchange Commission ("SEC"), the Office of the New York State Attorney General, and the Attorney General of New Jersey, in connection with their investigation of practices in the mutual fund industry identified as "market timing" and "late trading." Alger Management has assured the Board of the Fund that if it be determined that improper trading practices in the Fund detrimentally affected its performance, Alger Management will make appropriate restitution.
Certain civil actions have developed out of the regulatory investigations. Several purported class actions and shareholder derivative suits have been filed against various parties; including, depending on the lawsuit, Alger Management, certain of the mutual funds managed by Alger Management (the "Alger Mutual Funds"), and certain current and former Alger Mutual Fund trustees and officers, alleging wrongful market-timing and late-trading activities. These cases have been transferred to the U.S. District Court of Maryland by the Judicial Panel on Multidistrict Litigation for consolidated pre-trial proceedings. On September 29, 2004, consolidated amended complaints involving these cases - a Consolidated Amended Fund Derivative Complaint (the "Derivative Complaint") and two substantially identical Consolidated Amended Class Action Complaints (together, the "Class Action Complaint") - were filed in the Maryland federal district court under the caption number 1:04-MD-15863 (JFM).
The Derivative Complaint, brought on behalf of the Alger Mutual Funds and Castle
Convertible Fund, Inc., a registered closed-end fund managed by Alger
Management, alleges (i) violations, by Alger Management and, depending on the
specific offense alleged, by its immediate parent the Distributor (Fred Alger &
Company, Incorporated) and/or the fund trustee defendants, of Sections 36(a),
36(b), 47, and 48 of the Investment Company Act of 1940 and of Sections 206 and
215 of the Investment Advisers Act of 1940, breach of fiduciary duty, and breach
of contract, (ii) various offenses by other, unrelated, third-party defendants,
and (iii) unjust enrichment by all the named defendants, all by virtue of the
alleged wrongful market-timing and late-trading activities. The complaint seeks,
among other things, removal of the trustee defendants and of Alger Management,
certain rescissory relief, disgorgement of man agement fees and allegedly
unlawful profits, compensatory and punitive monetary damages, and plaintiffs'
fees and expenses (including attorney and expert fees). The Class Action
Complaint names the Alger-related defendants named in the Derivative Complaint
as well as certain defendants not named in the Derivative Complaint, including
certain entities affiliated with Alger Management, certain Alger Mutual Funds,
including the Fund, and certain additional former trustees and a former officer
of the defendant Alger Mutual Funds. It alleges, on the basis of factual
allegations similar to those of the Derivative Complaint with respect to the
Alger defendants, (i) offenses by the Alger defendants similar to those alleged
in the Derivative Complaint, (ii) violations, by Alger Management, the
Distributor, their affiliates, the funds named as defendants, and the current
and former fund trustees and officers, of Sections 11, 12(a)(2) and 15 of the
Securities Act of 1933, Sections 10(b) (and Rule 10b-5 thereunder) and 20(a) of
the Securities Exchange Act of 1934, and Section 34(b) of the Investment Company
Act of 1940, (iii) breach of contract by the funds named as defendants, and (iv)
unjust enrichment by all of the named defendants. It seeks relief similar to
that sought in the Derivative Complaint.
Alger Management does not believe that the foregoing lawsuits will materially affect its ability to perform its management contracts with any of the funds that it manages, and the management of the Fund believes that the Fund will not be materially adversely affected by the pending lawsuits.
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SHAREHOLDER INFORMATION
DISTRIBUTOR
Fred Alger & Company, Incorporated
30 Montgomery Street
Jersey City, NJ 07302
TRANSFER AGENT
State Street Bank and Trust Company
c/o Boston Financial Data Services, Inc.
Attn: The Alger American Fund
P.O. Box 8480
Boston, MA 02266-8480
NET ASSET VALUE
The value 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 reliable or 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.
In determining whether market quotations are reliable and readily available, the Manager monitors information it routinely receives for significant events it believes will affect market prices of portfolio instruments held by the Fund. Significant events may affect a particular company (for example, a trading halt in the company's securities on an exchange during the day) or may affect securities markets (for example, a natural disaster such as an earthquake causes a market to close early). If the Manager is aware of a significant event that has occurred after the close of the market where a portfolio instrument is primarily traded, but before the close of the New York Stock Exchange, and the Manager believes that such event has affected or is likely to affect the price of the instrument, the Manager will use its best judgment to determine a fair value for that portfolio instrument under procedures adopted by the Board of Trustees.
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. Dividends and distributions may differ between classes of shares of the portfolio.
Federal income taxation of separate accounts of insurance companies, variable annuity contracts and variable life insurance contracts is discussed in the prospectuses of participating insurance companies. Generally, distributions by the Fund will not be taxable to holders of variable annuity contracts or variable life insurance policies if the insurance company separate accounts to which those distributions are made meet certain requirements, including certain diversification requirements that the Fund has undertaken to meet, under the Internal Revenue Code. Participants in 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 from their plan accounts. Generally, distributions from plan accounts 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.
CLASSES OF FUND SHARES
The portfolio offers two classes of shares: Class O shares and Class S shares. Only Class O shares are offered in this prospectus. Both classes are offered only to separate accounts of insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies and to qualified pension and retirement plans. The classes differ only in that Class S shares are subject to a distribution and shareholder servicing fee, while Class O shares are not.
PURCHASING AND REDEEMING FUND SHARES
Because 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 Fund or its designated 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 seven days after it accepts a redemption request.
OTHER INFORMATION
The Fund may redeem some of your shares "in kind," which means that some of the proceeds will be paid with securities the portfolio owns instead of cash.
Shares may be worth more or less when you redeem them than they were at the time you bought them.
The Board of Trustees has determined that the Fund may reject purchase orders, on a temporary or permanent basis, from investors that the Manager is able to determine, consistent with its compliance procedures and its reasonable business judgment, are exhibiting a pattern of frequent or short-term trading in Fund shares or shares of other funds sponsored by the Manager.
The Fund might not be able to detect frequent or short-term trading conducted by the underlying owners of shares held in omnibus accounts, and therefore might not be able to effectively prevent frequent or short-term trading in those accounts. There is no guarantee that the Fund's compliance procedures will be successful to identify investors who engage in excessive trading activity or to curtail that activity.
The portfolio posts its month-end full portfolio with a 60-day lag, on its website, www.alger.com. The Fund reserves the right to change the policy for posting portfolio holdings on the website without further notice to shareholders. Following publication of portfolio holdings information on the Fund's website, it may be sent by the Fund to any party.
The Fund and Transfer Agent have reasonable procedures in place to determine that instructions submitted by telephone are genuine. They include requesting personal identification and recording calls. If the Fund and Transfer Agent follow these procedures, they are not liable for acting in good faith on telephone instructions.
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FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the portfolio's financial performance for the periods shown. Certain information reflects financial results for a single portfolio share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in the portfolio (assuming reinvestment of all dividends and distributions). Information for the periods shown from the year ended December 31, 2002 through the year ended December 31, 2004 has been audited by Ernst & Young LLP, the Fund's independent registered public accounting firm, whose report, along with the Fund's financial statements, is included in the Annual Report, which is available upon request. Information for the periods prior thereto has been audited by Arthur Andersen LLP.
Note that the Financial Highlights do 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.
INCOME FROM INVESTMENT OPERATIONS LESS DIVIDENDS AND DISTRIBUTIONS
--------------------------------- --------------------------------
NET ASSET NET REALIZED DISTRIBUTIONS
VALUE AND UNREALIZED TOTAL FROM DIVIDENDS FROM FROM NET
BEGINNING NET INVESTMENT GAIN (LOSS) INVESTMENT NET INVESTMENT REALIZED
OF PERIOD INCOME (LOSS) ON INVESTMENTS OPERATIONS INCOME GAINS
----------- -------------- --------------- ------------ -------------- -------------
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
CLASS O
Year ended 12/31/04 ............. $18.40 $(0.11) $ 2.51 $ 2.40 $ -- $ --
Year ended 12/31/03 ............. 12.45 (0.05) 6.00 5.95 -- --
Year ended 12/31/02 ............. 17.67 (0.10) (5.12) (5.22) -- --
Year ended 12/31/01 ............. 30.62 (0.09)(i) (1.23) (1.32) -- (11.63)
Year ended 12/31/00 ............. 32.23 (0.03)(i) 2.79 2.76 -- (4.37)
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(i) Amount was computed based on average shares outstanding during the year.
RATIOS/SUPPLEMENTAL DATA
-------------------------------------
RATIO OF
NET
RATIO OF INVESTMENT
NET ASSET NET ASSETS, EXPENSES INCOME (LOSS) PORTFOLIO
TOTAL VALUE, END END OF PERIOD TO AVERAGE TO AVERAGE TURNOVER
DISTRIBUTIONS OF PERIOD TOTAL RETURN (000'S OMITTED) NET ASSETS NET ASSETS RATE
------------- ---------- ------------ --------------- ----------- ------------- ---------
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
CLASS O
Year ended 12/31/04 ............. $ -- $20.80 13.04% $ 482,868 0.92% (0.62)% 229.17%
Year ended 12/31/03 ............. -- 18.40 47.79 414,590 0.93 (0.70) 196.43
Year ended 12/31/02 ............. -- 12.45 (29.54) 240,063 0.93 (0.56) 323.83
Year ended 12/31/01 ............. (11.63) 17.67 (6.52) 355,015 0.88 (0.45) 130.11
Year ended 12/31/00 ............. (4.37) 30.62 9.18 332,734 0.84 (0.09) 130.85
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FOR FUND INFORMATION:
By telephone: (800) 992-3863
By mail: Boston Financial Data Services, Inc.
Attn: The Alger American Fund
P.O. Box 8480
Boston, MA 02266-8480
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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, at the Fund's website at http://www. alger.com 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 of the Fund, by calling the Fund's toll-free number, at the Fund's website at http://www. alger.com or by writing to the address above.
Another way you can review and copy Fund documents is by visiting the SEC's Public Reference Room in Washington, DC. Copies can also be obtained, for a duplicating fee, by E-mail request to publicinfo@sec.gov or by writing to the SEC's Public Reference Section, Washington, DC 20549-0102. Information on the operation of the Public Reference Room is available by calling (202) 942-8090. Fund documents are also available on the EDGAR database on the SEC's internet site at http://www.sec.gov.
QUARTERLY FUND HOLDINGS
The portfolio files its complete schedule of portfolio holdings with the SEC for the first and third quarter of each fiscal year on Form N-Q. Forms N-Q are available online on the Fund's website at http://www.alger.com or on the SEC's website at http://www.sec.gov. The Fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330. A copy of the most recent quarterly holdings may also be obtained from the Fund by calling (800) 992-3863.
DISTRIBUTOR: FRED ALGER & COMPANY, INCORPORATED
THE ALGER AMERICAN FUND
SEC FILE #811-5550
FRED ALGER & COMPANY, INCORPORATED PRIVACY POLICY
YOUR PRIVACY IS OUR PRIORITY
At Fred Alger & Company, Incorporated ("Alger") we value the confidence you have placed in us. In trusting us with your assets, you provide us with personal and financial data. Alger is committed to maintaining the confidentiality of the personal nonpublic information ("personal information") entrusted to us by our customers. Your privacy is very important to us, and we are dedicated to safeguarding your personal information as we serve your financial needs.
OUR PRIVACY POLICY
We believe you should know about Alger's Privacy Policy and how we collect and protect your personal information. This Privacy Policy ("Policy") describes our practices and policy for collecting, sharing and protecting the personal information of our prospective, current and former customers. The Policy is applicable to Alger and its affiliates, Fred Alger Management, Inc., Alger National Trust Company and Alger Shareholder Services, Inc. as well as the following funds: The Alger Funds, The Alger Institutional Funds, The Alger American Fund, The China-U.S. Growth Fund, Spectra Fund and Castle Convertible Fund, Inc. We are proud of our Policy and hope you will take a moment to read about it.
INFORMATION WE COLLECT
The type of personal information we collect and use varies depending on the Alger products or services you select. We collect personal information that enables us to serve your financial needs, develop and offer new products and services, and fulfill legal and regulatory requirements. Depending on the products or services you request, we obtain personal information about you from the following sources:
o Information, such as your name, address and social security number, provided on applications and other forms we receive from you or your representative;
o Information from your communications with Alger employees or from your representative, which may be provided to us by telephone, in writing or through Internet transactions; and
o Information about your transactions, such as the purchase and redemption of fund shares, account balances and parties to the transactions, which we receive from our affiliates or other third parties.
SHARING OF PERSONAL INFORMATION
We may share your personal information with our affiliates so that they may process and service your transactions.
However, Alger never sells customer lists to any third party. Further, we do not disclose personal information to nonaffiliated third parties, except as required by law or as permitted by law to service your account, such as follows:
o To third-party service providers that assist us in servicing your accounts (e.g. securities clearinghouses);
o To governmental agencies and law enforcement officials (e.g. valid subpoenas, court orders); and
o To financial institutions that perform marketing services on our behalf or with whom we have joint marketing agreements that provide for the confidentiality of personal information.
OUR SECURITY PRACTICES
We protect your personal information by maintaining physical, electronic and procedural safeguards. When you visit Alger's Internet sites your information is protected by our systems that utilize 128-bit data encryption, Secure Socket Layer (SSL) protocol, user names, passwords and other precautions. We have implemented safeguards to ensure that access to customer information is limited to employees, such as customer service representatives, who require such information to carry out their job responsibilities. Our employees are aware of their strict responsibility to respect the confidentiality of your personal information.
Thank you for choosing to invest with Alger. We value your relationship with us and assure you we will abide by our policy to protect your information.
THIS POLICY STATEMENT IS NOT PART OF THE PROSPECTUS.
THE ALGER AMERICAN FUND
CLASS S SHARES
A POOLED FUNDING VEHICLE FOR:
o VARIABLE ANNUITY CONTRACTS
o VARIABLE LIFE INSURANCE POLICIES
o QUALIFIED PENSION PLANS
o QUALIFIED RETIREMENT PLANS
PROSPECTUS
MAY 1, 2005
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 any other government agency.
[ALGER LOGO]
THE ALGER
AMERICAN FUND
ALGER AMERICAN
MIDCAP GROWTH
PORTFOLIO
CLASS S SHARES
PROSPECTUS
MAY 1, 2005
2 ........... Risk/Return Summary: Investments, Risks & Performance
4 ........... Fees and Expenses
5 ........... Management and Organization
6 ........... Shareholder Information
Distributor ............................ 6
Transfer Agent ......................... 6
Net Asset Value ........................ 6
Dividends and Distributions ............ 6
Classes of Fund Shares ................. 6
Purchasing and Redeeming Fund Shares ... 6
Other Information ...................... 7
8 ........... Financial Highlights
Back Cover: How to obtain more information
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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.
The portfolio invests primarily in equity securities, such as common or preferred stocks, which are listed on U.S. exchanges or in the over-the-counter market. The portfolio invests primarily in "growth" stocks. The portfolio's Manager, Fred Alger Management, Inc., believes that these companies tend to fall into one of two categories:
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 must take into account a company's market capitalization when considering it for investment. The market capitalization of a company is its price per share multiplied by its number of outstanding shares.
The portfolio focuses on midsized companies with promising growth potential. Under normal circumstances, the portfolio invests at least 80% of its net assets in the 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 Russell Midcap Growth Index or the S&P MidCap 400 Index, updated quarterly. Both indexes are designed to track the performance of medium capitalization stocks.
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PRINCIPAL RISKS
As with any fund that invests in stocks, your investment will fluctuate 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. 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 investments' values.
The portfolio's trading in some stocks may be relatively short-term, meaning the portfolio may buy a security and sell it a short time later 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 and thereby adversely affect portfolio performance.
There may be additional risks applicable to the portfolio because of its investment approach.
To the extent that the portfolio invests in securities other than those that are its primary focus, the principal risks associated with such other investments, described in the Fund's Prospectus and Statement of Additional Information, are pertinent.
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 product lines or financial resources.
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PERFORMANCE
The following bar chart and the table beneath it give you some indication of the risks of an investment in the portfolio by showing changes in the portfolio's performance from year to year and by showing how the portfolio's average annual returns for the indicated periods compare with those of an appropriate benchmark index. They 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 the chart does not reflect separate account charges which, if reflected, would lower returns.
The index used in the table is a broad index designed to track a particular market or market segment. No expenses or fees are reflected in the returns for the index, which is unmanaged. All returns for the index assume reinvestment of dividends and interest on the underlying securities that make up the index. Investors cannot invest directly in the index.
o Russell Midcap Growth Index: An index of common stocks designed to track performance of medium-capitalization companies with greater than average growth orientation.
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
Annual Total Return as of December 31 (%) Class S
[The data below represent a bar chart in the printed report.]
47.47 12.77
----------------
03 04
Best Quarter: 20.62% Q2 2003
Worst Quarter: -8.13% Q3 2004
Average Annual Total Return as of December 31, 2004
Class S
Since
Inception
1 Year (5/1/02)
-----------------------------------------------------------------------
American MidCap Growth 12.77% 8.33%
Russell Midcap Growth Index 15.48% 9.88%
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The portfolio also offers Class O shares. Class S and Class O shares differ only in that Class S shares are subject to a distribution and shareholder servicing fee, whereas Class O shares are not. Because of the distribution and shareholder servicing fee, returns will be lower for Class S shares.
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FEES AND EXPENSES
Investors incur certain fees and expenses in connection with an investment in the portfolio. The following table shows the fees and expenses that you may incur if you buy and hold Class S shares of the portfolio. The numbers below are based on the portfolio's expenses during its fiscal year ended December 31, 2004.
ANNUAL FUND OPERATING
EXPENSES
(expenses that are deducted
from Fund assets)
------------------------------------------------
SHAREHOLDER
FEES TOTAL
(fees paid ANNUAL
directly FUND
from your Management Distribution Other OPERATING
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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 portfolio with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in Class S shares of 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 $119 $372 $644 $1,420
MIDCAP GROWTH
PORTFOLIO
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The example above does not reflect charges and deductions which are, or may be, imposed under variable annuity contracts, variable life insurance policies, or pension or retirement plans. Such charges and deductions are described in the prospectus for the contract or policy accompanying this prospectus or in the plan documents.
ADDITIONAL INFORMATION ABOUT
THE FUND'S INVESTMENTS
Other securities the portfolio may invest in are discussed in the Fund's Statement of Additional Information (see back cover of this Prospectus).
In times of adverse or unstable market, economic or political conditions, the portfolio may invest up to 100% of its assets in cash, high-grade bonds, or cash equivalents (such as commercial paper or money market instruments) for temporary defensive reasons. 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 also hold these types of securities pending the investment of proceeds from the sale of portfolio securities or to meet anticipated redemptions of portfolio shares. The portfolio may not achieve its objective while in a temporary defensive or interim position.
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MANAGEMENT AND ORGANIZATION
MANAGER
Fred Alger Management, Inc.
111 Fifth Avenue
New York, NY 10003
The Manager has been an investment adviser since 1964, and manages investments totaling (at 12/31/04) $8.2 billion in mutual fund assets as well as $1.5 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 an annual rate based on a percentage of average daily net assets of .80%.
PORTFOLIO MANAGERS
Fred M. Alger III is the chief market strategist for the portfolio, overseeing the investments of the portfolio since September 2001. Mr. Alger, who founded Fred Alger Management, Inc., has served as Chairman of the Board since 1964, and co-managed the portfolio prior to 1995. Dan C. Chung, CFA, and Andrew Silverberg are the individuals responsible for the day-to-day management of portfolio investments.
o Mr. Chung, manager of the portfolio since September 2001, has been employed by the Manager since 1994 as a Vice President and analyst from 1996 to 1999, as a Senior Vice President and senior analyst until 2000, as an Executive Vice President until 2003, as portfolio manager since 2000, as Chief Investment Officer since September 2001 and as President since 2003.
o Mr. Silverberg, assistant portfolio manager of the portfolio since September 2003, has been employed by the Manager as a Vice President and senior analyst since December 2004, as an analyst from October 2004 to December 2004 and as an Assistant Vice President from September 2002 to December 2004, prior to which period he was a research analyst at Mark Asset Management Corporation from June 1999 until September 2001 and a research intern at MBF Capital Corporation from December 1998 until June 1999.
LEGAL PROCEEDINGS
Alger Management has been responding to inquiries, document requests and/or subpoenas from regulatory authorities, including the United States Securities and Exchange Commission ("SEC"), the Office of the New York State Attorney General, and the Attorney General of New Jersey, in connection with their investigation of practices in the mutual fund industry identified as "market timing" and "late trading." Alger Management has assured the Board of the Fund that if it be determined that improper trading practices in the Fund detrimentally affected its performance, Alger Management will make appropriate restitution.
Certain civil actions have developed out of the regulatory investigations. Several purported class actions and shareholder derivative suits have been filed against various parties; including, depending on the lawsuit, Alger Management, certain of the mutual funds managed by Alger Management (the "Alger Mutual Funds"), and certain current and former Alger Mutual Fund trustees and officers, alleging wrongful market-timing and late-trading activities. These cases have been transferred to the U.S. District Court of Maryland by the Judicial Panel on Multidistrict Litigation for consolidated pre-trial proceedings. On September 29, 2004, consolidated amended complaints involving these cases - a Consolidated Amended Fund Derivative Complaint (the "Derivative Complaint") and two substantially identical Consolidated Amended Class Action Complaints (together, the "Class Action Complaint") - were filed in the Maryland federal district court under the caption number 1:04-MD-15863 (JFM).
The Derivative Complaint, brought on behalf of the Alger Mutual Funds and Castle
Convertible Fund, Inc., a registered closed-end fund managed by Alger
Management, alleges (i) violations, by Alger Management and, depending on the
specific offense alleged, by its immediate parent the Distributor (Fred Alger &
Company, Incorporated) and/or the fund trustee defendants, of Sections 36(a),
36(b), 47, and 48 of the Investment Company Act of 1940 and of Sections 206 and
215 of the Investment Advisers Act of 1940, breach of fiduciary duty, and breach
of contract, (ii) various offenses by other, unrelated, third-party defendants,
and (iii) unjust enrichment by all the named defendants, all by virtue of the
alleged wrongful market-timing and late-trading activities. The complaint seeks,
among other things, removal of the trustee defendants and of Alger Management,
certain rescissory relief, disgorgement of management fees and allegedly
unlawful profits, compensatory and punitive monetary damages, and plaintiffs'
fees and expenses (including attorney and expert fees). The Class Action
Complaint names the Alger-related defendants named in the Derivative Complaint
as well as certain defendants not named in the Derivative Complaint, including
certain entities affiliated with Alger Management, certain Alger Mutual Funds,
including the Fund, and certain additional former trustees and a former officer
of the defendant Alger Mutual Funds. It alleges, on the basis of factual
allegations similar to those of the Derivative Complaint with respect to the
Alger defendants, (i) offenses by the Alger defendants similar to those alleged
in the Derivative Complaint, (ii) violations, by Alger Management, the
Distributor, their affiliates, the funds named as defendants, and the current
and former fund trustees and officers, of Sections 11, 12(a)(2) and 15 of the
Securities Act of 1933, Sections 10(b) (and Rule 10b-5 thereunder) and 20(a) of
the Securities Exchange Act of 1934, and Section 34(b) of the Investment Company
Act of 1940, (iii) breach of contract by the funds named as defendants, and (iv)
unjust enrichment by all of the named defendants. It seeks relief similar to
that sought in the Derivative Complaint.
Alger Management does not believe that the foregoing lawsuits will materially affect its ability to perform its management contracts with any of the funds that it manages, and the management of the Fund believes that the Fund will not be materially adversely affected by the pending lawsuits.
SHAREHOLDER INFORMATION
DISTRIBUTOR
Fred Alger & Company, Incorporated
30 Montgomery Street
Jersey City, NJ 07302
TRANSFER AGENT
State Street Bank and Trust Company
c/o Boston Financial Data Services, Inc.
Attn: The Alger American Fund
P.O. Box 8480
Boston, MA 02266-8480
NET ASSET VALUE
The value 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 reliable or 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.
In determining whether market quotations are reliable and readily available, the Manager monitors information it routinely receives for significant events it believes will affect market prices of portfolio instruments held by the Fund. Significant events may affect a particular company (for example, a trading halt in the company's securities on an exchange during the day) or may affect securities markets (for example, a natural disaster such as an earthquake causes a market to close early). If the Manager is aware of a significant event that has occurred after the close of the market where a portfolio instrument is primarily traded, but before the close of the New York Stock Exchange, and the Manager believes that such event has affected or is likely to affect the price of the instrument, the Manager will use its best judgment to determine a fair value for that portfolio instrument under procedures adopted by the Board of Trustees.
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. Dividends and distributions may differ between classes of shares of the portfolio.
Federal income taxation of separate accounts of insurance companies, variable annuity contracts and variable life insurance contracts is discussed in the prospectuses of participating insurance companies. Generally, distributions by the Fund will not be taxable to holders of variable annuity contracts or variable life insurance policies if the insurance company separate accounts to which those distributions are made meet certain requirements, including certain diversification requirements that the Fund has undertaken to meet, under the Internal Revenue Code. Participants in 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 from their plan accounts. Generally, distributions from plan accounts 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.
CLASSES OF FUND SHARES
The portfolio offers two classes of shares: Class O shares and Class S shares. Only Class S shares are offered in this prospectus. Both classes are offered only to separate accounts of insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies and to qualified pension and retirement plans. The classes differ in that, pursuant to a plan adopted under Rule 12b-1 under the Investment Company Act, Class S shares pay a distribution and shareholder servicing fee out of their assets on an ongoing basis to compensate insurance companies and pension and retirement plan service providers for distribution assistance and shareholder services. Over time, these fees will increase the cost of an investment in Class S shares and may cost an investor more than paying other types of sales charges.
PURCHASING AND REDEEMING FUND SHARES
Because 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 Fund or its designated 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 seven days after it accepts a redemption request.
OTHER INFORMATION
The Fund may redeem some of your shares "in kind," which means that some of the proceeds will be paid with securities the portfolio owns instead of cash.
Shares may be worth more or less when you redeem them than they were at the time you bought them.
The Board of Trustees has determined that the Fund may reject purchase orders, on a temporary or permanent basis, from investors that the Manager is able to determine, consistent with its compliance procedures and its reasonable business judgment, are exhibiting a pattern of frequent or short-term trading in Fund shares or shares of other funds sponsored by the Manager.
The Fund might not be able to detect frequent or short-term trading conducted by the underlying owners of shares held in omnibus accounts, and therefore might not be able to effectively prevent frequent or short-term trading in those accounts. There is no guarantee that the Fund's compliance procedures will be successful to identify investors who engage in excessive trading activity or to curtail that activity.
The portfolio posts its month-end full portfolio with a 60-day lag, on its website, www.alger.com. The Fund reserves the right to change the policy for posting portfolio holdings on the website without further notice to shareholders. Following publication of portfolio holdings information on the Fund's website, it may be sent by the Fund to any party.
The Fund and Transfer Agent have reasonable procedures in place to determine that instructions submitted by telephone are genuine. They include requesting personal identification and recording calls. If the Fund and Transfer Agent follow these procedures, they are not liable for acting in good faith on telephone instructions.
[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 portfolio share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in the portfolio (assuming reinvestment of all dividends and distributions). Because Class S shares have been outstanding only since 2002, information is provided also with respect to Class O shares. Class S shares have higher expense ratios and lower total returns. Information shown from the period ended December 31, 2002 through the year ended December 31, 2004 has been audited by Ernst & Young LLP, the Fund's independent registered public accounting firm, whose report, along with the Fund's financial statements, is included in the Annual Report, which is available upon request. Information for the periods prior thereto has been audited by Arthur Andersen LLP.
Note that the Financial Highlights do 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.
INCOME FROM LESS DIVIDENDS
INVESTMENT OPERATIONS AND DISTRIBUTIONS
------------------------------ ------------------------------
NET ASSET NET REALIZED DISTRIBUTIONS
VALUE AND UNREALIZED TOTAL FROM DIVIDENDS FROM FROM NET
BEGINNING NET INVESTMENT GAIN (LOSS) INVESTMENT NET INVESTMENT REALIZED
OF PERIOD INCOME (LOSS) ON INVESTMENTS OPERATIONS INCOME GAINS
--------- ------------- -------------- ----------- --------------- -------------
ALGER AMERICAN MIDCAP
GROWTH PORTFOLIO
CLASS S
Year ended 12/31/04 ..................... $18.33 $(0.15)(ii) $ 2.49 $ 2.34 $ -- $ --
Year ended 12/31/03 ..................... 12.43 (0.14) 6.04 5.90 -- --
Eight months ended 12/31/02(i)(iii) ..... 16.69 (0.07) (4.19) (4.26) -- --
CLASS O
Year ended 12/31/04 ..................... $18.40 $(0.11) $ 2.51 $ 2.40 $ -- $ --
Year ended 12/31/03 ..................... 12.45 (0.05) 6.00 5.95 -- --
Year ended 12/31/02 ..................... 17.67 (0.10) (5.12) (5.22) -- --
Year ended 12/31/01 ..................... 30.62 (0.09)(ii) (1.23) (1.32) -- (11.63)
Year ended 12/31/00 ..................... 32.23 (0.03)(ii) 2.79 2.76 -- (4.37)
------------------------------------------------------------------------------------------------------------------------------------
|
(i) Ratios have been annualized; total return has not been annualized.
(ii) Amount was computed based on average shares outstanding during the year.
(iii) Commenced operations May 1, 2002.
RATIOS/SUPPLEMENTAL DATA
------------------------------------
RATIO
OF NET
RATIO OF INVESTMENT
NET ASSET NET ASSETS, EXPENSES INCOME (LOSS) PORTFOLIO
TOTAL VALUE, END TOTAL END OF PERIOD TO AVERAGE TO AVERAGE TURNOVER
DISTRIBUTIONS OF PERIOD RETURN (000'S OMITTED) NET ASSETS NET ASSET RATE
------------- --------- -------- --------------- ---------- ------------ ---------
ALGER AMERICAN MIDCAP
GROWTH PORTFOLIO
CLASS S
Year ended 12/31/04 ................... $ -- $ 20.67 12.77% $ 4,636 1.17% (0.82)% 229.17%
Year ended 12/31/03 ................... -- 18.33 47.47 43 1.18 (0.94) 196.43
Eight months ended 12/31/02(i)(iii) ... -- 12.43 (25.52) 8 1.19 (0.75) 323.83
CLASS O
Year ended 12/31/04 ................... $ -- $ 20.80 13.04% $482,868 0.92% (0.62)% 229.17%
Year ended 12/31/03 ................... -- 18.40 47.79 414,590 0.93 (0.70) 196.43
Year ended 12/31/02 ................... -- 12.45 (29.54) 240,063 0.93 (0.56) 323.83
Year ended 12/31/01 ................... (11.63) 17.67 (6.52) 355,015 0.88 (0.45) 130.11
Year ended 12/31/00 ................... (4.37) 30.62 9.18 332,734 0.84 (0.09) 130.85
|
FOR FUND INFORMATION:
By telephone: (800) 992-3863
By mail: Boston Financial Data Services, Inc.
Attn: The Alger American Fund
P.O. Box 8480
Boston, MA 02266-8480
|
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, at the Fund's website at http://www. alger.com 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 of the Fund, by calling the Fund's toll-free number, at the Fund's website at http://www. alger.com or by writing to the address above.
Another way you can review and copy Fund documents is by visiting the SEC's Public Reference Room in Washington, DC. Copies can also be obtained, for a duplicating fee, by E-mail request to publicinfo@sec.gov or by writing to the SEC's Public Reference Section, Washington, DC 20549-0102. Information on the operation of the Public Reference Room is available by calling (202) 942-8090. Fund documents are also available on the EDGAR database on the SEC's internet site at http://www.sec.gov.
QUARTERLY FUND HOLDINGS
The portfolio files its complete schedule of portfolio holdings with the SEC for the first and third quarter of each fiscal year on Form N-Q. Forms N-Q are available online on the Fund's website at http://www.alger.com or on the SEC's website at http://www.sec.gov. The Fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330. A copy of the most recent quarterly holdings may also be obtained from the Fund by calling (800) 992-3863.
DISTRIBUTOR: FRED ALGER & COMPANY, INCORPORATED
THE ALGER AMERICAN FUND
SEC FILE #811-5550
FRED ALGER & COMPANY, INCORPORATED PRIVACY POLICY
YOUR PRIVACY IS OUR PRIORITY
At Fred Alger & Company, Incorporated ("Alger") we value the confidence you have placed in us. In trusting us with your assets, you provide us with personal and financial data. Alger is committed to maintaining the confidentiality of the personal nonpublic information ("personal information") entrusted to us by our customers. Your privacy is very important to us, and we are dedicated to safeguarding your personal information as we serve your financial needs.
OUR PRIVACY POLICY
We believe you should know about Alger's Privacy Policy and how we collect and protect your personal information. This Privacy Policy ("Policy") describes our practices and policy for collecting, sharing and protecting the personal information of our prospective, current and former customers. The Policy is applicable to Alger and its affiliates, Fred Alger Management, Inc., Alger National Trust Company and Alger Shareholder Services, Inc. as well as the following funds: The Alger Funds, The Alger Institutional Funds, The Alger American Fund, The China-U.S. Growth Fund, Spectra Fund and Castle Convertible Fund, Inc. We are proud of our Policy and hope you will take a moment to read about it.
INFORMATION WE COLLECT
The type of personal information we collect and use varies depending on the Alger products or services you select.
We collect personal information that enables us to serve your financial needs, develop and offer new products and services, and fulfill legal and regulatory requirements. Depending on the products or services you request, we obtain personal information about you from the following sources:
o Information, such as your name, address and social security number, provided on applications and other forms we receive from you or your representative;
o Information from your communications with Alger employees or from your representative, which may be provided to us by telephone, in writing or through Internet transactions; and
o Information about your transactions, such as the purchase and redemption of fund shares, account balances and parties to the transactions, which we receive from our affiliates or other third parties.
SHARING OF PERSONAL INFORMATION
We may share your personal information with our affiliates so that they may process and service your transactions.
However, Alger never sells customer lists to any third party. Further, we do not disclose personal information to nonaffiliated third parties, except as required by law or as permitted by law to service your account, such as follows:
o To third-party service providers that assist us in servicing your accounts (e.g. securities clearinghouses);
o To governmental agencies and law enforcement officials (e.g. valid subpoenas, court orders); and
o To financial institutions that perform marketing services on our behalf or with whom we have joint marketing agreements that provide for the confidentiality of personal information.
OUR SECURITY PRACTICES
We protect your personal information by maintaining physical, electronic and procedural safeguards. When you visit Alger's Internet sites your information is protected by our systems that utilize 128-bit data encryption, Secure Socket Layer (SSL) protocol, user names, passwords and other precautions. We have implemented safeguards to ensure that access to customer information is limited to employees, such as customer service representatives, who require such information to carry out their job responsibilities. Our employees are aware of their strict responsibility to respect the confidentiality of your personal information.
Thank you for choosing to invest with Alger. We value your relationship with us and assure you we will abide by our policy to protect your information.
THIS POLICY STATEMENT IS NOT PART OF THE PROSPECTUS.
THE ALGER AMERICAN FUND
CLASS O SHARES
A POOLED FUNDING VEHICLE FOR:
o VARIABLE ANNUITY CONTRACTS
o VARIABLE LIFE INSURANCE POLICIES
o QUALIFIED PENSION PLANS
o QUALIFIED RETIREMENT PLANS
PROSPECTUS
MAY 1, 2005
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.
[graphic omitted]
THE ALGER
AMERICAN FUND
CLASS O SHARES
ALGER AMERICAN
GROWTH PORTFOLIO
PROSPECTUS
MAY 1, 2005
2 ............Risk/Return Summary: Investments,
Risks & Performance
4 ............Fees and Expenses
4 ............Management and Organization
6 ............Shareholder Information
Distributor .......................6
Transfer Agent ....................6
Net Asset Value ...................6
Dividends and Distributions .......6
Classes of Fund Shares ............6
Purchasing and Redeeming
Fund Shares .....................7
Other Information .................7
8 ............Financial Highlights
Back Cover: How to obtain more information
|
[graphic omitted]
THE ALGER AMERICAN FUND
ALGER AMERICAN GROWTH PORTFOLIO
RISK/RETURN SUMMARY: INVESTMENTS, RISKS & PERFORMANCE
INVESTMENT GOAL AND APPROACH
The Alger American Growth Portfolio seeks long-term capital appreciation.
The portfolio invests primarily in equity securities, such as common or preferred stocks, which are listed on U.S. exchanges or in the over-the-counter market. The portfolio invests primarily in "growth" stocks. The portfolio's Manager, Fred Alger Management, Inc., believes that these companies tend to fall into one of two categories:
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 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 companies that 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 outstanding shares.
[graphic omitted]
PRINCIPAL RISKS
As with any fund that invests in stocks, your investment will fluctuate 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. 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 investments' values.
The portfolio's trading in some stocks may be relatively short-term, meaning the portfolio may buy a security and sell it a short time later 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 and thereby adversely affect portfolio performance.
There may be additional risks applicable to the portfolio because of its investment approach.
To the extent that the portfolio invests in securities other than those that are its primary focus, the principal risks associated with such other investments, described in the Fund's Prospectus and Statement of Addition Information, are pertinent.
[graphic omitted]
PERFORMANCE
The following bar chart and the table beneath it give you some indication of the risks of an investment in the portfolio by showing changes in the portfolio's performance from year to year and by showing how the portfolio's average annual returns for the indicated periods compare with those of an appropriate benchmark index. They 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 the chart does not reflect separate account charges which, if reflected, would lower returns.
The index used in the table is a broad index designed to track a particular market or market segment. No expenses or fees are reflected in the returns for the index, which is unmanaged. All returns for the index assume reinvestment of dividends and interest on the underlying securities that make up the index. Investors cannot invest directly in the index.
ALGER AMERICAN GROWTH PORTFOLIO
[the data below represents a graph in the printed piece]
36.37 13.35 25.75 48.07 33.74 -14.77 -11.81 -32.99 35.16 5.50
95 96 97 98 99 00 01 02 03 04
Best Quarter: 25.93% Q4 1998 Worst Quarter: -20.20% Q3 2002
Average Annual Total Return as of December 31, 2004
Class O
Since
Inception
1 Year 5 Years 10 Years (1/9/89)
--------------------------------------------------------------------
American Growth 5.50% -6.41% 10.70% 12.95%
Russell 1000
Growth Index 6.30% -9.29% 9.60% 10.89%
|
The portfolio also offers Class S shares. Class S and Class O shares differ only in that Class S shares are subject to a distribution and shareholder servicing fee, whereas Class O shares are not. Because of the distribution and shareholder servicing fee, returns will be lower for Class S shares.
[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 Class O shares of the portfolio. The numbers shown below are based on the portfolio's expenses during its fiscal year ended December 31, 2004.
ANNUAL FUND OPERATING
EXPENSES
(expenses that are deducted
SHAREHOLDER from Fund assets)
FEES
(fees paid TOTAL ANNUAL
directly from Management Distribution Other FUND OPERATING
your investment) Fees (12b-1) Fees Expenses EXPENSES
--------------------------------- -----------------------------------------------------
ALGER AMERICAN None .75% None .11% .86%
GROWTH
PORTFOLIO
----------------------------------------------------------------------------------------
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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 portfolio with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in Class O shares of 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 $88 $274 $477 $1,061
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
Other securities the portfolio may invest in are discussed in the Fund's Statement of Additional Information (see back cover of this prospectus).
In times of adverse or unstable market or economic conditions, the portfolio may invest up to 100% of its assets in cash, high-grade bonds, or cash equivalents (such as commercial paper or paper market instruments) for temporary defensive reasons. 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 also hold these types of securities pending the investment of proceeds from the sale of portfolio securities or to meet anticipated redemptions of portfolio shares. The portfolio may not achieve its objective while in a temporary defensive or interim position.
[graphic omitted]
MANAGEMENT AND ORGANIZATION
MANAGER
Fred Alger Management, Inc.
111 Fifth Avenue
New York, NY 10003
The Manager has been an investment adviser since 1964, and manages investments totaling (at 12/31/04) $8.2 billion in mutual fund assets as well as $1.5 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 an annual rate based on a percentage of average daily net assets of .75%.
PORTFOLIO MANAGERS
Fred M. Alger III is the chief market strategist for the portfolio, overseeing the investments of the portfolio since September 2001. Mr. Alger, who founded Fred Alger Management, Inc., has served as Chairman of the Board since 1964, and co-managed the portfolio prior to 1995. Dan C. Chung, CFA is the individual responsible for the day-to-day management of portfolio investments.
o Mr. Chung, manager of the portfolio since September 2004 and co-manager of the portfolio from September 2001 to September 2004, has been employed by the Manager since 1994 as a Vice President and analyst from 1996 to 1999, as a Senior Vice President and senior analyst until 2000, as an Executive Vice President until 2003, as portfolio manager since 2000, as Chief Investment Officer since September 2001 and as President since 2003.
LEGAL PROCEEDINGS
Alger Management has been responding to inquiries, document requests and/or subpoenas from regulatory authorities, including the United States Securities and Exchange Commission ("SEC"), the Office of the New York State Attorney General, and the Attorney General of New Jersey, in connection with their investigation of practices in the mutual fund industry identified as "market timing" and "late trading." Alger Management has assured the Board of the Fund that if it be determined that improper trading practices in the Fund detrimentally affected its performance, Alger Management will make appropriate restitution.
Certain civil actions have developed out of the regulatory investigations. Several purported class actions and shareholder derivative suits have been filed against various parties; including, depending on the lawsuit, Alger Management, certain of the mutual funds managed by Alger Management (the "Alger Mutual Funds"), and certain current and former Alger Mutual Fund trustees and officers, alleging wrongful market-timing and late-trading activities. These cases have been transferred to the U.S. District Court of Maryland by the Judicial Panel on Multidistrict Litigation for consolidated pre-trial proceedings. On September 29, 2004, consolidated amended complaints involving these cases - a Consolidated Amended Fund Derivative Complaint (the "Derivative Complaint") and two substantially identical Consolidated Amended Class Action Complaints (together, the "Class Action Complaint") - were filed in the Maryland federal district court under the caption number 1:04-MD-15863 (JFM).
The Derivative Complaint, brought on behalf of the Alger Mutual Funds and Castle
Convertible Fund, Inc., a registered closed-end fund managed by Alger
Management, alleges (i) violations, by Alger Management and, depending on the
specific offense alleged, by its immediate parent the Distributor (Fred Alger &
Company, Incorporated) and/or the fund trustee defendants, of Sections 36(a),
36(b), 47, and 48 of the Investment Company Act of 1940 and of Sections 206 and
215 of the Investment Advisers Act of 1940, breach of fiduciary duty, and breach
of contract, (ii) various offenses by other, unrelated, third-party defendants,
and (iii) unjust enrichment by all the named defendants, all by virtue of the
alleged wrongful market-timing and late-trading activities. The complaint seeks,
among other things, removal of the trustee defendants and of Alger Management,
certain rescissory relief, disgorgement of management fees and allegedly
unlawful profits, compensatory and punitive monetary damages, and plaintiffs'
fees and expenses (including attorney and expert fees). The Class Action
Complaint names the Alger-related defendants named in the Derivative Complaint
as well as certain defendants not named in the Derivative Complaint, including
certain entities affiliated with Alger Management, certain Alger Mutual Funds,
including the Fund, and certain additional former trustees and a former officer
of the defendant Alger Mutual Funds. It alleges, on the basis of factual
allegations similar to those of the Derivative Complaint with respect to the
Alger defendants, (i) offenses by the Alger defendants similar to those alleged
in the Derivative Complaint, (ii) violations, by Alger Management, the
Distributor, their affiliates, the funds named as defendants, and the current
and former fund trustees and officers, of Sections 11, 12(a)(2) and 15 of the
Securities Act of 1933, Sections 10(b) (and Rule 10b-5 thereunder) and 20(a) of
the Securities Exchange Act of 1934, and Section 34(b) of the Investment Company
Act of 1940, (iii) breach of contract by the funds named as defendants, and (iv)
unjust enrichment by all of the named defendants. It seeks relief similar to
that sought in the Derivative Complaint.
Alger Management does not believe that the foregoing lawsuits will materially affect its ability to perform its management contracts with any of the funds that it manages, and the management of the Fund believes that the Fund will not be materially adversely affected by the pending lawsuits.
[graphic omitted]
SHAREHOLDER INFORMATION
DISTRIBUTOR
Fred Alger & Company, Incorporated
30 Montgomery Street
Jersey City, NJ 07302
TRANSFER AGENT
State Street Bank and Trust Company
c/o Boston Financial Data Services, Inc.
Attn: The Alger American Fund
P.O. Box 8480
Boston, MA 02266-8480
NET ASSET VALUE
The value 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 reliable or 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.
In determining whether market quotations are reliable and readily available, the Manager monitors information it routinely receives for significant events it believes will affect market prices of portfolio instruments held by the Fund. Significant events may affect a particular company (for example, a trading halt in the company's securities on an exchange during the day) or may affect securities markets (for example, a natural disaster such as an earthquake causes a market to close early). If the Manager is aware of a significant event that has occurred after the close of the market where a portfolio instrument is primarily traded, but before the close of the New York Stock Exchange, and the Manager believes that such event has affected or is likely to affect the price of the instrument, the Manager will use its best judgment to determine a fair value for that portfolio instrument under procedures adopted by the Board of Trustees.
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. Dividends and distributions may differ between classes of shares of the portfolio.
Federal income taxation of separate accounts of insurance companies, variable annuity contracts and variable life insurance contracts is discussed in the prospectuses of participating insurance companies. Generally, distributions by the Fund will not be taxable to holders of variable annuity contracts or variable life insurance policies if the insurance company separate accounts to which those distributions are made meet certain requirements, including certain diversification requirements that the Fund has undertaken to meet, under the Internal Revenue Code. Participants in 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 from their plan accounts. Generally, distributions from plan accounts 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.
CLASSES OF FUND SHARES
The portfolio offers two classes of shares: Class O shares and Class S shares. Only Class O shares are offered in this prospectus. Both classes are offered only to separate accounts of insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies and to qualified pension and retirement plans. The classes differ only in that Class S shares are subject to a distribution and shareholder servicing fee, while Class O shares are not.
PURCHASING AND REDEEMING FUND SHARES
Because 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 Fund or its designated 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 seven days after it accepts a redemption request.
OTHER INFORMATION
The Fund may redeem some of your shares "in kind," which means that some of the proceeds will be paid with securities the portfolio owns instead of cash.
Shares may be worth more or less when you redeem them than they were at the time you bought them.
The Board of Trustees has determined that the Fund may reject purchase orders, on a temporary or permanent basis, from investors that the Manager is able to determine, consistent with its compliance procedures and its reasonable business judgment, are exhibiting a pattern of frequent or short-term trading in Fund shares or shares of other funds sponsored by the Manager.
The Fund might not be able to detect frequent or short-term trading conducted by the underlying owners of shares held in omnibus accounts, and therefore might not be able to effectively prevent frequent or short-term trading in those accounts. There is no guarantee that the Fund's compliance procedures will be successful to identify investors who engage in excessive trading activity or to curtail that activity.
The portfolio posts its month-end full portfolio with a 60-day lag, on its website, www.alger.com. The Fund reserves the right to change the policy for posting portfolio holdings on the website without further notice to shareholders. Following publication of portfolio holdings information on the Fund's website, it may be sent by the Fund to any party.
The Fund and Transfer Agent have reasonable procedures in place to determine that instructions submitted by telephone are genuine. They include requesting personal identification and recording calls. If the Fund and Transfer Agent follow these procedures, they are not liable for acting in good faith on telephone instructions.
[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 portfolio share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in the portfolio (assuming reinvestment of all dividends and distributions). Information for the periods shown from the year ended December 31, 2002 through the year ended December 31, 2004 has been audited by Ernst & Young LLP, the Fund's independent registered public accounting firm, whose report, along with the Fund's financial statements, is included in the Annual Report, which is available upon request. Information for the periods prior thereto has been audited by Arthur Andersen LLP.
Note that the Financial Highlights do 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.
INCOME FROM INVESTMENT OPERATIONS LESS DIVIDENDS AND DISTRIBUTIONS
--------------------------------- ------------------------------
NET ASSET NET REALIZED DISTRIBUTIONS
VALUE AND UNREALIZED TOTAL FROM DIVIDENDS FROM FROM NET
BEGINNING NET INVESTMENT GAIN (LOSS) INVESTMENT NET INVESTMENT REALIZED
OF PERIOD INCOME (LOSS) ON INVESTMENTS OPERATIONS INCOME GAINS
----------- -------------- --------------- ------------ -------------- -----------
ALGER AMERICAN GROWTH PORTFOLIO
CLASS O
Year ended 12/31/04 $33.29 $ 0.07 $ 1.76 $ 1.83 $ -- $ --
Year ended 12/31/03 24.63 (0.02) 8.68 8.66 -- --
Year ended 12/31/02 36.77 (0.01) (12.12) (12.13) (0.01) --
Year ended 12/31/01 47.27 0.01 (4.88) (4.87) (0.10) (5.53)
Year ended 12/31/00 64.38 0.10 (8.75) (8.65) -- (8.46)
--------------------------------------------------------------------------------
|
RATIOS/SUPPLEMENTAL DATA
----------------------------------------
RATIO OF RATIO OF NET
NET ASSET NET ASSETS, EXPENSES INVESTMENT PORTFOLIO
TOTAL VALUE, END END OF PERIOD TO AVERAGE INCOME (LOSS) TO TURNOVER
DISTRIBUTIONS OF PERIOD TOTAL RETURN (000'S OMITTED) NET ASSETS AVERAGE NET ASSETS RATE
------------ --------- ------------ --------------- -------------- ------------------ -------
ALGER AMERICAN GROWTH PORTFOLIO
CLASS O
Year ended 12/31/04 $ -- $35.12 5.50% $1,028,652 0.86% 0.21% 194.25%
Year ended 12/31/03 -- 33.29 35.16 1,115,959 0.85 (0.05) 167.53
Year ended 12/31/02 (0.01) 24.63 (32.99) 874,914 0.85 (0.01) 238.03
Year ended 12/31/01 (5.63) 36.77 (11.81) 1,540,327 0.81 0.03 87.79
Year ended 12/31/00 (8.46) 47.27 (14.77) 1,809,937 0.79 0.12 108.27
--------------------------------------------------------------------------------
|
FOR FUND INFORMATION:
By telephone: (800) 992-3863
By mail: Boston Financial Data Services, Inc.
Attn: The Alger American Fund
P.O. Box 8480
Boston, MA 02266-8480
|
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, at the Fund's website at http://www. alger.com 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 of the Fund, by calling the Fund's toll-free number, at the Fund's website at http://www. alger.com or by writing to the address above.
Another way you can review and copy Fund documents is by visiting the SEC's Public Reference Room in Washington, DC. Copies can also be obtained, for a duplicating fee, by E-mail request to publicinfo@sec.gov or by writing to the SEC's Public Reference Section, Washington, DC 20549-0102. Information on the operation of the Public Reference Room is available by calling (202) 942-8090. Fund documents are also available on the EDGAR database on the SEC's internet site at http://www.sec.gov.
QUARTERLY FUND HOLDINGS
The portfolio files its complete schedule of portfolio holdings with the SEC for the first and third quarter of each fiscal year on Form N-Q. Forms N-Q are available online on the Fund's website at http://www.alger.com or on the SEC's website at http://www.sec.gov. The Fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330. A copy of the most recent quarterly holdings may also be obtained from the Fund by calling (800) 992-3863.
DISTRIBUTOR: FRED ALGER & COMPANY, INCORPORATED
THE ALGER AMERICAN FUND
SEC FILE #811-5550
FRED ALGER & COMPANY, INCORPORATED PRIVACY POLICY
YOUR PRIVACY IS OUR PRIORITY
At Fred Alger & Company, Incorporated ("Alger") we value the confidence you have
placed in us. In trusting us with your assets, you provide us with personal and
financial data. Alger is committed to maintaining the confidentiality of the
personal nonpublic information ("personal information") entrusted to us by our
customers. Your privacy is very important to us, and we are dedicated to
safeguarding your personal information as we serve your financial needs.
OUR PRIVACY POLICY
We believe you should know about Alger's Privacy Policy and how we collect and
protect your personal information. This Privacy Policy ("Policy") describes our
practices and policy for collecting, sharing and protecting the personal
information of our prospective, current and former customers. The Policy is
applicable to Alger and its affiliates, Fred Alger Management, Inc., Alger
National Trust Company and Alger Shareholder Services, Inc. as well as the
following funds: The Alger Funds, The Alger Institutional Funds, The Alger
American Fund, The China-U.S. Growth Fund, Spectra Fund and Castle Convertible
Fund, Inc. We are proud of our Policy and hope you will take a moment to read
about it.
INFORMATION WE COLLECT
The type of personal information we collect and use varies depending on the
Alger products or services you select.
We collect personal information that enables us to serve your financial needs, develop and offer new products and services, and fulfill legal and regulatory requirements. Depending on the products or services you request, we obtain personal information about you from the following sources:
o Information, such as your name, address and social security number, provided on applications and other forms we receive from you or your representative;
o Information from your communications with Alger employees or from your representative, which may be provided to us by telephone, in writing or through Internet transactions; and
o Information about your transactions, such as the purchase and redemption of fund shares, account balances and parties to the transactions, which we receive from our affiliates or other third parties.
SHARING OF PERSONAL INFORMATION
We may share your personal information with our affiliates so that they may
process and service your transactions.
However, Alger never sells customer lists to any third party. Further, we do not disclose personal information to nonaffiliated third parties, except as required by law or as permitted by law to service your account, such as follows:
o To third-party service providers that assist us in servicing your accounts (e.g. securities clearinghouses);
o To governmental agencies and law enforcement officials (e.g. valid subpoenas, court orders); and
o To financial institutions that perform marketing services on our behalf or with whom we have joint marketing agreements that provide for the confidentiality of personal information.
OUR SECURITY PRACTICES
We protect your personal information by maintaining physical, electronic and
procedural safeguards. When you visit Alger's Internet sites your information is
protected by our systems that utilize 128-bit data encryption, Secure Socket
Layer (SSL) protocol, user names, passwords and other precautions. We have
implemented safeguards to ensure that access to customer information is limited
to employees, such as customer service representatives, who require such
information to carry out their job responsibilities. Our employees are aware of
their strict responsibility to respect the confidentiality of your personal
information.
Thank you for choosing to invest with Alger. We value your relationship with us and assure you we will abide by our policy to protect your information.
THIS POLICY STATEMENT IS NOT PART OF THE PROSPECTUS.
THE ALGER AMERICAN FUND
CLASS S SHARES
A POOLED FUNDING VEHICLE FOR:
o VARIABLE ANNUITY CONTRACTS
o VARIABLE LIFE INSURANCE POLICIES
o QUALIFIED PENSION PLANS
o QUALIFIED RETIREMENT PLANS
PROSPECTUS
MAY 1, 2005
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.
[graphic omitted]
THE ALGER
AMERICAN FUND
ALGER AMERICAN
GROWTH PORTFOLIO
CLASS S SHARES
PROSPECTUS
MAY 1, 2005
2 ............Risk/Return Summary: Investments,
Risks & Performance
3 ............Fees and Expenses
4 ............Management and Organization
5 ............Shareholder Information
Distributor .......................5
Transfer Agent ....................5
Net Asset Value ...................5
Dividends and Distributions .......5
Classes of Fund Shares ............5
Purchasing and Redeeming
Fund Shares .....................6
Other Information .................6
8 ............Financial Highlights
Back Cover: How to obtain more information
|
[graphic omitted]
THE ALGER AMERICAN FUND
ALGER AMERICAN GROWTH PORTFOLIO
RISK/RETURN SUMMARY: INVESTMENTS, RISKS & PERFORMANCE
INVESTMENT GOAL AND APPROACH
The Alger American Growth Portfolio seeks long-term capital appreciation.
The portfolio invests primarily in equity securities, such as common or preferred stocks, which are listed on U.S. exchanges or in the over-the-counter market. The portfolio invests primarily in "growth" stocks. The portfolio's Manager, Fred Alger Management, Inc., believes that these companies tend to fall into one of two categories:
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 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 companies that 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 outstanding shares.
[graphic omitted]
PRINCIPAL RISKS
As with any fund that invests in stocks, your investment will fluctuate 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. 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 investments' values.
The portfolio's trading in some stocks may be relatively short-term, meaning the portfolio may buy a security and sell it a short time later 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 and thereby adversely affect portfolio performance.
There may be additional risks applicable to the portfolio because of its investment approach.
To the extent that the portfolio invests in securities other than those that are its primary focus, the principal risks associated with such other investments, described in the Fund's Prospectus and Statement of Additional Information, are pertinent.
[graphic omitted]
PERFORMANCE
The following bar chart and the table beneath it give you some indication of the risks of an investment in the portfolio by showing changes in the portfolio's performance from year to year and by showing how the portfolio's average annual returns for the indicated periods compare with those of an appropriate benchmark index. They 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 the chart does not reflect separate account charges which, if reflected, would lower returns.
The index used in the table is a broad index designed to track a particular market or market segment. No expenses or fees are reflected in the returns for the index, which is unmanaged. All returns for the index assume reinvestment of dividends and interest on the underlying securities that make up the index. Investors cannot invest directly in the index.
o Russell 1000 Growth Index: An index of common stocks designed to track performance of large capitalization companies with greater than average growth orientation.
ALGER AMERICAN GROWTH PORTFOLIO
[the data below represents a graph in the printed piece]
38.82 5.24
03 04
Best Quarter: 17.23% Q2 2003
Worst Quarter: -7.50% Q3 2004
Average Annual Total Return as of December 31, 2004
Class S
Since
Inception
1 Year (5/1/02)
--------------------------------------------------------------------------------
American Growth 5.24% 1.82%
Russell 1000
Growth Index 6.30% 4.05%
|
The portfolio also offers Class O shares. Class S and Class O shares differ only in that Class S shares are subject to a distribution and shareholder servicing fee, whereas Class O shares are not. Because of the distribution and shareholder servicing fee, returns will be lower for Class S shares.
[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 Class S shares of the portfolio. The numbers below are based on the portfolio's expenses during its fiscal year ended December 31, 2004.
ANNUAL FUND OPERATING
EXPENSES
(expenses that are deducted
SHAREHOLDER from Fund assets)
FEES
(fees paid TOTAL ANNUAL
directly from Management Distribution Other FUND OPERATING
your investment) Fees (12b-1) Fees Expenses EXPENSES
--------------------------------- -----------------------------------------------------
ALGER AMERICAN None .75% .25% .11% 1.11%
GROWTH
PORTFOLIO
|
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 portfolio with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in Class S shares of 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 $113 $353 $612 $1,352
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
Other securities the portfolio may invest in are discussed in the Fund's Statement of Additional Information (see back cover of this Prospectus).
In times of adverse or unstable market, economic or political conditions, the portfolio may invest up to 100% of its assets in cash, high-grade bonds, or cash equivalents (such as commercial paper or money market instruments) for temporary defensive reasons. 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 also hold these types of securities pending the investment of proceeds from the sale of portfolio securities or to meet anticipated redemptions of portfolio shares. The portfolio may not achieve its objective while in a temporary defensive or interim position.
[graphic omitted]
MANAGEMENT AND ORGANIZATION
MANAGER
Fred Alger Management, Inc.
111 Fifth Avenue
New York, NY 10003
The Manager has been an investment adviser since 1964, and manages investments totaling (at 12/31/04) $8.2 billion in mutual fund assets as well as $1.5 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 an annual rate based on a percentage of average daily net assets of .75%.
PORTFOLIO MANAGERS
Fred M. Alger III is the chief market strategist for the portfolio, overseeing the investments of the portfolio since September 2001. Mr. Alger, who founded Fred Alger Management, Inc., has served as Chairman of the Board since 1964, and co-managed the portfolio prior to 1995. Dan C. Chung, CFA, as the individual responsible for the day-to-day management of portfolio investments.
o Mr. Chung, manager of the portfolio since September 2004 and co-manager of the portfolio from September 2001 to September 2004, has been employed by the Manager since 1994 as a Vice President and analyst from 1996 to 1999, as a Senior Vice President and senior analyst until 2000, as an Executive Vice President until 2003, as portfolio manager since 2000, as Chief Investment Officer since September 2001 and as President since 2003.
LEGAL PROCEEDINGS
Alger Management has been responding to inquiries, document requests and/or subpoenas from regulatory authorities, including the United States Securities and Exchange Commission ("SEC"), the Office of the New York State Attorney General, and the Attorney General of New Jersey, in connection with their investigation of practices in the mutual fund industry identified as "market timing" and "late trading." Alger Management has assured the Board of the Fund that if it be determined that improper trading practices in the Fund detrimentally affected its performance, Alger Management will make appropriate restitution.
Certain civil actions have developed out of the regulatory investigations. Several purported class actions and shareholder derivative suits have been filed against various parties; including, depending on the lawsuit, Alger Management, certain of the mutual funds managed by Alger Management (the "Alger Mutual Funds"), and certain current and former Alger Mutual Fund trustees and officers, alleging wrongful market-timing and late-trading activities. These cases have been transferred to the U.S. District Court of Maryland by the Judicial Panel on Multidistrict Litigation for consolidated pre-trial proceedings. On September 29, 2004, consolidated amended complaints involving these cases - a Consolidated Amended Fund Derivative Complaint (the "Derivative Complaint") and two substantially identical Consolidated Amended Class Action Complaints (together, the "Class Action Complaint") - were filed in the Maryland federal district court under the caption number 1:04-MD-15863 (JFM).
The Derivative Complaint, brought on behalf of the Alger Mutual Funds and Castle
Convertible Fund, Inc., a registered closed-end fund managed by Alger
Management, alleges (i) violations, by Alger Management and, depending on the
specific offense alleged, by its immediate parent the Distributor (Fred Alger &
Company, Incorporated) and/or the fund trustee defendants, of Sections 36(a),
36(b), 47, and 48 of the Investment Company Act of 1940 and of Sections 206 and
215 of the Investment Advisers Act of 1940, breach of fiduciary duty, and breach
of contract, (ii) various offenses by other, unrelated, third-party defendants,
and (iii) unjust enrichment by all the named defendants, all by virtue of the
alleged wrongful market-timing and late-trading activities. The complaint seeks,
among other things, removal of the trustee defendants and of Alger Management,
certain rescissory relief, disgorgement of management fees and allegedly
unlawful profits, compensatory and punitive monetary damages, and plaintiffs'
fees and expenses (including attorney and expert fees). The Class Action
Complaint names the Alger-related defendants named in the Derivative Complaint
as well as certain defendants not named in the Derivative Complaint, including
certain entities affiliated with Alger Management, certain Alger Mutual Funds,
including the Fund, and certain additional former trustees and a former officer
of the
defendant Alger Mutual Funds. It alleges, on the basis of factual allegations
similar to those of the Derivative Complaint with respect to the Alger
defendants, (i) offenses by the Alger defendants similar to those alleged in the
Derivative Complaint, (ii) violations, by Alger Management, the Distributor,
their affiliates, the funds named as defendants, and the current and former fund
trustees and officers, of Sections 11, 12(a)(2) and 15 of the Securities Act of
1933, Sections 10(b) (and Rule 10b-5 thereunder) and 20(a) of the Securities
Exchange Act of 1934, and Section 34(b) of the Investment Company Act of 1940,
(iii) breach of contract by the funds named as defendants, and (iv) unjust
enrichment by all of the named defendants. It seeks relief similar to that
sought in the Derivative Complaint.
Alger Management does not believe that the foregoing lawsuits will materially affect its ability to perform its management contracts with any of the funds that it manages, and the management of the Fund believes that the Fund will not be materially adversely affected by the pending lawsuits.
[graphic omitted]
SHAREHOLDER INFORMATION
DISTRIBUTOR
Fred Alger & Company, Incorporated
30 Montgomery Street
Jersey City, NJ 07302
TRANSFER AGENT
State Street Bank and Trust Company
c/o Boston Financial Data Services, Inc.
Attn: The Alger American Fund
P.O. Box 8480
Boston, MA 02266-8480
NET ASSET VALUE
The value 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 reliable or 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.
In determining whether market quotations are reliable and readily available, the Manager monitors information it routinely receives for significant events it believes will affect market prices of portfolio instruments held by the Fund. Significant events may affect a particular company (for example, a trading halt in the company's securities on an exchange during the day) or may affect securities markets (for example, a natural disaster such as an earthquake causes a market to close early). If the Manager is aware of a significant event that has occurred after the close of the market where a portfolio instrument is primarily traded, but before the close of the New York Stock Exchange, and the Manager believes that such event has affected or is likely to affect the price of the instrument, the Manager will use its best judgment to determine a fair value for that portfolio instrument under procedures adopted by the Board of Trustees.
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. Dividends and distributions may differ between classes of shares of the portfolio.
Federal income taxation of separate accounts of insurance companies, variable annuity contracts and variable life insurance contracts is discussed in the prospectuses of participating insurance companies. Generally, distributions by the Fund will not be taxable to holders of variable annuity contracts or variable life insurance policies if the insurance company separate accounts to which those distributions are made meet certain requirements, including certain diversification requirements that the Fund has undertaken to meet, under the Internal Revenue Code. Participants in 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 from their plan accounts. Generally, distributions from plan accounts 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.
CLASSES OF FUND SHARES
The portfolio offers two classes of shares: Class O shares and Class S shares. Only Class S shares are offered in this prospectus. Both classes are offered only to separate accounts of insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies and to qualified pension and retirement plans. The classes differ in that, pursuant to a plan
adopted under Rule 12b-1 under the Investment Company Act, Class S shares pay a distribution and shareholder servicing fee out of their assets on an ongoing basis to compensate insurance companies and pension and retirement plan service providers for distribution assistance and shareholder services. Over time, these fees will increase the cost of an investment in Class S shares and may cost an investor more than paying other types of sales charges.
PURCHASING AND REDEEMING FUND SHARES
Because 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 Fund or its designated 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 seven days after it accepts a redemption request.
OTHER INFORMATION
The Fund may redeem some of your shares "in kind," which means that some of the proceeds will be paid with securities the portfolio owns instead of cash.
Shares may be worth more or less when you redeem them than they were at the time you bought them.
The Board of Trustees has determined that the Fund may reject purchase orders, on a temporary or permanent basis, from investors that the Manager is able to determine, consistent with its compliance procedures and its reasonable business judgment, are exhibiting a pattern of frequent or short-term trading in Fund shares or shares of other funds sponsored by the Manager.
The Fund might not be able to detect frequent or short-term trading conducted by the underlying owners of shares held in omnibus accounts, and therefore might not be able to effectively prevent frequent or short-term trading in those accounts. There is no guarantee that the Fund's compliance procedures will be successful to identify investors who engage in excessive trading activity or to curtail that activity.
The portfolio posts its month-end full portfolio with a 60-day lag, on its website, www.alger.com. The Fund reserves the right to change the policy for posting portfolio holdings on the website without further notice to shareholders. Following publication of portfolio holdings information on the Fund's website, it may be sent by the Fund to any party.
The Fund and Transfer Agent have reasonable procedures in place to determine that instructions submitted by telephone are genuine. They include requesting personal identification and recording calls. If the Fund and Transfer Agent follow these procedures, they are not liable for acting in good faith on telephone instructions.
[This page intentionally left blank]
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the portfolio's financial performance for the periods shown. Certain information reflects financial results for a single portfolio share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in the portfolio (assuming reinvestment of all dividends and distributions). Because Class S shares have been outstanding only since 2002, information is provided also with respect to Class O shares. Class S shares have higher expense ratios and lower total returns. Information shown from the period ended December 31, 2002 through the year ended December 31, 2004 has been audited by Ernst & Young LLP, the Fund's independent registered public accounting firm, whose report, along with the Fund's financial statements, is included in the Annual Report, which is available upon request. Information for the periods prior thereto has been audited by Arthur Andersen LLP.
Note that the Financial Highlights do 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.
INCOME FROM INVESTMENT OPERATIONS LESS DIVIDENDS AND DISTRIBUTIONS
--------------------------------- ------------------------------
NET ASSET NET REALIZED DISTRIBUTIONS
VALUE AND UNREALIZED TOTAL FROM DIVIDENDS FROM FROM NET
BEGINNING NET INVESTMENT GAIN (LOSS) INVESTMENT NET INVESTMENT REALIZED
OF PERIOD INCOME (LOSS) ON INVESTMENTS OPERATIONS INCOME GAINS
----------- -------------- --------------- ------------ -------------- -----------
ALGER AMERICAN GROWTH PORTFOLIO
CLASS S
Year ended 12/31/04............... $33.18 $ 0.06 $ 1.68 $ 1.74 $ -- $ --
Year ended 12/31/03............... 24.61 (0.05) 8.62 8.57 -- --
Eight months ended 12/31/02(i)(ii) 33.28 (0.01) (8.66) (8.67) -- --
CLASS O
Year ended 12/31/04............... $33.29 $ 0.07 $ 1.76 $ 1.83 $ -- $ --
Year ended 12/31/03............... 24.63 (0.02) 8.68 8.66 -- --
Year ended 12/31/02............... 36.77 (0.01) (12.12) (12.13) (0.01) --
Year ended 12/31/01............... 47.27 0.01 (4.88) (4.87) (0.10) (5.53)
Year ended 12/31/00............... 64.38 0.10 (8.75) (8.65) -- (8.46)
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(i) Ratios have been annualized; total return has not been annualized.
(ii) Commenced operations May 1, 2002.
RATIOS/SUPPLEMENTAL DATA
---------------------------------------
RATIO OF NET
RATIO OF INVESTMENT
NET ASSET NET ASSETS, EXPENSES INCOME (LOSS) PORTFOLIO
TOTAL VALUE, END END OF PERIOD TO AVERAGE TO AVERAGE TURNOVER
DISTRIBUTIONS OF PERIOD TOTAL RETURN (000'S OMITTED) NET ASSETS NET ASSETS RATE
------------ --------- ------------ --------------- ------------- ------------ ---------
ALGER AMERICAN GROWTH PORTFOLIO
CLASS S
Year ended 12/31/04............... $ -- $34.92 5.24% $ 9,323 1.11% 0.27% 194.25%
Year ended 12/31/03............... -- 33.18 34.82 1,726 1.10 (0.16) 167.53
Eight months ended 12/31/02(i)(ii) -- 24.61 (26.05) 19 1.10 (0.13) 238.03
CLASS O
Year ended 12/31/04............... $ -- $35.12 5.50% $1,028,652 0.86% 0.21% 194.25%
Year ended 12/31/03............... -- 33.29 35.16 1,115,959 0.85 (0.05) 167.53
Year ended 12/31/02............... (0.01) 24.63 (32.99) 874,914 0.85 (0.01) 238.03
Year ended 12/31/01............... (5.63) 36.77 (11.81) 1,540,327 0.81 0.03 87.79
Year ended 12/31/00............... (8.46) 47.27 (14.77) 1,809,937 0.79 0.12 108.27
--------------------------------------------------------------------------------
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FOR FUND INFORMATION:
By telephone: (800) 992-3863
By mail: Boston Financial Data Services, Inc.
Attn: The Alger American Fund
P.O. Box 8480
Boston, MA 02266-8480
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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, at the Fund's website at http://www. alger.com 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 of the Fund, by calling the Fund's toll-free number, at the Fund's website at http://www. alger.com or by writing to the address above.
Another way you can review and copy Fund documents is by visiting the SEC's Public Reference Room in Washington, DC. Copies can also be obtained, for a duplicating fee, by E-mail request to publicinfo@sec.gov or by writing to the SEC's Public Reference Section, Washington, DC 20549-0102. Information on the operation of the Public Reference Room is available by calling (202) 942-8090. Fund documents are also available on the EDGAR database on the SEC's internet site at http://www.sec.gov.
QUARTERLY FUND HOLDINGS
The portfolio files its complete schedule of portfolio holdings with the SEC for the first and third quarter of each fiscal year on Form N-Q. Forms N-Q are available online on the Fund's website at http://www.alger.com or on the SEC's website at http://www.sec.gov. The Fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330. A copy of the most recent quarterly holdings may also be obtained from the Fund by calling (800) 992-3863.
DISTRIBUTOR: FRED ALGER & COMPANY, INCORPORATED
THE ALGER AMERICAN FUND
SEC FILE #811-5550
FRED ALGER & COMPANY, INCORPORATED PRIVACY POLICY
YOUR PRIVACY IS OUR PRIORITY
At Fred Alger & Company, Incorporated ("Alger") we value the confidence you have placed in us. In trusting us with your assets, you provide us with personal and financial data. Alger is committed to maintaining the confidentiality of the personal nonpublic information ("personal information") entrusted to us by our customers. Your privacy is very important to us, and we are dedicated to safeguarding your personal information as we serve your financial needs.
OUR PRIVACY POLICY
We believe you should know about Alger's Privacy Policy and how we collect and protect your personal information. This Privacy Policy ("Policy") describes our practices and policy for collecting, sharing and protecting the personal information of our prospective, current and former customers. The Policy is applicable to Alger and its affiliates, Fred Alger Management, Inc., Alger National Trust Company and Alger Shareholder Services, Inc. as well as the following funds: The Alger Funds, The Alger Institutional Funds, The Alger American Fund, The China-U.S. Growth Fund, Spectra Fund and Castle Convertible Fund, Inc. We are proud of our Policy and hope you will take a moment to read about it.
INFORMATION WE COLLECT
The type of personal information we collect and use varies depending on the Alger products or services you select.
We collect personal information that enables us to serve your financial needs, develop and offer new products and services, and fulfill legal and regulatory requirements. Depending on the products or services you request, we obtain personal information about you from the following sources:
o Information, such as your name, address and social security number, provided on applications and other forms we receive from you or your representative;
o Information from your communications with Alger employees or from your representative, which may be provided to us by telephone, in writing or through Internet transactions; and
o Information about your transactions, such as the purchase and redemption of fund shares, account balances and parties to the transactions, which we receive from our affiliates or other third parties.
SHARING OF PERSONAL INFORMATION
We may share your personal information with our affiliates so that they may process and service your transactions.
However, Alger never sells customer lists to any third party. Further, we do not disclose personal information to nonaffiliated third parties, except as required by law or as permitted by law to service your account, such as follows:
o To third-party service providers that assist us in servicing your accounts (e.g. securities clearinghouses);
o To governmental agencies and law enforcement officials (e.g. valid subpoenas, court orders); and
o To financial institutions that perform marketing services on our behalf or with whom we have joint marketing agreements that provide for the confidentiality of personal information.
OUR SECURITY PRACTICES
We protect your personal information by maintaining physical, electronic and procedural safeguards. When you visit Alger's Internet sites your information is protected by our systems that utilize 128-bit data encryption, Secure Socket Layer (SSL) protocol, user names, passwords and other precautions. We have implemented safeguards to ensure that access to customer information is limited to employees, such as customer service representatives, who require such information to carry out their job responsibilities. Our employees are aware of their strict responsibility to respect the confidentiality of your personal information.
Thank you for choosing to invest with Alger. We value your relationship with us and assure you we will abide by our policy to protect your information.
THIS POLICY STATEMENT IS NOT PART OF THE PROSPECTUS.
THE ALGER AMERICAN FUND
CLASS O SHARES
A POOLED FUNDING VEHICLE FOR:
o VARIABLE ANNUITY CONTRACTS
o VARIABLE LIFE INSURANCE POLICIES
o QUALIFIED PENSION PLANS
0 QUALIFIED RETIREMENT PLANS
PROSPECTUS
MAY 1, 2005
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 any other government agency.
[LOGO OMITTED]
THE ALGER
AMERICAN FUND
ALGER AMERICAN
SMALL CAPITALIZATION
PORTFOLIO
CLASS O SHARES
PROSPECTUS
MAY 1, 2005
2 ............Risk/Return Summary: Investments,
Risks & Performance
4 ............Fees and Expenses
4 ............Management and Organization
6 ............Shareholder Information
Distributor .......................6
Transfer Agent ....................6
Dividends and Distributions .......6
Classes of Fund Shares ............6
Purchasing and Redeeming
Fund Shares .....................6
Other Information .................7
8 ............Financial Highlights
Back Cover: How to obtain more information
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[GRAPHIC OMITTED]
THE ALGER AMERICAN FUND
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
RISK/RETURN SUMMARY: INVESTMENTS, RISKS & PERFORMANCE
INVESTMENTS GOAL AND APPROACH
The Alger American Small Capitalization Portfolio seeks long-term capital appreciation.
The portfolio invests primarily in equity securities, such as common or preferred stocks, which are listed on U.S. exchanges or in the over-the-counter market. The portfolio invests primarily in "growth" stocks. The portfolio's Manager, Fred Alger Management, Inc., believes that these companies tend to fall into one of two categories:
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 must take into account a company's market capitalization when considering it for investment. The market capitalization of a company is its price per share multiplied by its number of outstanding shares.
The portfolio focuses on small, fast-growing companies that offer innovative products, services or technologies to a rapidly-expanding marketplace. Under normal circumstances, the portfolio invests at least 80% of its net assets in the equity securities of companies that, at the time of purchase of the securities, have a total market capitalization within the range of the companies included in the Russell 2000 Growth Index or the S&P SmallCap 600 Index, updated quarterly. Both indexes are broad indexes of small capitalization stocks.
[GRAPHIC OMITTED]
PRINCIPAL RISKS
As with any fund that invests in stocks, your investment will fluctuate 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. 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 investments' values.
The portfolio's trading in some stocks may be relatively short-term, meaning the portfolio may buy a security and sell it a short time later 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 and thereby adversely affect portfolio performance.
There may be additional risks applicable to the portfolio because of its investment approach.
To the extent that the portfolio invests in securities other than those that are its primary focus, the principal risks associated with such other investments, described in the Fund's Prospectus and Statement of Addition Information, are pertinent.
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 product lines or financial resources
[GRAPHIC OMITTED]
PERFORMANCE
The following bar chart and the table beneath it give you some indication of the risks of an investment in the portfolio by showing changes in the portfolio's performance from year to year and by showing how the portfolio's average annual returns for the indicated periods compare with those of an appropriate benchmark index. They 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 the chart does not reflect separate account charges which, if reflected, would lower returns.
The index used in the table is a broad index designed to track a particular market or market segment. No expenses or fees are reflected in the returns for the index, which is unmanaged. All returns for the index assume reinvestment of dividends and interest on the underlying securities that make up the index. Investors cannot invest directly in the index.
o Russell 2000 Growth Index: An index of common stocks designed to track performance of small capitalization companies with greater than average growth orientation.
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
Annual Total Return as of December 31 each year (%) Class O
[THE DATA BELOW REPRESENTS A GRAPH IN THE PRINTED PIECE]
44.31 4.18 11.39 15.53 43.42 -27.2 -29.51 -26.22 42.34 16.57
95 96 97 98 99 00 01 02 03 04
Best Quarter: 31.06% Q4 1999 Worst Quarter: -26.52% Q1 2001
Average Annual Total Return as of December 31, 2004
Class O Since
Inception
1 Year 5 Years 10 Years (9/21/88)
--------------------------------------------------------------------------------
American Small
Capitalization 16.57% -8.88% 5.71% 10.82%
Russell 2000
Growth Index 14.31% -3.58% 7.11% 8.10%
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The portfolio also offers Class S shares. Class S and Class O shares differ only in that Class S shares are subject to a distribution and shareholder servicing fee, whereas Class O shares are not. Because of the distribution and shareholder servicing fee, returns will be lower for Class S shares.
[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 Class O shares of the portfolio. The numbers shown below are based on the portfolio's expenses during its fiscal year ended December 31, 2004.
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted
from Fund assets)
SHAREHOLDER FEES TOTAL ANNUAL
(fees paid directly from Management Distribution Other FUND OPERATING
your investment) Fees (12b-1) Fees Expenses EXPENSES
------------------------------------------------------------------------------------------------------------------------------------
ALGER AMERICAN SMALL None .85% None .12% .97%
CAPITALIZATION
PORTFOLIO
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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 portfolio with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in Class O shares of 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 $ 99 $ 309 $ 536 $1,190
CAPITALIZATION
PORTFOLIO
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The example above does not reflect charges and deductions which are, or may be, imposed under variable annuity contracts, variable life insurance policies, or pension or retirement plans. Such charges and deductions are described in the prospectus for the contract or policy accompanying this prospectus or in the plan documents.
ADDITIONAL INFORMATION ABOUT
THE FUND'S INVESTMENTS
Other securities the portfolio may invest in are discussed in the Fund's Statement of Additional Information (see back cover of this prospectus).
In times of adverse or unstable market or economic conditions, the portfolio may invest up to 100% of its assets in cash, high-grade bonds, or cash equivalents (such as commercial paper or paper market instruments) for temporary defensive reasons. 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 also hold these types of securities pending the investment of proceeds from the sale of portfolio securities or to meet anticipated redemptions of portfolio shares. The portfolio may not achieve its objective while in a temporary defensive or interim position.
MANAGEMENT AND ORGANIZATION
MANAGER
Fred Alger Management, Inc.
111 Fifth Avenue
New York, NY 10003
The Manager has been an investment adviser since 1964, and manages investments totaling (at 12/31/04) $8.2 billion in mutual fund assets as well as $1.5 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 an annual rate based on a percentage of average daily net assets of .85%.
PORTFOLIO MANAGERS
Fred M. Alger III is the chief market strategist for the portfolio, overseeing the investments of the portfolio since September 2001. Mr. Alger, who founded Fred Alger Management, Inc., has served as Chairman of the Board since 1964, and co-managed the portfolio prior to 1995. Jill Greenwald, CFA, is the individual responsible for the day-to-day management of portfolio investments.
o Ms. Greenwald, manager of the portfolio since November 2001, has been employed by the Manager as a Senior Vice President and portfolio manager since November 2001, prior to which she was employed by the Manager as an analyst and later a senior analyst from 1986 to 1992, as a Managing Director and senior portfolio manager at Chase Manhattan Bank from 1994 through 1999 and as a Senior Vice President and Investment Officer at J&W Seligman & Co. from 1999 until November 2001.
LEGAL PROCEEDINGS
Alger Management has been responding to inquiries, document requests and/or subpoenas from regulatory authorities, including the United States Securities and Exchange Commission ("SEC"), the Office of the New York State Attorney General, and the Attorney General of New Jersey, in connection with their investigation of practices in the mutual fund industry identified as "market timing" and "late trading." Alger Management has assured the Board of the Fund that if it be determined that improper trading practices in the Fund detrimentally affected its performance, Alger Management will make appropriate restitution.
Certain civil actions have developed out of the regulatory investigations. Several purported class actions and shareholder derivative suits have been filed against various parties; including, depending on the lawsuit, Alger Management, certain of the mutual funds managed by Alger Management (the "Alger Mutual Funds"), and certain current and former Alger Mutual Fund trustees and officers, alleging wrongful market-timing and late-trading activities. These cases have been transferred to the U.S. District Court of Maryland by the Judicial Panel on Multidistrict Litigation for consolidated pre-trial proceedings. On September 29, 2004, consolidated amended complaints involving these cases - a Consolidated Amended Fund Derivative Complaint (the "Derivative Complaint") and two substantially identical Consolidated Amended Class Action Complaints (together, the "Class Action Complaint") - were filed in the Maryland federal district court under the caption number 1:04-MD-15863 (JFM).
The Derivative Complaint, brought on behalf of the Alger Mutual Funds and Castle
Convertible Fund, Inc., a registered closed-end fund managed by Alger
Management, alleges (i) violations, by Alger Management and, depending on the
specific offense alleged, by its immediate parent the Distributor (Fred Alger &
Company, Incorporated) and/or the fund trustee defendants, of Sections 36(a),
36(b), 47, and 48 of the Investment Company Act of 1940 and of Sections 206 and
215 of the Investment Advisers Act of 1940, breach of fiduciary duty, and breach
of contract, (ii) various offenses by other, unrelated, third-party defendants,
and (iii) unjust enrichment by all the named defendants, all by virtue of the
alleged wrongful market-timing and late-trading activities. The complaint seeks,
among other things, removal of the trustee defendants and of Alger Management,
certain rescissory relief, disgorgement of management fees and allegedly
unlawful profits, compensatory and punitive monetary damages, and plaintiffs'
fees and expenses (including attorney and expert fees). The Class Action
Complaint names the Alger-related defendants named in the Derivative Complaint
as well as certain defendants not named in the Derivative Complaint, including
certain entities affiliated with Alger Management, certain Alger Mutual Funds,
including the Fund, and certain additional former trustees and a former officer
of the defendant Alger Mutual Funds. It alleges, on the basis of factual
allegations similar to those of the Derivative Complaint with respect to the
Alger defendants, (i) offenses by the Alger defendants similar to those alleged
in the Derivative Complaint, (ii) violations, by Alger Management, the
Distributor, their affiliates, the funds named as defendants, and the current
and former fund trustees and officers, of Sections 11, 12(a)(2) and 15 of the
Securities Act of 1933, Sections 10(b) (and Rule 10b-5 thereunder) and 20(a) of
the Securities Exchange Act of 1934, and Section 34(b) of the Investment Company
Act of 1940, (iii) breach of contract by the funds named as defendants, and (iv)
unjust enrichment by all of the named defendants. It seeks relief similar to
that sought in the Derivative Complaint.
Alger Management does not believe that the foregoing lawsuits will materially affect its ability to perform its management contracts with any of the funds that it manages, and the management of the Fund believes that the Fund will not be materially adversely affected by the pending lawsuits.
[GRAPHIC OMITTED]
SHAREHOLDER INFORMATION
DISTRIBUTOR
Fred Alger & Company, Incorporated
30 Montgomery Street
Jersey City, NJ 07302
TRANSFER AGENT
State Street Bank and Trust Company
c/o Boston Financial Data Services, Inc.
Attn: The Alger American Fund
P.O. Box 8480
Boston, MA 02266-8480
NET ASSET VALUE
The value 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 reliable or 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.
In determining whether market quotations are reliable and readily available, the Manager monitors information it routinely receives for significant events it believes will affect market prices of portfolio instruments held by the Fund. Significant events may affect a particular company (for example, a trading halt in the company's securities on an exchange during the day) or may affect securities markets (for example, a natural disaster such as an earthquake causes a market to close early). If the Manager is aware of a significant event that has occurred after the close of the market where a portfolio instrument is primarily traded, but before the close of the New York Stock Exchange, and the Manager believes that such event has affected or is likely to affect the price of the instrument, the Manager will use its best judgment to determine a fair value for that portfolio instrument under procedures adopted by the Board of Trustees.
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. Dividends and distributions may differ between classes of shares of the portfolio.
Federal income taxation of separate accounts of insurance companies, variable annuity contracts and variable life insurance contracts is discussed in the prospectuses of participating insurance companies. Generally, distributions by the Fund will not be taxable to holders of variable annuity contracts or variable life insurance policies if the insurance company separate accounts to which those distributions are made meet certain requirements, including certain diversification requirements that the Fund has undertaken to meet, under the Internal Revenue Code. Participants in 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 from their plan accounts. Generally, distributions from plan accounts 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) OF A CLASS OF SHARES IS COMPUTED BY ADDING TOGETHER THE VALUE ALLOCABLE TO THE CLASS OF THE PORTFOLIO'S INVESTMENTS PLUS CASH AND OTHER ASSETS, SUBTRACTING THE APPLICABLE LIABILITIES AND THEN DIVIDING THE RESULT BY THE NUMBER OF OUTSTANDING SHARES OF THE CLASS.
CLASSES OF FUND SHARES
The portfolio offers two classes of shares: Class O shares and Class S shares. Only Class O shares are offered in this prospectus. Both classes are offered only to separate accounts of insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies and to qualified pension and retirement plans. The classes differ only in that Class S shares are subject to a distribution and shareholder servicing fee, while Class O shares are not.
PURCHASING AND REDEEMING FUND SHARES
Because 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 Fund or its designated 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 seven days after it accepts a redemption request.
OTHER INFORMATION
The Fund may redeem some of your shares "in kind," which means that some of the proceeds will be paid with securities the portfolio owns instead of cash.
Shares may be worth more or less when you redeem them than they were at the time you bought them.
The Board of Trustees has determined that the Fund may reject purchase orders, on a temporary or permanent basis, from investors that the Manager is able to determine, consistent with its compliance procedures and its reasonable business judgment, are exhibiting a pattern of frequent or short-term trading in Fund shares or shares of other funds sponsored by the Manager.
The Fund might not be able to detect frequent or short-term trading conducted by the underlying owners of shares held in omnibus accounts, and therefore might not be able to effectively prevent frequent or short-term trading in those accounts. There is no guarantee that the Fund's compliance procedures will be successful to identify investors who engage in excessive trading activity or to curtail that activity.
The portfolio posts its month-end full portfolio with a 60-day lag, on its website, www.alger.com. The Fund reserves the right to change the policy for posting portfolio holdings on the website without further notice to shareholders. Following publication of portfolio holdings information on the Fund's website, it may be sent by the Fund to any party.
The Fund and Transfer Agent have reasonable procedures in place to determine that instructions submitted by telephone are genuine. They include requesting personal identification and recording calls. If the Fund and Transfer Agent follow these procedures, they are not liable for acting in good faith on telephone instructions.
[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 portfolio share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in the portfolio (assuming reinvestment of all dividends and distributions). Information for the periods shown from the year ended December 31, 2002 through the year ended December 31, 2004 has been audited by Ernst & Young LLP, the Fund's independent registered public accounting firm, whose report, along with the Fund's financial statements, is included in the Annual Report, which is available upon request. Information for the periods prior thereto has been audited by Arthur Andersen LLP.
Note that the Financial Highlights do 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.
INCOME FROM INVESTMENT OPERATIONS LESS DIVIDENDS AND DISTRIBUTIONS
--------------------------------- ------------------------------
NET ASSET NET REALIZED DISTRIBUTIONS
VALUE AND UNREALIZED TOTAL FROM DIVIDENDS FROM FROM NET
BEGINNING NET INVESTMENT GAIN (LOSS) INVESTMENT NET INVESTMENT REALIZED
OF PERIOD INCOME (LOSS) ON INVESTMENTS OPERATIONS INCOME GAINS
----------- -------------- --------------- ------------ -------------- -----------
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
CLASS O
Year ended 12/31/04 ............. $17.38 $(0.27) $ 3.15 $ 2.88 $ -- $ --
Year ended 12/31/03 ............. 12.21 (0.15) 5.32 5.17 -- --
Year ended 12/31/02 ............. 16.55 (0.11) (4.23) (4.34) -- --
Year ended 12/31/01 ............. 23.49 (0.03) (6.90) (6.93) (0.01) --
Year ended 12/31/00 ............. 55.15 0.01(i) (12.80) (12.79) -- (18.87)
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NET ASSET
TOTAL VALUE, END
DISTRIBUTIONS OF PERIOD TOTAL RETURN
------------ --------- ------------
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
CLASS O
Year ended 12/31/04 ............. $ -- $20.26 16.57%
Year ended 12/31/03 ............. -- 17.38 42.34
Year ended 12/31/02 ............. -- 12.21 (26.22)
Year ended 12/31/01 ............. (0.01) 16.55 (29.51)
Year ended 12/31/00 ............. (18.87) 23.49 (27.20)
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RATIOS/SUPPLEMENTAL DATA
-----------------------------------------------------
RATIO OF NET
NET ASSETS, RATIO OF EXPENSES INVESTMENT PORTFOLIO
END OF PERIOD TO AVERAGE INCOME (LOSS) TO TURNOVER
(000'S OMITTED) NET ASSETS AVERAGE NET ASSETS RATE
--------------- ----------------- ------------------ ---------
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
CLASS O
Year ended 12/31/04 ............. $ 484,760 0.97% (0.72)% 135.33%
Year ended 12/31/03 ............. 496,076 0.97 (0.70) 146.69
Year ended 12/31/02 ............. 376,550 0.97 (0.69) 111.82
Year ended 12/31/01 ............. 517,364 0.92 (0.27) 181.80
Year ended 12/31/00 ............. 700,370 0.90 0.03 217.69
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FOR FUND INFORMATION:
By telephone: (800) 992-3863
By mail: Boston Financial Data Services, Inc.
Attn: The Alger American Fund
P.O. Box 8480
Boston, MA 02266-8480
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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, at the Fund's website at http://www.alger.com 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 of the Fund, by calling the Fund's toll-free number, at the Fund's website at http://www.alger.com or by writing to the address above.
Another way you can review and copy Fund documents is by visiting the SEC's Public Reference Room in Washington, DC. Copies can also be obtained, for a duplicating fee, by E-mail request to publicinfo@sec.gov or by writing to the SEC's Public Reference Section, Washington, DC 20549-0102. Information on the operation of the Public Reference Room is available by calling (202) 942-8090. Fund documents are also available on the EDGAR database on the SEC's internet site at http://www.sec.gov.
QUARTERLY FUND HOLDINGS
The portfolio files its complete schedule of portfolio holdings with the SEC for the first and third quarter of each fiscal year on Form N-Q. Forms N-Q are available online on the Fund's website at http://www.alger.com or on the SEC's website at http://www.sec.gov. The Fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330. A copy of the most recent quarterly holdings may also be obtained from the Fund by calling (800) 992-3863.
DISTRIBUTOR: FRED ALGER & COMPANY, INCORPORATED
THE ALGER AMERICAN FUND
SEC FILE #811-5550
FRED ALGER & COMPANY, INCORPORATED PRIVACY POLICY
YOUR PRIVACY IS OUR PRIORITY
At Fred Alger & Company, Incorporated ("Alger") we value the confidence you have
placed in us. In trusting us with your assets, you provide us with personal and
financial data. Alger is committed to maintaining the confidentiality of the
personal nonpublic information ("personal information") entrusted to us by our
customers. Your privacy is very important to us, and we are dedicated to
safeguarding your personal information as we serve your financial needs.
OUR PRIVACY POLICY
We believe you should know about Alger's Privacy Policy and how we collect and
protect your personal information. This Privacy Policy ("Policy") describes our
practices and policy for collecting, sharing and protecting the personal
information of our prospective, current and former customers. The Policy is
applicable to Alger and its affiliates, Fred Alger Management, Inc., Alger
National Trust Company and Alger Shareholder Services, Inc. as well as the
following funds: The Alger Funds, The Alger Institutional Funds, The Alger
American Fund, The China-U.S. Growth Fund, Spectra Fund and Castle Convertible
Fund, Inc. We are proud of our Policy and hope you will take a moment to read
about it.
INFORMATION WE COLLECT
The type of personal information we collect and use varies depending on the
Alger products or services you select.
We collect personal information that enables us to serve your financial needs, develop and offer new products and services, and fulfill legal and regulatory requirements. Depending on the products or services you request, we obtain personal information about you from the following sources:
o Information, such as your name, address and social security number, provided on applications and other forms we receive from you or your representative;
o Information from your communications with Alger employees or from your representative, which may be provided to us by telephone, in writing or through Internet transactions; and
o Information about your transactions, such as the purchase and redemption of fund shares, account balances and parties to the transactions, which we receive from our affiliates or other third parties.
SHARING OF PERSONAL INFORMATION
We may share your personal information with our affiliates so that they may
process and service your transactions.
However, Alger never sells customer lists to any third party. Further, we do not disclose personal information to nonaffiliated third parties, except as required by law or as permitted by law to service your account, such as follows:
o To third-party service providers that assist us in servicing your accounts (e.g. securities clearinghouses);
o To governmental agencies and law enforcement officials (e.g. valid subpoenas, court orders); and
o To financial institutions that perform marketing services on our behalf or with whom we have joint marketing agreements that provide for the confidentiality of personal information.
OUR SECURITY PRACTICES
We protect your personal information by maintaining physical, electronic and
procedural safeguards. When you visit Alger's Internet sites your information is
protected by our systems that utilize 128-bit data encryption, Secure Socket
Layer (SSL) protocol, user names, passwords and other precautions. We have
implemented safeguards to ensure that access to customer information is limited
to employees, such as customer service representatives, who require such
information to carry out their job responsibilities. Our employees are aware of
their strict responsibility to respect the confidentiality of your personal
information.
Thank you for choosing to invest with Alger. We value your relationship with us and assure you we will abide by our policy to protect your information.
THIS POLICY STATEMENT IS NOT PART OF THE PROSPECTUS.
THE ALGER AMERICAN FUND
CLASS S SHARES
A POOLED FUNDING VEHICLE FOR:
o VARIABLE ANNUITY CONTRACTS
o VARIABLE LIFE INSURANCE POLICIES
o QUALIFIED PENSION PLANS
o QUALIFIED RETIREMENT PLANS
PROSPECTUS
MAY 1, 2005
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 any other government agency.
[graphic omitted]
THE ALGER
AMERICAN FUND
ALGER AMERICAN
SMALL CAPITALIZATION PORTFOLIO
CLASS S SHARES
PROSPECTUS
MAY 1, 2005
2 ............Risk/Return Summary: Investments, Risks & Performance
4 ............Fees and Expenses
4 ............Management and Organization
5 ............Shareholder Information
Distributor .......................5
Transfer Agent ....................5
Net Asset Value ...................5
Dividends and Distributions .......6
Classes of Fund Shares ............6
Purchasing and Redeeming
Fund Shares .....................6
Other Information .................6
8 ............Financial Highlights
Back Cover: How to obtain more information
|
[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.
The portfolio invests primarily in equity securities, such as common or preferred stocks, which are listed on U.S. exchanges or in the over-the-counter market. The portfolio invests primarily in "growth" stocks. The portfolio's Manager, Fred Alger Management, Inc., believes that these companies tend to fall into one of two categories:
|_| High Unit Volume Growth
Vital, creative companies which offer goods or services to a rapidly-expanding marketplace. They include both established and emerging firms, offering new or improved products, or firms simply fulfilling an increased demand for an existing line.
|_| Positive Life Cycle Change
Companies experiencing a major change which is expected to produce advantageous results. These changes may be as varied as new management, products or technologies; restructuring or reorganization; or merger and acquisition.
The portfolio must take into account a company's market capitalization when considering it for investment. The market capitalization of a company is its price per share multiplied by its number of outstanding shares.
The portfolio focuses on small, fast-growing companies that offer innovative products, services or technologies to a rapidly-expanding marketplace. Under normal circumstances, the portfolio invests at least 80% of its net assets in the equity securities of companies that, at the time of purchase of the securities, have a total market capitalization within the range of the companies included in the Russell 2000 Growth Index or the S&P SmallCap 600 Index, updated quarterly. Both indexes are broad indexes of small capitalization stocks.
[graphic omitted]
PRINCIPAL RISKS
As with any fund that invests in stocks, your investment will fluctuate 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. 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 investments' values.
The portfolio's trading in some stocks may be relatively short-term, meaning the portfolio may buy a security and sell it a short time later 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 and thereby adversely affect portfolio performance.
There may be additional risks applicable to the portfolio because of its investment approach.
To the extent that the portfolio invests in securities other than those that are its primary focus, the principal risks associated with such other investments, described in the Fund's Prospectus and Statement of Additional Information, are pertinent.
An additional risk of investing in the portfolio is:
|_| 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 product lines or financial resources.
[graphic omitted]
PERFORMANCE
The following bar chart and the table beneath it give you some indication of the risks of an investment in the portfolio by showing changes in the portfolio's performance from year to year and by showing how the portfolio's average annual returns for the indicated periods compare with those of an appropriate benchmark index. They 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 the chart does not reflect separate account charges which, if reflected, would lower returns.
The index used in the table is a broad index designed to track a particular market or market segment. No expenses or fees are reflected in the returns for the index, which is unmanaged. All returns for the index assume reinvestment of dividends and interest on the underlying securities that make up the index. Investors cannot invest directly in the index.
|_| Russell 2000 Growth Index:An index of common stocks designed to track performance of small capitalization companies with greater than average growth orientation.
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
[the following data represents a graph in the printed piece]
42.00 16.29
03 04
Best Quarter: 16.31% Q2 2003
Worst Quarter: -7.21% Q3 2004
Average Annual Total Return as of December 31, 2004
Class S
Since
Inception
1 Year (5/1/02)
------------------------------------------------------------------------
American Small
Capitalization 16.29% 8.92%
Russell 2000
Growth Index 14.31% 8.20%
|
The portfolio also offers Class O shares. Class S and Class O shares differ only in that Class S shares are subject to a distribution and shareholder servicing fee, whereas Class O shares are not. Because of the distribution and shareholder servicing fee, returns will be lower for Class S shares.
[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 Class S shares of the portfolio. The numbers below are based on the portfolio's expenses during its fiscal year ended December 31, 2004.
ANNUAL FUND OPERATING
EXPENSES
(expenses that are deducted
SHAREHOLDER from Fund assets)
FEES
(fees paid TOTAL ANNUAL
directly from Management Distribution Other FUND OPERATING
your investment) Fees (12b-1) Fees Expenses EXPENSES
--------------------------------- -----------------------------------------------------
ALGER AMERICAN SMALL None .85% .25% .12% 1.22%
CAPITALIZATION
PORTFOLIO
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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 portfolio with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in Class S shares of 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 $124 $387 $670 $1,477
CAPITALIZATION
PORTFOLIO
--------------------------------------------------------------------------------
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The example above does not reflect charges and deductions which are, or may be, imposed under variable annuity contracts, variable life insurance policies, or pension or retirement plans. Such charges and deductions are described in the prospectus for the contract or policy accompanying this prospectus or in the plan documents.
ADDITIONAL INFORMATION ABOUT
THE FUND'S INVESTMENTS
Other securities the portfolio may invest in are discussed in the Fund's Statement of Additional Information (see back cover of this Prospectus).
In times of adverse or unstable market, economic or political conditions, the portfolio may invest up to 100% of its assets in cash, high-grade bonds, or cash equivalents (such as commercial paper or money market instruments) for temporary defensive reasons. 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 also hold these types of securities pending the investment of proceeds from the sale of portfolio securities or to meet anticipated redemptions of portfolio shares. The portfolio may not achieve its objective while in a temporary defensive or interim position.
[graphic omitted]
MANAGEMENT AND ORGANIZATION
MANAGER
Fred Alger Management, Inc.
111 Fifth Avenue
New York, NY 10003
The Manager has been an investment adviser since 1964, and manages investments totaling (at 12/31/04) $8.2 billion in mutual fund assets as well as $1.5 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
Fred M. Alger III is the chief market strategist for the portfolio, overseeing the investments of the portfolio since September 2001. Mr. Alger, who founded Fred Alger Management, Inc., has served as Chairman of the Board since 1964, and co-managed the portfolio prior to 1995. Jill Greenwald, CFA is the individual responsible for the day-to-day management of portfolio investments.
o Ms. Greenwald, manager of the portfolio since November 2001, has been employed by the Manager as a Senior Vice President and portfolio manager since November 2001, prior to which she was employed by the Manager as an analyst and later a senior analyst from 1986 to 1992, as a Managing Director and senior portfolio manager at Chase Manhattan Bank from 1994 through
1999 and as a Senior Vice President and Investment Officer at J&W Seligman & Co. from 1999 until November 2001.
LEGAL PROCEEDINGS
Alger Management has been responding to inquiries, document requests and/or subpoenas from regulatory authorities, including the United States Securities and Exchange Commission ("SEC"), the Office of the New York State Attorney General, and the Attorney General of New Jersey, in connection with their investigation of practices in the mutual fund industry identified as "market timing" and "late trading." Alger Management has assured the Board of the Fund that if it be determined that improper trading practices in the Fund detrimentally affected its performance, Alger Management will make appropriate restitution.
Certain civil actions have developed out of the regulatory investigations. Several purported class actions and shareholder derivative suits have been filed against various parties; including, depending on the lawsuit, Alger Management, certain of the mutual funds managed by Alger Management (the "Alger Mutual Funds"), and certain current and former Alger Mutual Fund trustees and officers, alleging wrongful market-timing and late-trading activities. These cases have been transferred to the U.S. District Court of Maryland by the Judicial Panel on Multidistrict Litigation for consolidated pre-trial proceedings. On September 29, 2004, consolidated amended complaints involving these cases - a Consolidated Amended Fund Derivative Complaint (the "Derivative Complaint") and two substantially identical Consolidated Amended Class Action Complaints (together, the "Class Action Complaint") - were filed in the Maryland federal district court under the caption number 1:04-MD-15863 (JFM).
The Derivative Complaint, brought on behalf of the Alger Mutual Funds and Castle
Convertible Fund, Inc., a registered closed-end fund managed by Alger
Management, alleges (i) violations, by Alger Management and, depending on the
specific offense alleged, by its immediate parent the Distributor (Fred Alger &
Company, Incorporated) and/or the fund trustee defendants, of Sections 36(a),
36(b), 47, and 48 of the Investment Company Act of 1940 and of Sections 206 and
215 of the Investment Advisers Act of 1940, breach of fiduciary duty, and breach
of contract, (ii) various offenses by other, unrelated, third-party defendants,
and (iii) unjust enrichment by all the named defendants, all by virtue of the
alleged wrongful market-timing and late-trading activities. The complaint seeks,
among other things, removal of the trustee defendants and of Alger Management,
certain rescissory relief, disgorgement of management fees and allegedly
unlawful profits, compensatory and punitive monetary damages, and plaintiffs'
fees and expenses (including attorney and expert fees). The Class Action
Complaint names the Alger-related defendants named in the Derivative Complaint
as well as certain defendants not named in the Derivative Complaint, including
certain entities affiliated with Alger Management, certain Alger Mutual Funds,
including the Fund, and certain additional former trustees and a former officer
of the defendant Alger Mutual Funds. It alleges, on the basis of factual
allegations similar to those of the Derivative Complaint with respect to the
Alger defendants, (i) offenses by the Alger defendants similar to those alleged
in the Derivative Complaint, (ii) violations, by Alger Management, the
Distributor, their affiliates, the funds named as defendants, and the current
and former fund trustees and officers, of Sections 11, 12(a)(2) and 15 of the
Securities Act of 1933, Sections 10(b) (and Rule 10b-5 thereunder) and 20(a) of
the Securities Exchange Act of 1934, and Section 34(b) of the Investment Company
Act of 1940, (iii) breach of contract by the funds named as defendants, and (iv)
unjust enrichment by all of the named defendants. It seeks relief similar to
that sought in the Derivative Complaint.
Alger Management does not believe that the foregoing lawsuits will materially affect its ability to perform its management contracts with any of the funds that it manages, and the management of the Fund believes that the Fund will not be materially adversely affected by the pending lawsuits.
[graphic omitted]
SHAREHOLDER INFORMATION
DISTRIBUTOR
Fred Alger & Company, Incorporated
30 Montgomery Street
Jersey City, NJ 07302
TRANSFER AGENT
State Street Bank and Trust Company
c/o Boston Financial Data Services, Inc.
Attn: The Alger American Fund
P.O. Box 8480
Boston, MA 02266-8480
NET ASSET VALUE
The value 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 reliable or 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.
In determining whether market quotations are reliable and readily available, the Manager monitors information it routinely receives for significant events it believes will affect market prices of portfolio instruments held by the Fund. Significant events may affect a particular company (for example, a trading
halt in the company's securities on an exchange during the day) or may affect securities markets (for example, a natural disaster such as an earthquake causes a market to close early). If the Manager is aware of a significant event that has occurred after the close of the market where a portfolio instrument is primarily traded, but before the close of the New York Stock Exchange, and the Manager believes that such event has affected or is likely to affect the price of the instrument, the Manager will use its best judgment to determine a fair value for that portfolio instrument under procedures adopted by the Board of Trustees.
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. Dividends and distributions may differ between classes of shares of the portfolio.
Federal income taxation of separate accounts of insurance companies, variable annuity contracts and variable life insurance contracts is discussed in the prospectuses of participating insurance companies. Generally, distributions by the Fund will not be taxable to holders of variable annuity contracts or variable life insurance policies if the insurance company separate accounts to which those distributions are made meet certain requirements, including certain diversification requirements that the Fund has undertaken to meet, under the Internal Revenue Code. Participants in 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 from their plan accounts. Generally, distributions from plan accounts 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.
CLASSES OF FUND SHARES
The portfolio offers two classes of shares: Class O shares and Class S shares. Only Class S shares are offered in this prospectus. Both classes are offered only to separate accounts of insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies and to qualified pension and retirement plans. The classes differ in that, pursuant to a plan adopted under Rule 12b-1 under the Investment Company Act, Class S shares pay a distribution and shareholder servicing fee out of their assets on an ongoing basis to compensate insurance companies and pension and retirement plan service providers for distribution assistance and shareholder services. Over time, these fees will increase the cost of an investment in Class S shares and may cost an investor more than paying other types of sales charges.
PURCHASING AND REDEEMING FUND SHARES
Because 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 Fund or its designated 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 seven days after it accepts a redemption request.
OTHER INFORMATION
The Fund may redeem some of your shares "in kind," which means that some of the proceeds will be paid with securities the portfolio owns instead of cash.
Shares may be worth more or less when you redeem them than they were at the time you bought them.
The Board of Trustees has determined that the Fund may reject purchase orders, on a temporary or permanent basis, from investors that the Manager is able to determine, consistent with its compliance procedures and its reasonable business judgment, are exhibiting a pattern of frequent or short-term trading in Fund shares or shares of other funds sponsored by the Manager.
The Fund might not be able to detect frequent or short-term trading conducted by the underlying owners of shares held in omnibus accounts, and therefore might not be able to effectively prevent frequent or short-term trading in those accounts. There is no guarantee that the Fund's compliance procedures will be successful to identify investors who engage in excessive trading activity or to curtail that activity.
The portfolio posts its month-end full portfolio with a 60-day lag, on its website, www.alger.com. The Fund reserves the right to change the policy for posting portfolio holdings on the website without further notice to shareholders. Following publication of portfolio holdings information on the Fund's website, it may be sent by the Fund to any party.
The Fund and Transfer Agent have reasonable procedures in place to determine that instructions submitted by telephone are genuine. They include requesting personal identification and recording calls. If the Fund and Transfer Agent follow these procedures, they are not liable for acting in good faith on telephone instructions.
[This page intentionally left blank]
[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 portfolio share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in the portfolio (assuming reinvestment of all dividends and distributions). Because Class S shares have been outstanding only since 2002, information is provided also with respect to Class O shares. Class S shares have higher expense ratios and lower total returns. Information shown from the period ended December 31, 2002 through the year ended December 31, 2004 has been audited by Ernst & Young LLP, the Fund's independent registered public accounting firm, whose report, along with the Fund's financial statements, is included in the Annual Report, which is available upon request. Information for the periods prior thereto has been audited by Arthur Andersen LLP.
Note that the Financial Highlights do 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.
INCOME FROM INVESTMENT OPERATIONS LESS DIVIDENDS AND DISTRIBUTIONS
--------------------------------- ------------------------------
NET ASSET NET REALIZED DISTRIBUTIONS
VALUE AND UNREALIZED TOTAL FROM DIVIDENDS FROM FROM NET
BEGINNING NET INVESTMENT GAIN (LOSS) INVESTMENT NET INVESTMENT REALIZED
OF PERIOD INCOME (LOSS) ON INVESTMENTS OPERATIONS INCOME GAINS
----------- -------------- --------------- ------------ -------------- -----------
ALGER AMERICAN SMALL
CAPITALIZATION PORTFOLIO
CLASS S
Year ended 12/31/04 ............... $17.31 $(0.08) $ 2.90 $ 2.82 $ -- $ --
Year ended 12/31/03 ............... 12.19 (0.15) 5.27 5.12 -- --
Eight months ended 12/31/02(i)(iii) 16.02 (0.08) (3.75) (3.83) -- --
CLASS O
Year ended 12/31/04 ............... $17.38 $(0.27) $ 3.15 $ 2.88 $ -- $ --
Year ended 12/31/03 ............... 12.21 (0.15) 5.32 5.17 -- --
Year ended 12/31/02 ............... 16.55 (0.11) (4.23) (4.34) -- --
Year ended 12/31/01 ............... 23.49 (0.03) (6.90) (6.93) (0.01) --
Year ended 12/31/00 ............... 55.15 0.01(ii) (12.80) (12.79) -- (18.87)
|
(i) Ratios have been annualized; total return has not been annualized.
(ii) Amount was computed based on average shares outstanding during the year.
(iii) Commenced operations May 1, 2002.
RATIOS/SUPPLEMENTAL DATA
-----------------------------------
RATIO OF NET
RATIO OF INVESTMENT
NET ASSET NET ASSETS, EXPENSES INCOME (LOSS) PORTFOLIO
TOTAL VALUE, END END OF PERIOD TO AVERAGE TO AVERAGE TURNOVER
DISTRIBUTIONS OF PERIOD TOTAL RETURN (000'S OMITTED) NET ASSETS NET ASSETS RATE
------------ --------- ------------ --------------- ----------- ------------ ---------
ALGER AMERICAN SMALL
CAPITALIZATION PORTFOLIO
CLASS S
Year ended 12/31/04 ............... $ -- $20.13 16.29% $ 21,809 1.22% (0.98)% 135.33%
Year ended 12/31/03 ............... -- 17.31 42.00 4,556 1.23 (1.02) 146.69
Eight months ended 12/31/02(i)(iii) -- 12.19 (23.91) 7 1.20 (0.87) 111.82
CLASS O
Year ended 12/31/04 ............... $ -- $20.26 16.57% $ 484,760 0.97% (0.72)% 135.33%
Year ended 12/31/03 ............... -- 17.38 42.34 496,076 0.97 (0.70) 146.69
Year ended 12/31/02 ............... -- 12.21 (26.22) 376,550 0.97 (0.69) 111.82
Year ended 12/31/01 ............... (0.01) 16.55 (29.51) 517,364 0.92 (0.27) 181.80
Year ended 12/31/00 ............... (18.87) 23.49 (27.20) 700,370 0.90 0.03 217.69
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FOR FUND INFORMATION:
By telephone: (800) 992-3863
By mail: Boston Financial Data Services, Inc.
Attn: The Alger American Fund
P.O. Box 8480
Boston, MA 02266-8480
|
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, at the Fund's website at http://www. alger.com 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 of the Fund, by calling the Fund's toll-free number, at the Fund's website at http://www. alger.com or by writing to the address above.
Another way you can review and copy Fund documents is by visiting the SEC's Public Reference Room in Washington, DC. Copies can also be obtained, for a duplicating fee, by E-mail request to publicinfo@sec.gov or by writing to the SEC's Public Reference Section, Washington, DC 20549-0102. Information on the operation of the Public Reference Room is available by calling (202) 942-8090. Fund documents are also available on the EDGAR database on the SEC's internet site at http://www.sec.gov.
QUARTERLY FUND HOLDINGS
The portfolio files its complete schedule of portfolio holdings with the SEC for the first and third quarter of each fiscal year on Form N-Q. Forms N-Q are available online on the Fund's website at http://www.alger.com or on the SEC's website at http://www.sec.gov. The Fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330. A copy of the most recent quarterly holdings may also be obtained from the Fund by calling (800) 992-3863.
DISTRIBUTOR: FRED ALGER & COMPANY, INCORPORATED
THE ALGER AMERICAN FUND
SEC FILE #811-5550
FRED ALGER & COMPANY, INCORPORATED PRIVACY POLICY
YOUR PRIVACY IS OUR PRIORITY
At Fred Alger & Company, Incorporated ("Alger") we value the confidence you have placed in us. In trusting us with your assets, you provide us with personal and financial data. Alger is committed to maintaining the confidentiality of the personal nonpublic information ("personal information") entrusted to us by our customers. Your privacy is very important to us, and we are dedicated to safeguarding your personal information as we serve your financial needs.
OUR PRIVACY POLICY
We believe you should know about Alger's Privacy Policy and how we collect and protect your personal information. This Privacy Policy ("Policy") describes our practices and policy for collecting, sharing and protecting the personal information of our prospective, current and former customers. The Policy is applicable to Alger and its affiliates, Fred Alger Management, Inc., Alger National Trust Company and Alger Shareholder Services, Inc. as well as the following funds: The Alger Funds, The Alger Institutional Funds, The Alger American Fund, The China-U.S. Growth Fund, Spectra Fund and Castle Convertible Fund, Inc. We are proud of our Policy and hope you will take a moment to read about it.
INFORMATION WE COLLECT
The type of personal information we collect and use varies depending on the Alger products or services you select. We collect personal information that enables us to serve your financial needs, develop and offer new products and services, and fulfill legal and regulatory requirements. Depending on the products or services you request, we obtain personal information about you from the following sources:
o Information, such as your name, address and social security number, provided on applications and other forms we receive from you or your representative;
o Information from your communications with Alger employees or from your representative, which may be provided to us by telephone, in writing or through Internet transactions; and
o Information about your transactions, such as the purchase and redemption of fund shares, account balances and parties to the transactions, which we receive from our affiliates or other third parties.
SHARING OF PERSONAL INFORMATION
We may share your personal information with our affiliates so that they may process and service your transactions.
However, Alger never sells customer lists to any third party. Further, we do not disclose personal information to nonaffiliated third parties, except as required by law or as permitted by law to service your account, such as follows:
o To third-party service providers that assist us in servicing your accounts (e.g. securities clearinghouses);
o To governmental agencies and law enforcement officials (e.g. valid subpoenas, court orders); and
o To financial institutions that perform marketing services on our behalf or with whom we have joint marketing agreements that provide for the confidentiality of personal information.
OUR SECURITY PRACTICES
We protect your personal information by maintaining physical, electronic and procedural safeguards. When you visit Alger's Internet sites your information is protected by our systems that utilize 128-bit data encryption, Secure Socket Layer (SSL) protocol, user names, passwords and other precautions. We have implemented safeguards to ensure that access to customer information is limited to employees, such as customer service representatives, who require such information to carry out their job responsibilities. Our employees are aware of their strict responsibility to respect the confidentiality of your personal information.
Thank you for choosing to invest with Alger. We value your relationship with us and assure you we will abide by our policy to protect your information.
THIS POLICY STATEMENT IS NOT PART OF THE PROSPECTUS.
THE ALGER AMERICAN FUND
CLASS O SHARES
A POOLED FUNDING VEHICLE FOR:
o VARIABLE ANNUITY CONTRACTS
o VARIABLE LIFE INSURANCE POLICIES
o QUALIFIED PENSION PLANS
o QUALIFIED RETIREMENT PLANS
PROSPECTUS
MAY 1, 2005
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.
[ALGER LOGO]
THE ALGER
AMERICAN FUND
ALGER AMERICAN
LEVERAGED ALLCAP
PORTFOLIO
CLASS O SHARES
PROSPECTUS
MAY 1, 2005
2 ........... Risk/Return Summary: Investments,
Risks & Performance
4 ........... Fees and Expenses
5 ........... Management and Organization
6 ........... Shareholder Information
Distributor ...................... 6
Transfer Agent ................... 6
Net Asset Value .................. 6
Dividends and Distributions ...... 6
Classes of Fund Shares ........... 6
Purchasing and Redeeming
Fund Shares ...................... 6
Other Information ................ 7
8 ........... Financial Highlights
Back Cover: How to obtain more information
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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.
The portfolio invests primarily in equity securities, such as common or preferred stocks, which are listed on U.S. exchanges or in the over-the-counter market. The portfolio invests primarily in "growth" stocks. The portfolio's Manager, Fred Alger Management, Inc., believes that these companies tend to fall into one of two categories:
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 that 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.
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PRINCIPAL RISKS
As with any fund that invests in stocks, your investment will fluctuate 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. 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 investments' values.
The portfolio's trading in some stocks may be relatively short-term, meaning the portfolio may buy a security and sell it a short time later 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 and thereby adversely affect portfolio performance.
There may be additional risks applicable to the portfolio because of its investment approach.
To the extent that the portfolio invests in securities other than those that are its primary focus, the principal risks associated with such other investments, described in the Fund's Prospectus and Statement of Addition Information, are pertinent.
Additional risks of investing in the portfolio are:
o smaller issuers in which the portfolio invests may have limited product lines or financial resources or lack management depth.
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.
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PERFORMANCE
The following bar chart and the table beneath it give you some indication of the risks of an investment in the portfolio by showing changes in the portfolio's performance from year to year and by showing how the portfolio's average annual returns for the indicated periods compare with those of an appropriate benchmark index. They 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 the chart does not reflect separate account charges which, if reflected, would lower returns.
The index used in the table is a broad index designed to track a particular market or market segment. No expenses or fees are reflected in the returns for the index, which is unmanaged. All returns for the index assume reinvestment of dividends and interest on the underlying securities that make up the index. Investors cannot invest directly in the index.
o Russell 3000 Growth Index: An index of common stocks designed to track performance of companies with greater than average growth orientation in general.
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
Annual Total Return as of December 31 each year (%) Class O
[The following represents a bar graph in the original]
Best Quarter: 40.16% Q4 1999 Worst Quarter: -21.93% Q4 2000
Average Annual Total Return as of December 31, 2004
Class O
Since
Inception
1 Year 5 Years (1/25/95)
--------------------------------------------------------------------------------
American Leveraged AllCap 8.19% -9.45% 14.97%
Russell 3000 Growth Index 6.93% -8.88% 9.20%
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The portfolio also offers Class S shares. Class S and Class O shares differ only in that Class S shares are subject to a distribution and shareholder servicing fee, whereas Class O shares are not. Because of the distribution and shareholder servicing fee, returns will be lower for Class S shares.
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FEES AND EXPENSES
Investors incur certain fees and expenses in connection with an investment in the portfolio. The following table shows the fees and expenses that you may incur if you buy and hold Class O shares of the portfolio. The numbers shown below are based on the portfolio's expenses during its fiscal year ended December 31, 2004.
ANNUAL FUND OPERATING
EXPENSES
(expenses that are deducted
from Fund assets)
------------------------------------------------
SHAREHOLDER
FEES TOTAL
(fees paid ANNUAL
directly FUND
from your Management Distribution Other OPERATING
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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 portfolio with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in Class O shares of 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 $99 $309 $536 $1,190
LEVERAGED ALLCAP
PORTFOLIO
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The example above does not reflect charges and deductions which are, or may be, imposed under variable annuity contracts, variable life insurance policies, or pension or retirement plans. Such charges and deductions are described in the prospectus for the contract or policy accompanying this prospectus or in the plan documents.
ADDITIONAL INFORMATION ABOUT
THE FUND'S INVESTMENTS
Other securities the portfolio may invest in are discussed in the Fund's Statement of Additional Information (see back cover of this prospectus).
In times of adverse or unstable market or economic conditions, the portfolio may invest up to 100% of its assets in cash, high-grade bonds, or cash equivalents (such as commercial paper or paper market instruments) for temporary defensive reasons. 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 also hold these types of securities pending the investment of proceeds from the sale of portfolio securities or to meet anticipated redemptions of portfolio shares. The portfolio may not achieve its objective while in a temporary defensive or interim position.
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MANAGEMENT AND ORGANIZATION
MANAGER
Fred Alger Management, Inc.
111 Fifth Avenue
New York, NY 10003
The Manager has been an investment adviser since 1964, and manages investments totaling (at 12/31/04) $8.2 billion in mutual fund assets as well as $1.5 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 an annual rate based on a percentage of average daily net assets of .85%.
PORTFOLIO MANAGERS
Fred M. Alger III is the chief market strategist for the portfolio, overseeing the investments of the portfolio since September 2001. Mr. Alger, who founded Fred Alger Management, Inc., has served as Chairman of the Board since 1964, and co-managed the portfolio prior to 1995. Patrick Kelly, CFA and Teresa McRoberts are the individuals responsible for the day-to-day management of portfolio investments.
o Ms. McRoberts, co-manager of the portfolio since September 2004, has been employed by the Manager as a Senior Vice President and portfolio manager since October 2001, prior to which she was a portfolio manager and partner at Maximus Capital from April 2001 until October 2001, a Vice President and portfolio manager at Morgan Stanley Dean Witter from June 1998 to March 2001 and a principal of that firm from December 2000 to March 2001. Ms. McRoberts had previously been employed by the Manager as a Vice President and senior analyst from July 1994 until May 1998.
o Mr. Kelly, co-manager of the portfolio since September 2004, has been employed by the Manager as a research associate from July 1999 to February 2001, as an Assistant Vice President and associate analyst from February 2001 to September 2001, as a Vice President and analyst from September 2001 to September 2004, and as a Senior Vice President and portfolio manager since September 2004.
LEGAL PROCEEDINGS
Alger Management has been responding to inquiries, document requests and/or subpoenas from regulatory authorities, including the United States Securities and Exchange Commission ("SEC"), the Office of the New York State Attorney General, and the Attor ney General of New Jersey, in connection with their investigation of practices in the mutual fund industry identified as "market timing" and "late trading." Alger Management has assured the Board of the Fund that if it be determined that improper trading practices in the Fund detrimentally affected its performance, Alger Management will make appropriate restitution.
Certain civil actions have developed out of the regulatory investigations. Several purported class actions and shareholder derivative suits have been filed against various parties; including, depending on the lawsuit, Alger Management, certain of the mutual funds managed by Alger Management (the "Alger Mutual Funds"), and certain current and former Alger Mutual Fund trustees and officers, alleging wrongful market-timing and late-trading activities. These cases have been transferred to the U.S. District Court of Maryland by the Judicial Panel on Multidistrict Litigation for consolidated pre-trial proceedings. On September 29, 2004, consolidated amended complaints involving these cases - a Consolidated Amended Fund Derivative Complaint (the "Derivative Complaint") and two substantially identical Consolidated Amended Class Action Complaints (together, the "Class Action Complaint") - were filed in the Maryland federal district court under the caption number 1:04-MD-15863 (JFM).
The Derivative Complaint, brought on behalf of the Alger Mutual Funds and Castle
Convertible Fund, Inc., a registered closed-end fund managed by Alger
Management, alleges (i) violations, by Alger Management and, depending on the
specific offense alleged, by its immediate parent the Distributor (Fred Alger &
Company, Incorporated) and/or the fund trustee defendants, of Sections 36(a),
36(b), 47, and 48 of the Investment Company Act of 1940 and of Sections 206 and
215 of the Investment Advisers Act of 1940, breach of fiduciary duty, and breach
of contract, (ii) various offenses by other, unrelated, third-party defendants,
and (iii) unjust enrichment by all the named defendants, all by virtue of the
alleged wrongful market-timing and late-trading activities. The complaint seeks,
among other things, removal of the trustee defendants and of Alger Management,
certain rescissory relief, disgorgement of management fees and allegedly
unlawful profits, compensatory and punitive monetary damages, and plaintiffs'
fees and expenses (including attorney and expert fees). The Class Action
Complaint names the Alger-related defendants named in the Derivative Complaint
as well as certain defendants not named in the Derivative Complaint, including
certain entities affiliated with Alger Management, certain Alger Mutual Funds,
including the Fund, and certain additional former trustees and a former officer
of the defendant Alger Mutual Funds. It alleges, on the basis of factual
allegations similar to those of the Derivative Complaint with respect to the
Alger defendants, (i) offenses by the Alger defendants similar to those alleged
in the Derivative Complaint, (ii) violations, by Alger Management, the
Distributor, their affiliates, the funds named as defendants, and the current
and former fund trustees and officers, of Sections 11, 12(a)(2) and 15 of the
Securities Act of 1933, Sections 10(b) (and Rule 10b-5 thereunder) and 20(a) of
the Securities Exchange Act of 1934, and Section 34(b) of the Investment Company
Act of 1940, (iii) breach of contract by the funds named as defendants, and (iv)
unjust enrichment by all of the named defendants. It seeks relief similar to that sought in the Derivative Complaint.
Alger Management does not believe that the foregoing lawsuits will materially affect its ability to perform its management contracts with any of the funds that it manages, and the management of the Fund believes that the Fund will not be materially adversely affected by the pending lawsuits.
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SHAREHOLDER INFORMATION
DISTRIBUTOR
Fred Alger & Company, Incorporated
30 Montgomery Street
Jersey City, NJ 07302
TRANSFER AGENT
State Street Bank and Trust Company
c/o Boston Financial Data Services, Inc.
Attn: The Alger American Fund
P.O. Box 8480
Boston, MA 02266-8480
NET ASSET VALUE
The value 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 reliable or 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.
In determining whether market quotations are reliable and readily available, the Manager monitors information it routinely receives for significant events it believes will affect market prices of portfolio instruments held by the Fund. Significant events may affect a particular company (for example, a trading halt in the company's securities on an exchange during the day) or may affect securities markets (for example, a natural disaster such as an earthquake causes a market to close early). If the Manager is aware of a significant event that has occurred after the close of the market where a portfolio instrument is primarily traded, but before the close of the New York Stock Exchange, and the Manager believes that such event has affected or is likely to affect the price of the instrument, the Manager will use its best judgment to determine a fair value for that portfolio instrument under procedures adopted by the Board of Trustees.
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. Dividends and distributions may differ between classes of shares of the portfolio.
Federal income taxation of separate accounts of insurance companies, variable annuity contracts and variable life insurance contracts is discussed in the prospectuses of participating insurance companies. Generally, distributions by the Fund will not be taxable to holders of variable annuity contracts or variable life insurance policies if the insurance company separate accounts to which those distributions are made meet certain requirements, including certain diversification requirements that the Fund has undertaken to meet, under the Internal Revenue Code. Participants in 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 from their plan accounts. Generally, distributions from plan accounts 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.
CLASSES OF FUND SHARES
The portfolio offers two classes of shares: Class O shares and Class S shares. Only Class O shares are offered in this prospectus. Both classes are offered only to separate accounts of insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies and to qualified pension and retirement plans. The classes differ only in that Class S shares are subject to a distribution and shareholder servicing fee, while Class O shares are not.
PURCHASING AND REDEEMING FUND SHARES
Because 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 Fund or its designated 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 seven days after it accepts a redemption request.
OTHER INFORMATION
The Fund may redeem some of your shares "in kind," which means that some of the proceeds will be paid with securities the portfolio owns instead of cash.
Shares may be worth more or less when you redeem them than they were at the time you bought them.
The Board of Trustees has determined that the Fund may reject purchase orders, on a temporary or permanent basis, from investors that the Manager is able to determine, consistent with its compliance procedures and its reasonable business judgment, are exhibiting a pattern of frequent or short-term trading in Fund shares or shares of other funds sponsored by the Manager.
The Fund might not be able to detect frequent or short-term trading conducted by the underlying owners of shares held in omnibus accounts, and therefore might not be able to effectively prevent frequent or short-term trading in those accounts. There is no guarantee that the Fund's compliance procedures will be successful to identify investors who engage in excessive trading activity or to curtail that activity.
The portfolio posts its month-end full portfolio with a 60-day lag, on its website, www.alger.com. The Fund reserves the right to change the policy for posting portfolio holdings on the website without further notice to shareholders. Following publication of portfolio holdings information on the Fund's website, it may be sent by the Fund to any party.
The Fund and Transfer Agent have reasonable procedures in place to determine that instructions submitted by telephone are genuine. They include requesting personal identification and recording calls. If the Fund and Transfer Agent follow these procedures, they are not liable for acting in good faith on telephone instructions.
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FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the portfolio's financial performance for the periods shown. Certain information reflects financial results for a single portfolio share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in the portfolio (assuming reinvestment of all dividends and distributions). Information for the periods shown from the year ended December 31, 2002 through the year ended December 31, 2004 has been audited by Ernst & Young LLP, the Fund's independent registered public accounting firm, whose report, along with the Fund's financial statements, is included in the Annual Report, which is available upon request. Information for the periods prior thereto has been audited by Arthur Andersen LLP.
Note that the Financial Highlights do 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.
INCOME FROM LESS DIVIDENDS
INVESTMENT OPERATIONS AND DISTRIBUTIONS
------------------------------ ------------------------------
NET ASSET NET REALIZED DISTRIBUTIONS
VALUE AND UNREALIZED TOTAL FROM DIVIDENDS FROM FROM NET
BEGINNING NET INVESTMENT GAIN (LOSS) INVESTMENT NET INVESTMENT REALIZED
OF PERIOD INCOME (LOSS) ON INVESTMENTS OPERATIONS INCOME GAINS
--------- ------------- -------------- ----------- --------------- -------------
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
CLASS O
Year ended 12/31/04 ................... $28.09 $(0.07) $ 2.37 $ 2.30 $ -- $ --
Year ended 12/31/03 ................... 20.85 (0.07) 7.31 7.24 -- --
Year ended 12/31/02 ................... 31.55 (0.14) (10.56) (10.70) -- --
Year ended 12/31/01 ................... 38.80 0.00(i) (6.06) (6.06) -- (1.19)
Year ended 12/31/00 ................... 57.97 (0.02)(i) (13.77) (13.79) -- (5.38)
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(i) Amount was computed based on average shares outstanding during the year.
RATIOS/SUPPLEMENTAL DATA
------------------------------------
RATIO
OF NET
RATIO OF INVESTMENT
NET ASSET NET ASSETS, EXPENSES INCOME (LOSS) PORTFOLIO
TOTAL VALUE, END TOTAL END OF PERIOD TO AVERAGE TO AVERAGE TURNOVER
DISTRIBUTIONS OF PERIOD RETURN (000'S OMITTED) NET ASSETS NET ASSET RATE
------------- --------- -------- --------------- ---------- ------------ ---------
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
CLASS O
Year ended 12/31/04 ................... $ -- $30.39 8.19% $380,336 0.97% (0.14)% 182.41%
Year ended 12/31/03 ................... -- 28.09 34.72 382,289 0.97 (0.36) 161.71
Year ended 12/31/02 ................... -- 20.85 (33.91) 271,373 0.96 (0.49) 203.05
Year ended 12/31/01 ................... (1.19) 31.55 (15.93) 443,209 0.92 0.00 103.03
Year ended 12/31/00 ................... (5.38) 38.80 (24.83) 476,517 0.90 (0.03) 132.28
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FOR FUND INFORMATION:
By telephone: (800) 992-3863
By mail: Boston Financial Data Services, Inc.
Attn: The Alger American Fund
P.O. Box 8480
Boston, MA 02266-8480
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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, at the Fund's website at http://www. alger.com 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 of the Fund, by calling the Fund's toll-free number, at the Fund's website at http://www. alger.com or by writing to the address above.
Another way you can review and copy Fund documents is by visiting the SEC's Public Reference Room in Washington, DC. Copies can also be obtained, for a duplicating fee, by E-mail request to publicinfo@sec.gov or by writing to the SEC's Public Reference Section, Washington, DC 20549-0102. Information on the operation of the Public Reference Room is available by calling (202) 942-8090. Fund documents are also available on the EDGAR database on the SEC's internet site at http://www.sec.gov.
QUARTERLY FUND HOLDINGS
The portfolio files its complete schedule of portfolio holdings with the SEC for the first and third quarter of each fiscal year on Form N-Q. Forms N-Q are available online on the Fund's website at http://www.alger.com or on the SEC's website at http://www.sec.gov. The Fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330. A copy of the most recent quarterly holdings may also be obtained from the Fund by calling (800) 992-3863.
DISTRIBUTOR: FRED ALGER & COMPANY, INCORPORATED
THE ALGER AMERICAN FUND
SEC FILE #811-5550
FRED ALGER & COMPANY, INCORPORATED PRIVACY POLICY
YOUR PRIVACY IS OUR PRIORITY
At Fred Alger & Company, Incorporated ("Alger") we value the confidence you have placed in us. In trusting us with your assets, you provide us with personal and financial data. Alger is committed to maintaining the confidentiality of the personal nonpublic information ("personal information") entrusted to us by our customers. Your privacy is very important to us, and we are dedicated to safeguarding your personal information as we serve your financial needs.
OUR PRIVACY POLICY
We believe you should know about Alger's Privacy Policy and how we collect and protect your personal information. This Privacy Policy ("Policy") describes our practices and policy for collecting, sharing and protecting the personal information of our prospective, current and former customers. The Policy is applicable to Alger and its affiliates, Fred Alger Management, Inc., Alger National Trust Company and Alger Shareholder Services, Inc. as well as the following funds: The Alger Funds, The Alger Institutional Funds, The Alger American Fund, The China-U.S. Growth Fund, Spectra Fund and Castle Convertible Fund, Inc. We are proud of our Policy and hope you will take a moment to read about it.
INFORMATION WE COLLECT
The type of personal information we collect and use varies depending on the Alger products or services you select.
We collect personal information that enables us to serve your financial needs, develop and offer new products and services, and fulfill legal and regulatory requirements. Depending on the products or services you request, we obtain personal information about you from the following sources:
o Information, such as your name, address and social security number, provided on applications and other forms we receive from you or your representative;
o Information from your communications with Alger employees or from your representative, which may be provided to us by telephone, in writing or through Internet transactions; and
o Information about your transactions, such as the purchase and redemption of fund shares, account balances and parties to the transactions, which we receive from our affiliates or other third parties.
SHARING OF PERSONAL INFORMATION
We may share your personal information with our affiliates so that they may process and service your transactions.
However, Alger never sells customer lists to any third party. Further, we do not disclose personal information to nonaffiliated third parties, except as required by law or as permitted by law to service your account, such as follows:
o To third-party service providers that assist us in servicing your accounts (e.g. securities clearinghouses);
o To governmental agencies and law enforcement officials (e.g. valid subpoenas, court orders); and
o To financial institutions that perform marketing services on our behalf or with whom we have joint marketing agreements that provide for the confidentiality of personal information.
OUR SECURITY PRACTICES
We protect your personal information by maintaining physical, electronic and procedural safeguards. When you visit Alger's Internet sites your information is protected by our systems that utilize 128-bit data encryption, Secure Socket Layer (SSL) protocol, user names, passwords and other precautions. We have implemented safeguards to ensure that access to customer information is limited to employees, such as customer service representatives, who require such information to carry out their job responsibilities. Our employees are aware of their strict responsibility to respect the confidentiality of your personal information.
Thank you for choosing to invest with Alger. We value your relationship with us and assure you we will abide by our policy to protect your information.
THIS POLICY STATEMENT IS NOT PART OF THE PROSPECTUS.
THE ALGER AMERICAN FUND
CLASS S SHARES
A POOLED FUNDING VEHICLE FOR:
o VARIABLE ANNUITY CONTRACTS
o VARIABLE LIFE INSURANCE POLICIES
o QUALIFIED PENSION PLANS
o QUALIFIED RETIREMENT PLANS
PROSPECTUS
MAY 1, 2005
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.
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THE ALGER
AMERICAN FUND
ALGER AMERICAN
LEVERAGED ALLCAP
PORTFOLIO
CLASS S SHARES
PROSPECTUS
MAY 1, 2005
TABLE OF CONTENTS
2 ............Risk/Return Summary: Investments,
Risks & Performance
4 ............Fees and Expenses
5 ............Management and Organization
6 ............Shareholder Information
Distributor .......................6
Transfer Agent ....................6
Net Asset Value ...................6
Dividends and Distributions .......6
Classes of Fund Shares ............6
Purchasing and Redeeming
Fund Shares .....................7
Other Information .................7
8 ............Financial Highlights
Back Cover: How to obtain more information
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THE 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.
The portfolio invests primarily in equity securities, such as common or preferred stocks, which are listed on U.S. exchanges or in the over-the-counter market. The prtfolio 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 that 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.
[GRAPHIC OMITTED]
PRINCIPAL RISKS
As with any fund that invests in stocks, your investment will fluctuate 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. 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 investments' values.
The portfolio's trading in some stocks may be relatively short-term, meaning the portfolio may buy a security and sell it a short time later 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 and thereby adversely affect portfolio performance.
There may be additional risks applicable to the portfolio because of its investment approach.
To the extent that the portfolio invests in securities other than those that are its primary focus, the principal risks associated with such other investments, described in the Fund's Prospectus and Statement of Additional Information, are pertinent.
Additional risks of investing in the portfolio are:
o smaller issuers in which the portfolio invests may have limited product lines or financial resources or lack management depth.
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.
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PERFORMANCE
The following bar chart and the table beneath it give you some indication of the risks of an investment in the portfolio by showing changes in the portfolio's performance from year to year and by showing how the portfolio's average annual returns for the indicated periods compare with those of an appropriate benchmark index. They 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 the chart does not reflect separate account charges which, if reflected, would lower returns. The index used in the table is a broad index designed to track a particular market or market segment. No expenses or fees are reflected in the returns for the index, which is unmanaged. All returns for the index assume reinvestment of dividends and interest on the underlying securities that make up the index. Investors cannot invest directly in the index.
o Russell 3000 Growth Index: An index of common stocks designed to track performance of companies with greater than average growth orientation in general.
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
Annual Total Return as of December 31 (%)
Class S
34.23 7.90
03 04
Best Quarter: 16.42% Q2 2003
Worst Quarter: -9.83% Q3 2004
Average Annual Total Return as of December 31, 2004
Class S
Since
Inception
1 Year (5/1/02)
-------------------------------------------------------
American Leveraged
AllCap 7.90% 2.21%
Russell 3000
Growth Index 6.93% 4.36%
|
The portfolio also offers Class O shares. Class S and Class O shares differ only in that Class S shares are subject to a distribution and shareholder servicing fee, whereas Class O shares are not. Because of the distribution and shareholder servicing fee, returns will be lower for Class S shares.
[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 Class S shares of the portfolio. The numbers below are based on the portfolio's expenses during its fiscal year ended December 31, 2004.
ANNUAL FUND OPERATING EXPENSES
(expenses that are deducted from Fund assets)
-----------------------------------------------------------
SHAREHOLDER FEES TOTAL ANNUAL
(fees paid directly Management Distribution Other FUND OPERATING
from your investment Fees (12b-1) Fees Expenses EXPENSES
--------------------------------------------------------------------------------------------------------
ALGER AMERICAN None .85% .25% .12% 1.22%
LEVERAGED ALLCAP
PORTFOLIO
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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 portfolio with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in Class S shares of 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 $124 $387 $670 $1,477
LEVERAGED ALLCAP
PORTFOLIO
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The example above does not reflect charges and deductions which are, or may be, imposed under variable annuity contracts, variable life insurance policies, or pension or retirement plans. Such charges and deductions are described in the prospectus for the contract or policy accompanying this prospectus or in the plan documents.
ADDITIONAL INFORMATION ABOUT
THE FUND'S INVESTMENTS
Other securities the portfolio may invest in are discussed in the Fund's Statement of Additional Information (see back cover of this Prospectus).
In times of adverse or unstable market, economical or political conditions, the portfolio may invest up to 100% of its assets in cash, high-grade bonds, or cash equivalents (such as commercial paper or money market instruments) for temporary defensive reasons. 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 also hold these types of securities pending the investment of proceeds from the sale of portfolio securities or to meet anticipated redemptions of portfolio shares. The portfolio may not achieve its objective while in a temporary defensive or interim position.
[GRAPHIC OMITTED]
MANAGEMENT AND ORGANIZATION
MANAGER
Fred Alger Management, Inc.
111 Fifth Avenue
New York, NY 10003
The Manager has been an investment adviser since 1964, and manages investments totaling (at 12/31/04) $8.2 billion in mutual fund assets as well as $1.5 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 an annual rate based on a percentage of average daily net assets of .85%.
PORTFOLIO MANAGERS
Fred M. Alger III is the chief market strategist for the portfolio, overseeing the investments of the portfolio since September 2001. Mr. Alger, who founded Fred Alger Management, Inc., has served as Chairman of the Board since 1964, and co-managed the portfolio prior to 1995. Patrick Kelly, CFA and Teresa McRoberts are the individuals responsible for the day-to-day management of portfolio investments.
o Mr. Kelly, co-manager of the portfolio since September 2004, has been employed by the Manager as a research associate from July 1999 to February 2001, as an Assistant Vice President and associate analyst from February 2001 to September 2001, as a Vice President and analyst from September 2001 to September 2004, and as a Senior Vice President and portfolio manager since September 2004.
o Ms. McRoberts, co-manager of the portfolio since September 2004, has been employed by the Manager as a Senior Vice President and portfolio manager since October 2001, prior to which she was a portfolio manager and partner at Maximus Capital from April 2001 until October 2001, a Vice President and portfolio manager at Morgan Stanley Dean Witter from June 1998 to March 2001 and a principal of that firm from December 2000 to March 2001. Ms. McRoberts had previously been employed by the Manager as a Vice President and senior analyst from July 1994 until May 1998.
LEGAL PROCEEDINGS
Alger Management has been responding to inquiries, document requests and/or subpoenas from regulatory authorities, including the United States Securities and Exchange Commission ("SEC"), the Office of the New York State Attorney General, and the Attorney General of New Jersey, in connection with their investigation of practices in the mutual fund industry identified as "market timing" and "late trading." Alger Management has assured the Board of the Fund that if it be determined that improper trading practices in the Fund detrimentally affected its performance, Alger Management will make appropriate restitution.
Certain civil actions have developed out of the regulatory investigations. Several purported class actions and shareholder derivative suits have been filed against various parties; including, depending on the lawsuit, Alger Management, certain of the mutual funds managed by Alger Management (the "Alger Mutual Funds"), and certain current and former Alger Mutual Fund trustees and officers, alleging wrongful market-timing and late-trading activities. These cases have been transferred to the U.S. District Court of Maryland by the Judicial Panel on Multidistrict Litigation for consolidated pre-trial proceedings. On September 29, 2004, consolidated amended complaints involving these cases - a Consolidated Amended Fund Derivative Complaint (the "Derivative Complaint") and two substantially identical Consolidated Amended Class Action Complaints (together, the "Class Action Complaint") - were filed in the Maryland federal district court under the caption number 1:04-MD-15863 (JFM).
The Derivative Complaint, brought on behalf of the Alger Mutual Funds and Castle
Convertible Fund, Inc., a registered closed-end fund managed by Alger
Management, alleges (i) violations, by Alger Management and, depending on the
specific offense alleged, by its immediate parent the Distributor (Fred Alger &
Company, Incorporated) and/or the fund trustee defendants, of Sections 36(a),
36(b), 47, and 48 of the Investment Company Act of 1940 and of Sections 206 and
215 of the Investment Advisers Act of 1940, breach of fiduciary duty, and breach
of contract, (ii) various offenses by other, unrelated, third-party defendants,
and (iii) unjust enrichment by all the named defendants, all by virtue of the
alleged wrongful market-timing and late-trading activities. The complaint seeks,
among other things, removal of the trustee defendants and of Alger Management,
certain rescissory relief, disgorgement of management fees and allegedly
unlawful profits, compensatory and punitive monetary damages, and plaintiffs'
fees and expenses (including attorney and expert fees). The Class Action
Complaint names the Alger-related defendants named in the Derivative Complaint
as well as certain defendants not named in the Derivative Complaint, including
certain entities affiliated with Alger Management, certain Alger Mutual Funds,
including the Fund, and certain additional former trustees and a former officer
of the defendant Alger Mutual Funds. It alleges, on the basis of factual
allegations similar to those of the Derivative Complaint with respect to the
Alger defendants, (i) offenses by the Alger defendants similar to those alleged
in the Derivative Complaint, (ii) violations, by Alger Management, the
Distributor, their affiliates, the funds named as defendants, and the current
and former fund trustees and officers, of Sections 11, 12(a)(2) and 15 of the
Securities Act of 1933, Sections 10(b) (and Rule 10b-5 thereunder) and 20(a) of
the Securities Exchange Act of 1934, and Section 34(b) of the Investment Company
Act of 1940, (iii) breach of contract by the funds named as defendants, and (iv)
unjust
enrichment by all of the named defendants. It seeks relief similar to that sought in the Derivative Complaint.
Alger Management does not believe that the foregoing lawsuits will materially affect its ability to perform its management contracts with any of the funds that it manages, and the management of the Fund believes that the Fund will not be materially adversely affected by the pending lawsuits.
[GRAPHIC OMITTED]
SHAREHOLDER INFORMATION
DISTRIBUTOR
Fred Alger & Company, Incorporated
30 Montgomery Street
Jersey City, NJ 07302
TRANSFER AGENT
State Street Bank and Trust Company
c/o Boston Financial Data Services, Inc.
Attn: The Alger American Fund
P.O. Box 8480 Boston, MA 02266-8480
NET ASSET VALUE
The value 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 reliable or 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.
In determining whether market quotations are reliable and readily available, the Manager monitors information it routinely receives for significant events it believes will affect market prices of portfolio instruments held by the Fund. Significant events may affect a particular company (for example, a trading halt in the company's securities on an exchange during the day) or may affect securities markets (for example, a natural disaster such as an earthquake causes a market to close early). If the Manager is aware of a significant event that has occurred after the close of the market where a portfolio instrument is primarily traded, but before the close of the New York Stock Exchange, and the Manager believes that such event has affected or is likely to affect the price of the instrument, the Manager will use its best judgment to determine a fair value for that portfolio instrument under procedures adopted by the Board of Trustees.
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. Dividends and distributions may differ between classes of shares of the portfolio.
Federal income taxation of separate accounts of insurance companies, variable annuity contracts and variable life insurance contracts is discussed in the prospectuses of participating insurance companies. Generally, distributions by the Fund will not be taxable to holders of variable annuity contracts or variable life insurance policies if the insurance company separate accounts to which those distributions are made meet certain requirements, including certain diversification requirements that the Fund has undertaken to meet, under the Internal Revenue Code. Participants in 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 from their plan accounts. Generally, distributions from plan accounts 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) OF A CLASS OF SHARES IS COMPUTED BY ADDING TOGETHER THE VALUE ALLOCABLE TO THE CLASS OF THE PORTFOLIO'S INVESTMENTS PLUS CASH AND OTHER ASSETS, SUBTRACTING APPLICABLE LIABILITIES AND THEN DIVIDING THE RESULT BY THE NUMBER OF OUTSTANDING SHARES OF THE CLASS.
CLASSES OF FUND SHARES
The portfolio offers two classes of shares: Class O shares and Class S shares. Only Class S shares are offered in this prospectus. Both classes are offered only to separate accounts of insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies and to qualified pension and retirement plans. The classes differ in that, pursuant to a plan adopted under Rule 12b-1 under the Investment Company Act, Class S shares pay a distribution and shareholder servicing fee out of their assets on an ongoing basis to compensate insurance companies and pension and retirement plan service providers for distribution assistance and shareholder services. Over time, these fees will increase the cost of an investment in Class S shares and # may cost an investor more than paying other types of sales charges.
PURCHASING AND REDEEMING FUND SHARES
Because 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 Fund or its designated 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 seven days after it accepts a redemption request.
OTHER INFORMATION
The Fund may redeem some of your shares "in kind," which means that some of the proceeds will be paid with securities the portfolio owns instead of cash.
Shares may be worth more or less when you redeem them than they were at the time you bought them.
The Board of Trustees has determined that the Fund may reject purchase orders, on a temporary or permanent basis, from investors that the Manager is able to determine, consistent with its compliance procedures and its reasonable business judgment, are exhibiting a pattern of frequent or short-term trading in Fund shares or shares of other funds sponsored by the Manager.
The Fund might not be able to detect frequent or short-term trading conducted by the underlying owners of shares held in omnibus accounts, and therefore might not be able to effectively prevent frequent or short-term trading in those accounts. There is no guarantee that the Fund's compliance procedures will be successful to identify investors who engage in excessive trading activity or to curtail that activity.
The portfolio posts its month-end full portfolio with a 60-day lag, on its website, WWW.ALGER.COM. The Fund reserves the right to change the policy for posting portfolio holdings on the website without further notice to shareholders. Following publication of portfolio holdings information on the Fund's website, it may be sent by the Fund to any party.
The Fund and Transfer Agent have reasonable procedures in place to determine that instructions submitted by telephone are genuine. They include requesting personal identification and recording calls. If the Fund and Transfer Agent follow these procedures, they are not liable for acting in good faith on telephone instructions.
[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 portfolio share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in the portfolio (assuming reinvestment of all dividends and distributions). Because Class S shares have been outstanding only since 2002, information is provided also with respect to Class O shares. Class S shares have higher expense ratios and lower total returns. Information shown from the period ended December 31, 2002 through the year ended December 31, 2004 has been audited by Ernst & Young LLP, the Fund's independent registered public accounting firm, whose report, along with the Fund's financial statements, is included in the Annual Report, which is available upon request. Information for the periods prior thereto has been audited by Arthur Andersen LLP.
Note that the Financial Highlights do 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.
INCOME FROM INVESTMENT OPERATIONS LESS DIVIDENDS AND DISTRIBUTIONS
--------------------------------- --------------------------------
NET ASSET NET REALIZED DISTRIBUTIONS
VALUE AND UNREALIZED TOTAL FROM DIVIDENDS FROM FROM NET
BEGINNING NET INVESTMENT GAIN (LOSS) INVESTMENT NET INVESTMENT REALIZED
OF PERIOD INCOME (LOSS) ON INVESTMENTS OPERATIONS INCOME GAINS
----------- -------------- --------------- ----------- -------------- -------------
ALGER AMERICAN LEVERAGED
ALLCAP PORTFOLIO
CLASS S
Year ended 12/31/04 $27.96 $(0.04) $ 2.25 $ 2.21 $ -- $ --
Year ended 12/31/03 20.83 (0.16) 7.29 7.13 -- --
Eight months ended 12/31/02(i)(iii) 28.46 (0.02) (7.61) (7.63) -- --
CLASS O
Year ended 12/31/04 $28.09 $(0.07) $ 2.37 $ 2.30 $ -- $ --
Year ended 12/31/03 20.85 (0.07) 7.31 7.24 -- --
Year ended 12/31/02 31.55 (0.14) (10.56) (10.70) -- --
Year ended 12/31/01 38.80 0.00(ii) (6.06) (6.06) -- (1.19)
Year ended 12/31/00 57.97 (0.02)(ii) (13.77) (13.79) -- (5.38)
------------------------------------------------------------------------------------------------------------------------------------
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(i) Ratios have been annualized; total return has not been annualized.
(ii) Amount was computed based on average shares outstanding during the year.
(iii) Commenced operations May 1, 2002.
RATIOS/SUPPLEMENTAL DATA
-----------------------------------
RATIO OF NET
RATIO OF INVESTMENT
NET ASSET NET ASSETS, EXPENSES INCOME (LOSS) PORTFOLIO
TOTAL VALUE, END END OF PERIOD TO AVERAGE TO AVERAGE TURNOVER
DISTRIBUTIONS OF PERIOD TOTAL RETURN (000'S OMITTED) NET ASSETS NET ASSETS RATE
------------- ---------- ------------ --------------- ---------- ------------- ----------
ALGER AMERICAN LEVERAGED
ALLCAP PORTFOLIO
CLASS S
Year ended 12/31/04 $ -- $30.17 7.90% $ 13,772 1.22% (0.31)% 182.41%
Year ended 12/31/03 -- 27.96 34.23 7,328 1.21 (0.63) 161.71
Eight months ended 12/31/02(i)(iii) -- 20.83 (26.81) 281 1.32 (0.92) 203.05
CLASS O
Year ended 12/31/04 $ -- $30.39 8.19% $380,336 0.97% (0.14)% 182.41%
Year ended 12/31/03 -- 28.09 34.72 382,289 0.97 (0.36) 161.71
Year ended 12/31/02 -- 20.85 (33.91) 271,373 0.96 (0.49) 203.05
Year ended 12/31/01 (1.19) 31.55 (15.93) 443,209 0.92 0.00 103.03
Year ended 12/31/00 (5.38) 38.80 (24.83) 476,517 0.90 (0.03) 132.28
------------------------------------------------------------------------------------------------------------------------------------
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FOR FUND INFORMATION:
By telephone: (800) 992-3863
By mail: Boston Financial Data Services, Inc.
Attn: The Alger American Fund
P.O. Box 8480
Boston, MA 02266-8480
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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, at the Fund's website at http://www. alger.com 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 of the Fund, by calling the Fund's toll-free number, at the Fund's website at http://www. alger.com or by writing to the address above.
Another way you can review and copy Fund documents is by visiting the SEC's Public Reference Room in Washington, DC. Copies can also be obtained, for a duplicating fee, by E-mail request to publicinfo@sec.gov or by writing to the SEC's Public Reference Section, Washington, DC 20549-0102. Information on the operation of the Public Reference Room is available by calling (202) 942-8090. Fund documents are also available on the EDGAR database on the SEC's internet site at http://www.sec.gov.
QUARTERLY FUND HOLDINGS
The portfolio files its complete schedule of portfolio holdings with the SEC for the first and third quarter of each fiscal year on Form N-Q. Forms N-Q are available online on the Fund's website at http://www.alger.com or on the SEC's website at http://www.sec.gov. The Fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330. A copy of the most recent quarterly holdings may also be obtained from the Fund by calling (800) 992-3863.
DISTRIBUTOR: FRED ALGER & COMPANY, INCORPORATED
THE ALGER AMERICAN FUND
SEC FILE #811-5550
FRED ALGER & COMPANY, INCORPORATED PRIVACY POLICY
YOUR PRIVACY IS OUR PRIORITY
At Fred Alger & Company, Incorporated ("Alger") we value the confidence you have
placed in us. In trusting us with your assets, you provide us with personal and
financial data. Alger is committed to maintaining the confidentiality of the
personal nonpublic information ("personal information") entrusted to us by our
customers. Your privacy is very important to us, and we are dedicated to
safeguarding your personal information as we serve your financial needs.
OUR PRIVACY POLICY
We believe you should know about Alger's Privacy Policy and how we collect and
protect your personal information. This Privacy Policy ("Policy") describes our
practices and policy for collecting, sharing and protecting the personal
information of our prospective, current and former customers. The Policy is
applicable to Alger and its affiliates, Fred Alger Management, Inc., Alger
National Trust Company and Alger Shareholder Services, Inc. as well as the
following funds: The Alger Funds, The Alger Institutional Funds, The Alger
American Fund, The China-U.S. Growth Fund, Spectra Fund and Castle Convertible
Fund, Inc. We are proud of our Policy and hope you will take a moment to read
about it.
INFORMATION WE COLLECT
The type of personal information we collect and use varies depending on the
Alger products or services you select. We collect personal information that
enables us to serve your financial needs, develop and offer new products and
services, and fulfill legal and regulatory requirements. Depending on the
products or services you request, we obtain personal information about you from
the following sources:
o Information, such as your name, address and social security number, provided on applications and other forms we receive from you or your representative;
o Information from your communications with Alger employees or from your representative, which may be provided to us by telephone, in writing or through Internet transactions; and
o Information about your transactions, such as the purchase and redemption of fund shares, account balances and parties to the transactions, which we receive from our affiliates or other third parties.
SHARING OF PERSONAL INFORMATION
We may share your personal information with our affiliates so that they may
process and service your transactions.
However, Alger never sells customer lists to any third party. Further, we do not disclose personal information to nonaffiliated third parties, except as required by law or as permitted by law to service your account, such as follows:
o To third-party service providers that assist us in servicing your accounts (e.g. securities clearinghouses);
o To governmental agencies and law enforcement officials (e.g. valid subpoenas, court orders); and
o To financial institutions that perform marketing services on our behalf or with whom we have joint marketing agreements that provide for the confidentiality of personal information.
OUR SECURITY PRACTICES
We protect your personal information by maintaining physical, electronic and
procedural safeguards. When you visit Alger's Internet sites your information is
protected by our systems that utilize 128-bit data encryption, Secure Socket
Layer (SSL) protocol, user names, passwords and other precautions. We have
implemented safeguards to ensure that access to customer information is limited
to employees, such as customer service representatives, who require such
information to carry out their job responsibilities. Our employees are aware of
their strict responsibility to respect the confidentiality of your personal
information.
Thank you for choosing to invest with Alger. We value your relationship with us and assure you we will abide by our policy to protect your information.
THIS POLICY STATEMENT IS NOT PART OF THE PROSPECTUS.
THE ALGER AMERICAN FUND
CLASS O SHARES
A POOLED FUNDING VEHICLE FOR:
o VARIABLE ANNUITY CONTRACTS
o VARIABLE LIFE INSURANCE POLICIES
o QUALIFIED PENSION PLANS
o QUALIFIED RETIREMENT PLANS
PROSPECTUS
MAY 1, 2005
ALGER AMERICAN BALANCED PORTFOLIO
As with all mutual funds, the Securities and Exchange Commission has not determined if the information in this Prospectus is accurate or complete, nor has it approved or disapproved these securities. It is a criminal offense to represent otherwise.
An investment in the 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.
[ALGER LOGO OMITTED]
THE ALGER
AMERICAN FUND
ALGER AMERICAN
BALANCED PORTFOLIO
CLASS O SHARES
2 ............Risk/Return Summary: Investments,
.............Risks & Performance
4 ............Fees and Expenses
4 ............Management and Organization
6 ............Shareholder Information
Distributor .......................6
Transfer Agent ....................6
Net Asset Value ...................6
Dividends and Distributions .......6
Classes of Fund Shares ............6
Purchasing and Redeeming
Fund Shares .....................6
Other Information .................7
8 ............Financial Highlights
Back Cover: How to obtain more information
|
[GRAPHIC OMITTED]
THE ALGER AMERICAN FUND
ALGER AMERICAN BALANCED PORTFOLIO
RISK/RETURN SUMMARY: INVESTMENTS, RISKS & PERFORMANCE
INVESTMENT GOAL AND APPROACH
THE ALGER AMERICAN BALANCED PORTFOLIO SEEKS CURRENT INCOME AND LONG-TERM CAPITAL APPRECIATION.
The portfolio invests primarily in equity securities, such as common or preferred stocks, which are listed on U.S. exchanges or in the over-the-counter market. The portfolio invests primarily in "growth" stocks. The portfolio's Manager, Fred Alger Management, Inc., believes that these companies tend to fall into one of two categories:
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 focuses on stocks of companies with growth potential and on fixed-income securities, especially those 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 that are rated within the four highest rating categories by an established rating agency or, if not rated, are determined by the Fund's Manager to be of comparable quality. Under normal circumstances, at least 25% of the portfolio's net assets are invested in fixed-income senior securities.
[GRAPHIC OMITTED]
PRINCIPAL RISKS
As with any fund that invests in stocks, your investment will fluctuate 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. 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 investments' values.
The portfolio's trading in some stocks may be relatively short-term, meaning the portfolio may buy a security and sell it a short time later 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 and thereby adversely affect portfolio performance.
There may be additional risks applicable to the portfolio because of its investment approach.
To the extent that the portfolio invests in securities other than those that are its primary focus, the principal risks associated with such other investments, described in the Fund's Prospectus and Statement of Addition Information, are pertinent.
The primary risks arising from the fixed-income portion of the portfolio are:
o fixed-income securities' sensitivity to interest rate movements; their market values tend to fall when interest rates rise and to rise when interest rates fall.
o the potential for a decline in the value of the portfolio's securities in the event of an issuer's falling credit rating or actual default.
[GRAPHIC OMITTED]
PERFORMANCE
The following bar chart and the table beneath it give you some indication of the risks of an investment in the portfolio by showing changes in the portfolio's performance from year to year and by showing how the portfolio's average annual returns for the indicated periods compare with those of appropriate benchmark indexes. They 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 the chart does not reflect separate account charges which, if reflected, would lower returns.
Each index used in the table 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. Investors cannot invest directly in any index.
o Russell 1000 Growth Index: An index of common stocks designed to track performance of large capitalization companies with greater than average growth orientation.
o Lehman Brothers Government/Credit Bond Index: 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.
[THE DATA BELOW REPRESENTS A GRAPH IN THE PRINTED PIECE]
28.62 10.17 19.82 31.51 29.21 -2.76 -1.93 -12.29 19.03 4.57 ----- ----- ----- ----- ----- ----- ------ ------ ----- ----- 95 96 97 98 99 00 01 02 03 04 |
Best Quarter: 16.94% Q4 1998 Worst Quarter: -6.58% Q4 2000
Average Annual Total Return as of December 31, 2004
Class O
Since
Inception
1 Year 5 Years 10 Years (9/5/89)
---------------------------------------------------------------------
American Balanced 4.57% 0.81% 11.63% 9.26%
Russell 1000
Growth Index 6.30% -9.29% 9.60% 9.51%
Lehman Brothers Gov't/
Credit Bond Index 4.21% 8.00% 7.80% 7.87%
|
The portfolio also offers Class S shares. Class S and Class O shares differ only in that Class S shares are subject to a distribution and shareholder servicing fee, whereas Class O shares are not. Because of the distribution and shareholder servicing fee, returns will be lower for Class S shares.
[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 Class O shares of the portfolio. The numbers shown
below are based on the portfolio's expenses during its fiscal year ended
December 31, 2004.
------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING
EXPENSES
(expenses that are deducted
from Fund assets)
---------------------------------------------------
SHAREHOLDER FEES TOTAL ANNUAL
(fees paid directly Management Distribution Other FUND OPERATING
from your investment) Fees (12b-1) Fees Expenses EXPENSES
===================== ====================== =========== ============= ========= ===============
ALGER AMERICAN None .75% None .12% .87%
BALANCED PORTFOLIO
------------------------------------------------------------------------------------------------
|
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 portfolio with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in Class O shares of 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 $89 $278 $482 $1,073
BALANCED
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
Other securities the portfolio may invest in are discussed in the Fund's Statement of Additional Information (see back cover of this prospectus).
In times of adverse or unstable market or economic conditions, the portfolio may invest up to 100% of its assets in cash, high-grade bonds, or cash equivalents (such as commercial paper or paper market instruments) for temporary defensive reasons. 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 also hold these types of securities pending the investment of proceeds from the sale of portfolio securities or to meet anticipated redemptions of portfolio shares. The portfolio may not achieve its objective while in a temporary defensive or interim position.
[GRAPHIC OMITTED]
MANAGEMENT AND ORGANIZATION
MANAGER
Fred Alger Management, Inc.
111 Fifth Avenue
New York, NY 10003
The Manager has been an investment adviser since 1964, and manages investments totaling (at 12/31/04) $8.2 billion in mutual fund assets as well as $1.5 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 fees at an annual rate based on a percentage of average daily net assets of .75%.
PORTFOLIO MANAGERS
Fred M. Alger III is the chief market strategist for the portfolio, overseeing the investments of the portfolio since September 2001. Mr. Alger, who founded Fred Alger Management, Inc., has served as Chairman of the Board since 1964, and co-managed the portfolio prior to 1995. Kevin Collins, CFA and John A. Curry are the individuals responsible for the day-to-day management of portfolio investments.
o Mr. Collins, co-manager of the portfolio since September 2003, has been employed by the Manager as a Senior Vice President, portfolio manager and senior analyst since September 2003, prior to which period he was employed by the Manager as an analyst and later as a Vice President and senior analyst from 1996 until September 2003.
o Mr. Curry, co-manager of the portfolio since December 2004, has been employed by the Manager as a Vice President and portfolio manager since December 2004. Mr. Curry was previously Vice President at Janney Montgomery Scott, LLC (September 2003 to December 2004), prior to which he was a portfolio manager for Whitehall Asset Management's fixed-income institutional and retail assets (March 1999 to March 2003), and a portfolio manager at UBS Global Asset Management within the firm's institutional fixed-income assets division (July 1995 to February 1999).
LEGAL PROCEEDINGS
Alger Management has been responding to inquiries, document requests and/or subpoenas from regulatory authorities, including the United States Securities and Exchange Commission ("SEC"), the Office of the New York State Attorney General, and the Attorney General of New Jersey, in connection with their investigation of practices in the mutual fund industry identified as "market timing" and "late trading." Alger Management has assured the Board of the Fund that if it be determined that improper trading practices in the Fund detrimentally affected its performance, Alger Management will make appropriate restitution.
Certain civil actions have developed out of the regulatory investigations. Several purported class actions and shareholder derivative suits have been filed against various parties; including, depending on the lawsuit, Alger Management, certain of the mutual funds managed by Alger Management (the "Alger Mutual Funds"), and certain current and former Alger Mutual Fund trustees and officers, alleging wrongful market-timing and late-trading activities. These cases have been transferred to the U.S. District Court of Maryland by the Judicial Panel on Multidistrict Litigation for consolidated pre-trial proceedings. On September 29, 2004, consolidated amended complaints involving these cases - a Consolidated Amended Fund Derivative Complaint (the "Derivative Complaint") and two substantially identical Consolidated Amended Class Action Complaints (together, the "Class Action Complaint") - were filed in the Maryland federal district court under the caption number 1:04-MD-15863 (JFM).
The Derivative Complaint, brought on behalf of the Alger Mutual Funds and Castle
Convertible Fund, Inc., a registered closed-end fund managed by Alger
Management, alleges (i) violations, by Alger Management and, depending on the
specific offense alleged, by its immediate parent the Distributor (Fred Alger &
Company, Incorporated) and/or the fund trustee defendants, of Sections 36(a),
36(b), 47, and 48 of the Investment Company Act of 1940 and of Sections 206 and
215 of the Investment Advisers Act of 1940, breach of fiduciary duty, and breach
of contract, (ii) various offenses by other, unrelated, third-party defendants,
and (iii) unjust enrichment by all the named defendants, all by virtue of the
alleged wrongful market-timing and late-trading activities. The complaint seeks,
among other things, removal of the trustee defendants and of Alger Management,
certain rescissory relief, disgorgement of management fees and allegedly
unlawful profits, compensatory and punitive monetary damages, and plaintiffs'
fees and expenses (including attorney and expert fees). The Class Action
Complaint names the Alger-related defendants named in the Derivative Complaint
as well as certain defendants not named in the Derivative Complaint, including
certain entities affiliated with Alger Management, certain Alger Mutual Funds,
including the Fund, and certain additional former trustees and a former officer
of the defendant Alger Mutual Funds. It alleges, on the basis of factual
allegations similar to those of the Derivative Complaint with respect to the
Alger defendants, (i) offenses by the Alger defendants similar to those alleged
in the Derivative Complaint, (ii) violations, by Alger Management, the
Distributor, their affiliates, the funds named as defendants, and the current
and former fund trustees and officers, of Sections 11, 12(a)(2) and 15 of the
Securities Act of 1933, Sections 10(b) (and Rule 10b-5 thereunder) and 20(a) of
the Securities Exchange Act of 1934, and Section 34(b) of the Investment Company
Act of 1940, (iii) breach of contract by the funds named as defendants, and (iv)
unjust enrichment by all of the named defendants. It seeks relief similar to
that sought in the Derivative Complaint.
Alger Management does not believe that the foregoing lawsuits will materially affect its ability to perform its management contracts with any of the funds that it manages, and the management of the Fund believes that the Fund will not be materially adversely affected by the pending lawsuits.
[GRAPHIC OMITTED]
SHAREHOLDER INFORMATION
DISTRIBUTOR
Fred Alger & Company, Incorporated
30 Montgomery Street
Jersey City, NJ 07302
TRANSFER AGENT
State Street Bank and Trust Company
c/o Boston Financial Data Services, Inc.
Attn: The Alger American Fund
P.O. Box 8480
Boston, MA 02266-8480
NET ASSET VALUE
The value 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 reliable or 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.
In determining whether market quotations are reliable and readily available, the Manager monitors information it routinely receives for significant events it believes will affect market prices of portfolio instruments held by the Fund. Significant events may affect a particular company (for example, a trading halt in the company's securities on an exchange during the day) or may affect securities markets (for example, a natural disaster such as an earthquake causes a market to close early). If the Manager is aware of a significant event that has occurred after the close of the market where a portfolio instrument is primarily traded, but before the close of the New York Stock Exchange, and the Manager believes that such event has affected or is likely to affect the price of the instrument, the Manager will use its best judgment to determine a fair value for that portfolio instrument under procedures adopted by the Board of Trustees.
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. Dividends and distributions may differ between classes of shares of the portfolio.
Federal income taxation of separate accounts of insurance companies, variable annuity contracts and variable life insurance contracts is discussed in the prospectuses of participating insurance companies. Generally, distributions by the Fund will not be taxable to holders of variable annuity contracts or variable life insurance policies if the insurance company separate accounts to which those distributions are made meet certain requirements, including certain diversification requirements that the Fund has undertaken to meet, under the Internal Revenue Code. Participants in 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 from their plan accounts. Generally, distributions from plan accounts 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.
CLASSES OF FUND SHARES
The portfolio offers two classes of shares: Class O shares and Class S shares. Only Class O shares are offered in this prospectus. Both classes are offered only to separate accounts of insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies and to qualified pension and retirement plans. The classes differ only in that Class S shares are subject to a distribution and shareholder servicing fee, while Class O shares are not.
PURCHASING AND REDEEMING FUND SHARES
Because 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 Fund or its designated 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 seven days after it accepts a redemption request.
OTHER INFORMATION
The Fund may redeem some of your shares "in kind," which means that some of the proceeds will be paid with securities the portfolio owns instead of cash.
Shares may be worth more or less when you redeem them than they were at the time you bought them.
The Board of Trustees has determined that the Fund may reject purchase orders, on a temporary or permanent basis, from investors that the Manager is able to determine, consistent with its compliance procedures and its reasonable business judgment, are exhibiting a pattern of frequent or short-term trading in Fund shares or shares of other funds sponsored by the Manager.
The Fund might not be able to detect frequent or short-term trading conducted by the underlying owners of shares held in omnibus accounts, and therefore might not be able to effectively prevent frequent or short-term trading in those accounts. There is no guarantee that the Fund's compliance procedures will be successful to identify investors who engage in excessive trading activity or to curtail that activity.
The portfolio posts its month-end full portfolio with a 60-day lag, on its website, www.alger.com. The Fund reserves the right to change the policy for posting portfolio holdings on the website without further notice to shareholders. Following publication of portfolio holdings information on the Fund's website, it may be sent by the Fund to any party.
The Fund and Transfer Agent have reasonable procedures in place to determine that instructions submitted by telephone are genuine. They include requesting personal identification and recording calls. If the Fund and Transfer Agent follow these procedures, they are not liable for acting in good faith on telephone instructions.
[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 portfolio share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in the portfolio (assuming reinvestment of all dividends and distributions). Information for the periods shown from the year ended December 31, 2002 through the year ended December 31, 2004 has been audited by Ernst & Young LLP, the Fund's independent registered public accounting firm, whose report, along with the Fund's financial statements, is included in the Annual Report, which is available upon request. Information for the periods prior thereto has been audited by Arthur Andersen LLP.
Note that the Financial Highlights do 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.
INCOME FROM INVESTMENT OPERATIONS LESS DIVIDENDS AND DISTRIBUTIONS
--------------------------------- --------------------------------
NET
REALIZED
AND DIVIDENDS
NET ASSET NET UNREALIZED TOTAL FROM DISTRIBUTIONS
VALUE INVESTMENT GAIN FROM NET FROM NET
BEGINNING INCOME (LOSS) ON INVESTMENT INVESTMENT REALIZED
OF PERIOD (LOSS) INVESTMENTS OPERATIONS INCOME GAINS
--------- ---------- ------------ ---------- ------------- ------------
ALGER AMERICAN BALANCED PORTFOLIO
CLASS O
Year ended 12/31/04 .................. $13.16 $ 0.19 $ 0.40 $ 0.59 $(0.20) $ --
Year ended 12/31/03 .................. 11.29 0.19 1.94 2.13 (0.26) --
Year ended 12/31/02 .................. 13.08 0.20 (1.79) (1.59) (0.20) --
Year ended 12/31/01 .................. 13.77 0.18 (0.43) (0.25) (0.20) (0.24)
Year ended 12/31/00 .................. 15.57 0.20 (0.61) (0.41) (0.13) (1.26)
|
RATIOS/SUPPLEMENTAL DATA
------------------------------------
RATIO
RATIO OF OF NET
NET EXPENSES INVESTMENT
ASSETS, TO INCOME
NET ASSET PERIOD AVERAGE (LOSS) TO PORTFOLIO
TOTAL VALUE, END TOTAL 000'S NET AVERAGE TURNOVER
DISTRIBUTIONS OF PERIOD RETURN OMITTED) ASSETS NET ASSETS RATE
------------- ---------- -------- -------- --------- ------------- ---------
ALGER AMERICAN BALANCED PORTFOLIO
CLASS O
Year ended 12/31/04 ................. $ (0.20) $13.55 4.57% $ 309,744 0.87% 1.41% 177.66%
Year ended 12/31/03 ................. (0.26) 13.16 19.03 308,990 0.87 1.60 135.67
Year ended 12/31/02 ................. (0.20) 11.29 (12.29) 254,290 0.87 2.16 188.76
Year ended 12/31/01 ................. (0.44) 13.08 (1.93) 224,959 0.85 2.53 62.93
Year ended 12/31/00 ................. (1.39) 13.77 (2.76) 115,894 0.88 2.40 63.37
|
FOR FUND INFORMATION:
By telephone: (800) 992-3863
By mail: Boston Financial Data Services, Inc.
Attn: The Alger American Fund
P.O. Box 8480
Boston, MA 02266-8480
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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, at the Fund's website at http://www. alger.com 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 of the Fund, by calling the Fund's toll-free number, at the Fund's website at http://www.alger.com or by writing to the address above.
Another way you can review and copy Fund documents is by visiting the SEC's Public Reference Room in Washington, DC. Copies can also be obtained, for a duplicating fee, by E-mail request to publicinfo@sec.gov or by writing to the SEC's Public Reference Section, Washington, DC 20549-0102. Information on the operation of the Public Reference Room is available by calling (202) 942-8090. Fund documents are also available on the EDGAR database on the SEC's internet site at http://www.sec.gov.
QUARTERLY FUND HOLDINGS
The portfolio files its complete schedule of portfolio holdings with the SEC for the first and third quarter of each fiscal year on Form N-Q. Forms N-Q are available online on the Fund's website at http://www.alger.com or on the SEC's website at http://www.sec.gov. The Fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330. A copy of the most recent quarterly holdings may also be obtained from the Fund by calling (800) 992-3863.
DISTRIBUTOR: FRED ALGER & COMPANY, INCORPORATED
THE ALGER AMERICAN FUND
SEC FILE #811-5550
FRED ALGER & COMPANY, INCORPORATED PRIVACY POLICY
YOUR PRIVACY IS OUR PRIORITY
At Fred Alger & Company, Incorporated ("Alger") we value the confidence you have placed in us. In trusting us with your assets, you provide us with personal and financial data. Alger is committed to maintaining the confidentiality of the personal nonpublic information ("personal information") entrusted to us by our customers. Your privacy is very important to us, and we are dedicated to safeguarding your personal information as we serve your financial needs.
OUR PRIVACY POLICY
We believe you should know about Alger's Privacy Policy and how we collect and protect your personal information. This Privacy Policy ("Policy") describes our practices and policy for collecting, sharing and protecting the personal information of our prospective, current and former customers. The Policy is applicable to Alger and its affiliates, Fred Alger Management, Inc., Alger National Trust Company and Alger Shareholder Services, Inc. as well as the following funds: The Alger Funds, The Alger Institutional Funds, The Alger American Fund, The China-U.S. Growth Fund, Spectra Fund and Castle Convertible Fund, Inc. We are proud of our Policy and hope you will take a moment to read about it.
INFORMATION WE COLLECT
The type of personal information we collect and use varies depending on the Alger products or services you select.
We collect personal information that enables us to serve your financial needs, develop and offer new products and services, and fulfill legal and regulatory requirements. Depending on the products or services you request, we obtain personal information about you from the following sources:
o Information, such as your name, address and social security number, provided on applications and other forms we receive from you or your representative;
o Information from your communications with Alger employees or from your representative, which may be provided to us by telephone, in writing or through Internet transactions; and
o Information about your transactions, such as the purchase and redemption of fund shares, account balances and parties to the transactions, which we receive from our affiliates or other third parties.
SHARING OF PERSONAL INFORMATION
We may share your personal information with our affiliates so that they may process and service your transactions.
However, Alger never sells customer lists to any third party. Further, we do not disclose personal information to nonaffiliated third parties, except as required by law or as permitted by law to service your account, such as follows:
o To third-party service providers that assist us in servicing your accounts (e.g. securities clearinghouses);
o To governmental agencies and law enforcement officials (e.g. valid subpoenas, court orders); and
o To financial institutions that perform marketing services on our behalf or with whom we have joint marketing agreements that provide for the confidentiality of personal information.
OUR SECURITY PRACTICES
We protect your personal information by maintaining physical, electronic and procedural safeguards. When you visit Alger's Internet sites your information is protected by our systems that utilize 128-bit data encryption, Secure Socket Layer (SSL) protocol, user names, passwords and other precautions. We have implemented safeguards to ensure that access to customer information is limited to employees, such as customer service representatives, who require such information to carry out their job responsibilities. Our employees are aware of their strict responsibility to respect the confidentiality of your personal information.
Thank you for choosing to invest with Alger. We value your relationship with us and assure you we will abide by our policy to protect your information.
THIS POLICY STATEMENT IS NOT PART OF THE PROSPECTUS.
THE ALGER AMERICAN FUND
CLASS S SHARES
A POOLED FUNDING VEHICLE FOR:
o VARIABLE ANNUITY CONTRACTS
o VARIABLE LIFE INSURANCE POLICIES
o QUALIFIED PENSION PLANS
o QUALIFIED RETIREMENT PLANS
PROSPECTUS
MAY 1, 2005
ALGER AMERICAN BALANCED PORTFOLIO
As with all mutual funds, the Securities and Exchange Commission has not determined if the information in this Prospectus is accurate or complete, nor has it approved or disapproved these securities. It is a criminal offense to represent otherwise.
An investment in the 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.
[graphic omitted]
THE ALGER
AMERICAN FUND
ALGER AMERICAN
BALANCED FUND
CLASS S SHARES
PROSPECTUS
MAY 1, 2005
2 ............Risk/Return Summary: Investments, Risks & Performance
4 ............Fees and Expenses
5 ............Management and Organization
6 ............Shareholder Information
Distributor .......................6
Transfer Agent ....................6
Net Asset Value ...................6
Dividends and Distributions .......6
Classes of Fund Shares ............7
Purchasing and Redeeming
Fund Shares .....................7
Other Information .................7
8 ............Financial Highlights
Back Cover: How to obtain more information
|
[graphic omitted]
THE ALGER AMERICAN FUND
ALGER AMERICAN BALANCED PORTFOLIO
RISK/RETURN SUMMARY: INVESTMENTS, RISKS & PERFORMANCE
INVESTMENT GOAL AND APPROACH
The Alger American Balanced Portfolio seeks current income and long-term capital appreciation.
The portfolio invests primarily in equity securities, such as common or preferred stocks, which are listed on U.S. exchanges or in the over-the-counter market. The portfolio invests primarily in "growth" stocks. The portfolio's Manager, Fred Alger Management, Inc., believes that these companies tend to fall into one of two categories:
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.
APPROACH
The portfolio focuses on stocks of companies with growth potential and on fixed-income securities, especially those 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 that are rated within the four highest rating categories by an established rating agency or, if not rated, are determined by the Fund's Manager to be of comparable quality. Under normal circumstances, at least 25% of the portfolio's net assets are invested in fixed-income senior securities.
[graphic omitted]
PRINCIPAL RISKS
As with any fund that invests in stocks, your investment will fluctuate 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. 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 investments' values.
The portfolio's trading in some stocks may be relatively short-term, meaning the portfolio may buy a security and sell it a short time later 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 and thereby adversely affect portfolio performance.
There may be additional risks applicable to the portfolio because of its investment approach.
To the extent that the portfolio invests in securities other than those that are its primary focus, the principal risks associated with such other investments, described in the Fund's Prospectus and Statement of Additional Information, are pertinent.
The primary risks arising from the fixed-income portion of the portfolio are:
o fixed-income securities' sensitivity to interest rate movements; their market values tend to fall when interest rates rise and to rise when interest rates fall.
o the potential for a decline in the value of the portfolio's securities in the event of an issuer's falling credit rating or actual default.
[graphic omitted]
PERFORMANCE
The following bar chart and the table beneath it give you some indication of the risks of an investment in a portfolio by showing changes in the portfolio's performance from year to year and by showing how the portfolio's average annual returns for the indicated periods compare with those of appropriate benchmark indexes. They 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 the chart does not reflect separate account charges which, if reflected, would lower returns.
Each index used in the table 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. Investors cannot invest directly in any index.
o Russell 1000 Growth Index: An index of common stocks designed to track performance of large capitalization companies with greater than average growth orientation.
o Lehman Brothers Government/Credit Bond Index: An index designed to track performance of government and corporate bonds.
Since the portfolio invests in both equity and fixed income securities, you should compare its performance to both indexes presented.
ALGER AMERICAN BALANCED PORTFOLIO
[the data below represents a graph in the printed piece]
18.73 4.27
03 04
Best Quarter: 10.26% Q2 2003
Worst Quarter: -3.53% Q3 2004
Average Annual Total Return as of December 31, 2004
Class S
Since
Inception
1 Year (5/1/02)
---------------------------------------------------------------------
American Balanced 4.27% 4.87%
Russell 1000
Growth Index 6.30% 4.05%
Lehman Brothers Gov't/
Credit Bond Index 4.21% 6.85%
|
The portfolio also offers Class O shares. Class S and Class O shares differ only in that Class S shares are subject to a distribution and shareholder servicing fee, whereas Class O shares are not. Because of the distribution and shareholder servicing fee, returns will be lower for Class S shares.
[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 Class S shares of the portfolio. The numbers below are based on the portfolio's expenses during its fiscal year ended December 31, 2004.
ANNUAL FUND OPERATING
EXPENSES
(expenses that are deducted
SHAREHOLDER from Fund assets)
FEES
(fees paid TOTAL ANNUAL
directly from Management Distribution Other FUND OPERATING
your investment) Fees (12b-1) Fees Expenses EXPENSES
--------------------------------- -----------------------------------------------------
ALGER AMERICAN None .75% .25% .12% 1.12%
BALANCED PORTFOLIO
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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 portfolio with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in Class S shares of 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 $114 $356 $617 $1,363
BALANCED
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
Other securities the portfolio may invest in are discussed in the Fund's Statement of Additional Information (see back cover of this Prospectus).
In times of adverse or unstable market, economic or political conditions, the portfolio may invest up to 100% of its assets in cash, high-grade bonds, or cash equivalents (such as commercial paper or money market instruments) for temporary defensive reasons. 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 also hold these types of securities pending the investment of proceeds from the sale of portfolio securities or to meet anticipated redemptions of portfolio shares. The portfolio may not achieve its objective while in a temporary defensive or interim position.
[graphic omitted]
MANAGEMENT AND ORGANIZATION
MANAGER
Fred Alger Management, Inc.
111 Fifth Avenue
New York, NY 10003
The Manager has been an investment adviser since 1964, and manages investments totaling (at 12/31/04) $8.2 billion in mutual fund assets as well as $1.5 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 portfolios. The portfolio has had the same manager since inception and, for the most recent fiscal year, the portfolio paid the Manager a fee at an annual rate based on a percentage of average daily net assets of .75%.
PORTFOLIO MANAGERS
Fred M. Alger III is the chief market strategist for the portfolio, overseeing the investments of the portfolio since September 2001. Mr. Alger, who founded Fred Alger Management, Inc., has served as Chairman of the Board since 1964, and co-managed the portfolio prior to 1995. Kevin Collins, CFA and John A. Curry are the individuals responsible for the day-to-day management of portfolio investments.
o Mr. Collins, co-manager of the portfolio since September 2003, has been employed by the Manager as a Senior Vice President, portfolio manager and senior analyst since September 2003, prior to which period he was employed by the Manager as an analyst and later as a Vice President and senior analyst from 1996 until September 2003.
o Mr. Curry, co-manager of the portfolio since December 2004, has been employed by the Manager as a Vice President and portfolio manager since December 2004. Mr. Curry was previously Vice President at Janney Montgomery Scott, LLC (September 2003 to December 2004), prior to which he was a portfolio manager for Whitehall Asset Management's fixed-income institutional and retail assets (March 1999 to March 2003), and a portfolio manager at UBS Global Asset Management within the firm's institutional fixed-income assets division (July 1995 to February 1999).
LEGAL PROCEEDINGS
Alger Management has been responding to inquiries, document requests and/or subpoenas from regulatory authorities, including the United States Securities and Exchange Commission ("SEC"), the Office of the New York State Attorney General, and the Attorney General of New Jersey, in connection with their investigation of practices in the mutual fund industry identified as "market timing" and "late trading." Alger Management has assured the Board of the Fund that if it be determined that improper trading practices in the Fund detrimentally affected its performance, Alger Management will make appropriate restitution.
Certain civil actions have developed out of the regulatory investigations. Several purported class actions and shareholder derivative suits have been filed against various parties; including, depending on the lawsuit, Alger Management, certain of the mutual funds managed by Alger Management (the "Alger Mutual Funds"), and certain current and former Alger Mutual Fund trustees and officers, alleging wrongful market-timing and late-trading activities. These cases have been transferred to the U.S. District Court of Maryland by the Judicial Panel on Multidistrict Litigation for consolidated pre-trial proceedings. On September 29, 2004, consolidated amended complaints involving these cases - a Consolidated Amended Fund Derivative Complaint (the "Derivative Complaint") and two substantially identical Consolidated Amended Class Action Complaints (together, the "Class Action Complaint") - were filed in the Maryland federal district court under the caption number 1:04-MD-15863 (JFM).
The Derivative Complaint, brought on behalf of the Alger Mutual Funds and Castle
Convertible Fund, Inc., a registered closed-end fund managed by Alger
Management, alleges (i) violations, by Alger Management and, depending on the
specific offense alleged, by its immediate parent the Distributor (Fred Alger &
Company, Incorporated) and/or the fund trustee defendants, of Sections 36(a),
36(b), 47, and 48 of the Investment Company Act of 1940 and of Sections 206 and
215 of the Investment Advisers Act of 1940, breach of fiduciary duty, and breach
of contract, (ii) various offenses by other, unrelated, third-party defendants,
and (iii) unjust enrichment by all the named defendants, all by virtue of the
alleged wrongful market-timing and late-trading activities. The complaint seeks,
among other things, removal of the trustee defendants and of Alger Management,
certain rescissory relief, disgorgement of management fees and allegedly
unlawful profits, compensatory and punitive monetary damages, and plaintiffs'
fees and expenses (including attorney and expert fees). The Class Action
Complaint names the Alger-related defendants named in the Derivative Complaint
as well as certain defendants not named in the Derivative Complaint, including
certain entities affiliated with Alger Management, certain Alger Mutual Funds,
including the Fund, and certain additional former trustees and a former officer
of the defendant
Alger Mutual Funds. It alleges, on the basis of factual allegations similar to
those of the Derivative Complaint with respect to the Alger defendants, (i)
offenses by the Alger defendants similar to those alleged in the Derivative
Complaint, (ii) violations, by Alger Management, the Distributor, their
affiliates, the funds named as defendants, and the current and former fund
trustees and officers, of Sections 11, 12(a)(2) and 15 of the Securities Act of
1933, Sections 10(b) (and Rule 10b-5 thereunder) and 20(a) of the Securities
Exchange Act of 1934, and Section 34(b) of the Investment Company Act of 1940,
(iii) breach of contract by the funds named as defendants, and (iv) unjust
enrichment by all of the named defendants. It seeks relief similar to that
sought in the Derivative Complaint.
Alger Management does not believe that the foregoing lawsuits will materially affect its ability to perform its management contracts with any of the funds that it manages, and the management of the Fund believes that the Fund will not be materially adversely affected by the pending lawsuits.
[graphic omitted]
SHAREHOLDER INFORMATION
DISTRIBUTOR
Fred Alger & Company, Incorporated
30 Montgomery Street
Jersey City, NJ 07302
TRANSFER AGENT
State Street Bank and Trust Company
c/o Boston Financial Data Services, Inc.
Attn: The Alger American Fund
P.O. Box 8480
Boston, MA 02266-8480
NET ASSET VALUE
The value 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 reliable or 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.
In determining whether market quotations are reliable and readily available, the Manager monitors information it routinely receives for significant events it believes will affect market prices of portfolio instruments held by the Fund. Significant events may affect a particular company (for example, a trading halt in the company's securities on an exchange during the day) or may affect securities markets (for example, a natural disaster such as an earthquake causes a market to close early). If the Manager is aware of a significant event that has occurred after the close of the market where a portfolio instrument is primarily traded, but before the close of the New York Stock Exchange, and the Manager believes that such event has affected or is likely to affect the price of the instrument, the Manager will use its best judgment to determine a fair value for that portfolio instrument under procedures adopted by the Board of Trustees.
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. Dividends and distributions may differ between classes of shares of the portfolio.
Federal income taxation of separate accounts of insurance companies, variable annuity contracts and variable life insurance contracts is discussed in the prospectuses of participating insurance companies. Generally, distributions by the Fund will not be taxable to holders of variable annuity contracts or variable life insurance policies if the insurance company separate accounts to which those distributions are made meet certain requirements, including certain diversification requirements that the Fund has undertaken to meet, under the Internal Revenue Code. Participants in 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 from their plan accounts. Generally, distributions from plan accounts 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.
CLASSES OF FUND SHARES
The portfolio offers two classes of shares: Class O shares and Class S shares. Only Class S shares are offered in this prospectus. Both classes are offered only to separate accounts of insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies and to qualified pension and retirement plans. The classes differ in that, pursuant to a plan adopted under Rule 12b-1 under the Investment Company Act, Class S shares pay a distribution and shareholder servicing fee out of their assets on an ongoing basis to compensate insurance companies and pension and retirement plan service providers for distribution assistance and shareholder services. Over time, these fees will increase the cost of an investment in Class S shares and may cost an investor more than paying other types of sales charges.
PURCHASING AND REDEEMING FUND SHARES
Because 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 Fund or its designated 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 seven days after it accepts a redemption request.
OTHER INFORMATION
The Fund may redeem some of your shares "in kind," which means that some of the proceeds will be paid with securities the portfolio owns instead of cash.
Shares may be worth more or less when you redeem them than they were at the time you bought them.
The Board of Trustees has determined that the Fund may reject purchase orders, on a temporary or permanent basis, from investors that the Manager is able to determine, consistent with its compliance procedures and its reasonable business judgment, are exhibiting a pattern of frequent or short-term trading in Fund shares or shares of other funds sponsored by the Manager.
The Fund might not be able to detect frequent or short-term trading conducted by the underlying owners of shares held in omnibus accounts, and therefore might not be able to effectively prevent frequent or short-term trading in those accounts. There is no guarantee that the Fund's compliance procedures will be successful to identify investors who engage in excessive trading activity or to curtail that activity.
The portfolio posts its month-end full portfolio with a 60-day lag, on its website, www.alger.com. The Fund reserves the right to change the policy for posting portfolio holdings on the website without further notice to shareholders. Following publication of portfolio holdings information on the Fund's website, it may be sent by the Fund to any party.
The Fund and Transfer Agent have reasonable procedures in place to determine that instructions submitted by telephone are genuine. They include requesting personal identification and recording calls. If the Fund and Transfer Agent follow these procedures, they are not liable for acting in good faith on telephone instructions.
[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 portfolio share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in the portfolio (assuming reinvestment of all dividends and distributions). Because Class S shares have been outstanding only since 2002, information is provided also with respect to Class O shares. Class S shares have higher expense ratios and lower total returns. Information shown from the period ended December 31, 2002 through the year ended December 31, 2004 has been audited by Ernst & Young LLP, the Fund's independent registered public accounting firm, whose report, along with the Fund's financial statements, is included in the Annual Report, which is available upon request. Information for the periods prior thereto has been audited by Arthur Andersen LLP.
Note that the Financial Highlights do 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.
INCOME FROM INVESTMENT OPERATIONS LESS DIVIDENDS AND DISTRIBUTIONS
--------------------------------- ------------------------------
NET ASSET NET REALIZED DISTRIBUTIONS
VALUE AND UNREALIZED TOTAL FROM DIVIDENDS FROM FROM NET
BEGINNING NET INVESTMENT GAIN (LOSS) INVESTMENT NET INVESTMENT REALIZED
OF PERIOD INCOME (LOSS) ON INVESTMENTS OPERATIONS INCOME GAINS
----------- -------------- --------------- ------------ -------------- -----------
ALGER AMERICAN BALANCED PORTFOLIO
CLASS S
Year ended 12/31/04 ............. $13.34 $0.17 $ 0.39 $ 0.56 $(0.19) $ --
Year ended 12/31/03 ............. 11.47 0.23 1.90 2.13 (0.26) --
Eight months ended 12/31/02(i)(ii) 12.50 0.02 (1.05) (1.03) -- --
CLASS O
Year ended 12/31/04 ............. $13.16 $0.19 $ 0.40 $ 0.59 $(0.20) $ --
Year ended 12/31/03 ............. 11.29 0.19 1.94 2.13 (0.26) --
Year ended 12/31/02 ............. 13.08 0.20 (1.79) (1.59) (0.20) --
Year ended 12/31/01 ............. 13.77 0.18 (0.43) (0.25) (0.20) (0.24)
Year ended 12/31/00 ............. 15.57 0.20 (0.61) (0.41) (0.13) (1.26)
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(i) Ratios have been annualized; total return has not been annualized.
(ii) Commenced operations May 1, 2002.
RATIOS/SUPPLEMENTAL DATA
--------------------------------------
RATIO OF NET
RATIO OF INVESTMENT
NET ASSET NET ASSETS, EXPENSES INCOME (LOSS) PORTFOLIO
TOTAL VALUE, END END OF PERIOD TO AVERAGE TO AVERAGE TURNOVER
DISTRIBUTIONS OF PERIOD TOTAL RETURN (000'S OMITTED) NET ASSETS NET ASSETS RATE
------------ --------- ------------ --------------- ------------ ------------ -------
ALGER AMERICAN BALANCED PORTFOLIO
CLASS S
Year ended 12/31/04 ............. $ (0.19) $13.71 4.27% $ 44,435 1.12% 1.20% 177.66%
Year ended 12/31/03 ............. (0.26) 13.34 18.73 28,680 1.11 1.25 135.67
Eight months ended 12/31/02(i)(ii) -- 11.47 (8.24) 494 1.17 1.67 188.76
CLASS O
Year ended 12/31/04 ............. $ (0.20) $13.55 4.57% $ 309,744 0.87% 1.41% 177.66%
Year ended 12/31/03 ............. (0.26) 13.16 19.03 308,990 0.87 1.60 135.67
Year ended 12/31/02 ............. (0.20) 11.29 (12.29) 254,290 0.87 2.16 188.76
Year ended 12/31/01 ............. (0.44) 13.08 (1.93) 224,959 0.85 2.53 62.93
Year ended 12/31/00 ............. (1.39) 13.77 (2.76) 115,894 0.88 2.40 63.37
--------------------------------------------------------------------------------
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FOR FUND INFORMATION:
By telephone: (800) 992-3863
By mail: Boston Financial Data Services, Inc.
Attn: the Alger American Fund
P.O. Box 8480
Boston, MA 02266-8480
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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, at the Fund's website at http://www. alger.com 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 of the Fund, by calling the Fund's toll-free number, at the Fund's website at http://www. alger.com or by writing to the address above.
Another way you can review and copy Fund documents is by visiting the SEC's Public Reference Room in Washington, DC. Copies can also be obtained, for a duplicating fee, by E-mail request to publicinfo@sec.gov or by writing to the SEC's Public Reference Section, Washington, DC 20549-0102. Information on the operation of the Public Reference Room is available by calling (202) 942-8090. Fund documents are also available on the EDGAR database on the SEC's internet site at http://www.sec.gov.
QUARTERLY FUND HOLDINGS
The portfolio files its complete schedule of portfolio holdings with the SEC for the first and third quarter of each fiscal year on Form N-Q. Forms N-Q are available online on the Fund's website at http://www.alger.com or on the SEC's website at http://www.sec.gov. The Fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330. A copy of the most recent quarterly holdings may also be obtained from the Fund by calling (800) 992-3863.
DISTRIBUTOR: FRED ALGER & COMPANY, INCORPORATED
THE ALGER AMERICAN FUND
SEC FILE #811-5550
FRED ALGER & COMPANY, INCORPORATED PRIVACY POLICY
YOUR PRIVACY IS OUR PRIORITY
At Fred Alger & Company, Incorporated ("Alger") we value the confidence you have
placed in us. In trusting us with your assets, you provide us with personal and
financial data. Alger is committed to maintaining the confidentiality of the
personal nonpublic information ("personal information") entrusted to us by our
customers. Your privacy is very important to us, and we are dedicated to
safeguarding your personal information as we serve your financial needs.
OUR PRIVACY POLICY
We believe you should know about Alger's Privacy Policy and how we collect and
protect your personal information. This Privacy Policy ("Policy") describes our
practices and policy for collecting, sharing and protecting the personal
information of our prospective, current and former customers. The Policy is
applicable to Alger and its affiliates, Fred Alger Management, Inc., Alger
National Trust Company and Alger Shareholder Services, Inc. as well as the
following funds: The Alger Funds, The Alger Institutional Funds, The Alger
American Fund, The China-U.S. Growth Fund, Spectra Fund and Castle Convertible
Fund, Inc. We are proud of our Policy and hope you will take a moment to read
about it.
INFORMATION WE COLLECT
The type of personal information we collect and use varies depending on the
Alger products or services you select.
We collect personal information that enables us to serve your financial needs, develop and offer new products and services, and fulfill legal and regulatory requirements. Depending on the products or services you request, we obtain personal information about you from the following sources:
o Information, such as your name, address and social security number, provided on applications and other forms we receive from you or your representative;
o Information from your communications with Alger employees or from your representative, which may be provided to us by telephone, in writing or through Internet transactions; and
o Information about your transactions, such as the purchase and redemption of fund shares, account balances and parties to the transactions, which we receive from our affiliates or other third parties.
SHARING OF PERSONAL INFORMATION
We may share your personal information with our affiliates so that they may
process and service your transactions.
However, Alger never sells customer lists to any third party. Further, we do not disclose personal information to nonaffiliated third parties, except as required by law or as permitted by law to service your account, such as follows:
o To third-party service providers that assist us in servicing your accounts (e.g. securities clearinghouses);
o To governmental agencies and law enforcement officials (e.g. valid subpoenas, court orders); and
o To financial institutions that perform marketing services on our behalf or with whom we have joint marketing agreements that provide for the confidentiality of personal information.
OUR SECURITY PRACTICES
We protect your personal information by maintaining physical, electronic and
procedural safeguards. When you visit Alger's Internet sites your information is
protected by our systems that utilize 128-bit data encryption, Secure Socket
Layer (SSL) protocol, user names, passwords and other precautions. We have
implemented safeguards to ensure that access to customer information is limited
to employees, such as customer service representatives, who require such
information to carry out their job responsibilities. Our employees are aware of
their strict responsibility to respect the confidentiality of your personal
information.
Thank you for choosing to invest with Alger. We value your relationship with us and assure you we will abide by our policy to protect your information.
THIS POLICY STATEMENT IS NOT PART OF THE PROSPECTUS.
THE ALGER AMERICAN FUND
CLASS O SHARES
A POOLED FUNDING VEHICLE FOR:
o VARIABLE ANNUITY CONTRACTS
o VARIABLE LIFE INSURANCE POLICIES
o QUALIFIED PENSION PLANS
o QUALIFIED RETIREMENT PLANS
PROSPECTUS
MAY 1, 2005
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.
[ALGER LOGO OMITTED]
THE ALGER
AMERICAN FUND
ALGER AMERICAN INCOME &
GROWTH PORTFOLIO
CLASS O SHARES
PROSPECTUS
MAY 1, 2005
2 ............Risk/Return Summary: Investments,
Risks & Performance
3 ............Fees and Expenses
4 ............Management and Organization
5 ............Shareholder Information
Distributor .......................5
Transfer Agent ....................5
Dividends and Distributions .......5
Classes of Fund Shares ............5
Purchasing and Redeeming
Fund Shares .....................5
Other Information .................6
8 ............Financial Highlights
Back Cover: How to obtain more information
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[GRAPHIC OMITTED]
THE ALGER AMERICAN FUND
ALGER AMERICAN INCOME & GROWTH PORTFOLIO
RISK/RETURN SUMMARY: INVESTMENTS, RISKS & PERFORMANCE
INVESTMENT GOAL AND APPROACH
The Alger American Income & Growth Portfolio primarily seeks to provide a high level of dividend income; its secondary goal is to provide capital appreciation.
The portfolio invests primarily in equity securities, such as common or preferred stocks, which are listed on U.S. exchanges or in the over-the-counter market. The portfolio invests primarily in "growth" stocks. The portfolio's Manager, Fred Alger Management, Inc., believes that these companies tend to fall into one of two categories:
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 fluctuate 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. 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 objectives, an investment in it may be better suited to investors who seek long-term capital growth and can tolerate fluctuations in their investments' values.
The portfolio's trading in some stocks may be relatively short-term, meaning the portfolio may buy a security and sell it a short time later 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 and thereby adversely affect portfolio performance.
There may be additional risks applicable to the portfolio because of its investment approach.
To the extent that the portfolio invests in securities other than those that are its primary focus, the principal risks associated with such other investments, described in the Fund's Prospectus and Statement of Addition Information, are pertinent.
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 chart and the table beneath it give you some indication of the risks of an investment in the portfolio by showing changes in the portfolio's performance from year to year and by showing how the portfolio's average annual returns for the indicated periods compare with those of an appropriate benchmark index. They 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 the chart does not reflect separate account charges which, if reflected, would lower returns.
The index used in the table is a broad index designed to track a particular market or market segment. No expenses or fees are reflected in the returns for the index, which is unmanaged. All returns for the index assume reinvestment of dividends and interest on the underlying securities that make up the index. Investors cannot invest directly in the index.
o Russell 1000 Growth Index: An index of common stocks designed to track performance of large capitalization companies with greater than average growth orientation.
Annual Total Return as of December 31 each year (%) Class O
[THE DATA BELOW REPRESENTS A GRAPH IN THE PRINTED PIECE]
35.13 19.68 36.29 32.39 42.45 -1.27 -14.32 -31.10 29.84 7.85
----- ----- ----- ----- ----- ----- ------ ----- ----- ---- 95 96 97 98 99 00 01 - 02 03 04 Best Quarter: 35.96% Q4 1999 Worst Quarter: -19.33% Q3 2002 |
Average Annual Total Return as of December 31, 2004
Class O
Since
Inception
1 Year 5 Years 10 Years (11/15/88)
----------------------------------------------------------------------
American
Income & Growth 7.85% -3.98% 12.99% 10.50%
Russell 1000
Growth Index 6.30% -9.29% 9.60% 11.02%
|
The portfolio also offers Class S shares. Class S and Class O shares differ only in that Class S shares are subject to a distribution and shareholder servicing fee, whereas Class O shares are not. Because of the distribution and shareholder servicing fee, returns will be lower for Class S shares.
[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 Class O shares of the portfolio. The numbers shown below are based on the portfolio's expenses during its fiscal year ended December 31, 2004.
------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING
EXPENSES
(expenses that are deducted
from Fund assets)
---------------------------------------------------
SHAREHOLDER FEES TOTAL ANNUAL
(fees paid directly Management Distribution Other FUND OPERATING
from your investment) Fees (12b-1) Fees Expenses EXPENSES
===================== ====================== =========== ============= ========= ===============
ALGER AMERICAN None .625% None .155% .78%
INCOME & GROWTH
PORTFOLIO
------------------------------------------------------------------------------------------------
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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 portfolio with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in Class O shares of 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 $80 $249 $433 $966
INCOME & GROWTH
PORTFOLIO
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The example above does not reflect charges and deductions which are, or may be, imposed under variable annuity contracts, variable life insurance policies, or pension or retirement plans. Such charges and deductions are described in the prospectus for the contract or policy accompanying this prospectus or in the plan documents.
ADDITIONAL INFORMATION ABOUT
THE FUND'S INVESTMENTS
Other securities the portfolio may invest in are discussed in the Fund's Statement of Additional Information (see back cover of this prospectus).
In times of adverse or unstable market or economic conditions, the portfolio may invest up to 100% of its assets in cash, high-grade bonds, or cash equivalents (such as commercial paper or paper market instruments) for temporary defensive reasons. 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 also hold these types of securities pending the investment of proceeds from the sale of portfolio securities or to meet antic-
ipated redemptions of portfolio shares. The portfolio may not achieve its objective while in a temporary defensive or interim position.
[GRAPHIC OMITTED]
MANAGEMENT AND ORGANIZATION
MANAGER
Fred Alger Management, Inc.
111 Fifth Avenue
New York, NY 10003
The Manager has been an investment adviser since 1964, and manages investments totaling (at 12/31/04) $8.2 billion in mutual fund assets as well as $1.5 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 an annual rate based on a percentage of average daily net assets of .625%.
PORTFOLIO MANAGERS
Fred M. Alger III is the chief market strategist for the portfolio, overseeing the investments of the portfolio since September 2001. Mr. Alger, who founded Fred Alger Management, Inc., has served as Chairman of the Board since 1964, and co-managed the portfolio prior to 1995. Dan C. Chung, CFA, and Kevin Collins, CFA are the individuals responsible for the day-to-day management of portfolio investments.
o Mr. Chung, co-manager of the portfolio since September 2003 (and manager prior thereto from September 2001), has been employed by the Manager since 1994 as a Vice President and analyst from 1996 to 1999, as a Senior Vice President and senior analyst until 2000, as an Executive Vice President until 2003, as portfolio manager since 2000, as Chief Investment Officer since September 2001 and as President since 2003.
o Mr. Collins, co-manager of the portfolio since September 2003, has been employed by the Manager as a Senior Vice President, portfolio manager and senior analyst since September 2003, prior to which period he was employed by the Manager as an analyst and later as a Vice President and senior analyst from 1996 until September 2003.
LEGAL PROCEEDINGS
Alger Management has been responding to inquiries, document requests and/or subpoenas from regulatory authorities, including the United States Securities and Exchange Commission ("SEC"), the Office of the New York State Attorney General, and the Attorney General of New Jersey, in connection with their investigation of practices in the mutual fund industry identified as "market timing" and "late trading." Alger Management has assured the Board of the Fund that if it be determined that improper trading practices in the Fund detrimentally affected its performance, Alger Management will make appropriate restitution.
Certain civil actions have developed out of the regulatory investigations. Several purported class actions and shareholder derivative suits have been filed against various parties; including, depending on the lawsuit, Alger Management, certain of the mutual funds managed by Alger Management (the "Alger Mutual Funds"), and certain current and former Alger Mutual Fund trustees and officers, alleging wrongful market-timing and late-trading activities. These cases have been transferred to the U.S. District Court of Maryland by the Judicial Panel on Multidistrict Litigation for consolidated pre-trial proceedings. On September 29, 2004, consolidated amended complaints involving these cases - a Consolidated Amended Fund Derivative Complaint (the "Derivative Complaint") and two substantially identical Consolidated Amended Class Action Complaints (together, the "Class Action Complaint") - were filed in the Maryland federal district court under the caption number 1:04-MD-15863 (JFM).
The Derivative Complaint, brought on behalf of the Alger Mutual Funds and Castle
Convertible Fund, Inc., a registered closed-end fund managed by Alger
Management, alleges (i) violations, by Alger Management and, depending on the
specific offense alleged, by its immediate parent the Distributor (Fred Alger &
Company, Incorporated) and/or the fund trustee defendants, of Sections 36(a),
36(b), 47, and 48 of the Investment Company Act of 1940 and of Sections 206 and
215 of the Investment Advisers Act of 1940, breach of fiduciary duty, and breach
of contract, (ii) various offenses by other, unrelated, third-party defendants,
and (iii) unjust enrichment by all the named defendants, all by virtue of the
alleged wrongful market-timing and late-trading activities. The complaint seeks,
among other things, removal of the trustee defendants and of Alger Management,
certain rescissory relief, disgorgement of management fees and allegedly
unlawful profits, compensatory and punitive monetary damages, and plaintiffs'
fees and expenses (including attorney and expert fees). The Class Action
Complaint names the Alger-related defendants named in the Derivative Complaint
as well as certain defendants not named in the Derivative Complaint, including
certain entities affiliated with Alger Management, certain Alger Mutual Funds,
including the Fund, and certain additional former trustees and a former officer
of the defendant Alger Mutual Funds. It alleges, on the basis of factual
allegations similar to those of the Derivative Complaint with respect to the
Alger defendants, (i) offenses by the Alger defendants similar to those alleged
in the Derivative Complaint, (ii) violations, by Alger Management, the
Distributor, their affiliates, the funds named as defendants, and the current
and former fund trustees and officers, of Sections 11, 12(a)(2) and 15 of the
Securities Act of 1933, Sections 10(b) (and Rule 10b-5 thereunder) and 20(a) of
the Securities Exchange Act of 1934, and Section 34(b) of the Investment Company
Act of 1940, (iii) breach of contract by the funds named as defendants, and (iv)
unjust enrichment by all of the named defendants. It seeks relief similar to that sought in the Derivative Complaint.
Alger Management does not believe that the foregoing lawsuits will materially affect its ability to perform its management contracts with any of the funds that it manages, and the management of the Fund believes that the Fund will not be materially adversely affected by the pending lawsuits.
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SHAREHOLDER INFORMATION
DISTRIBUTOR
Fred Alger & Company, Incorporated
30 Montgomery Street
Jersey City, NJ 07302
TRANSFER AGENT
State Street Bank and Trust Company
c/o Boston Financial Data Services, Inc.
Attn: The Alger American Fund
P.O. Box 8480 Boston, MA 02266-8480
NET ASSET VALUE
The value 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 reliable or 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.
In determining whether market quotations are reliable and readily available, the Manager monitors information it routinely receives for significant events it believes will affect market prices of portfolio instruments held by the Fund. Significant events may affect a particular company (for example, a trading halt in the company's securities on an exchange during the day) or may affect securities markets (for example, a natural disaster such as an earthquake causes a market to close early). If the Manager is aware of a significant event that has occurred after the close of the market where a portfolio instrument is primarily traded, but before the close of the New York Stock Exchange, and the Manager believes that such event has affected or is likely to affect the price of the instrument, the Manager will use its best judgment to determine a fair value for that portfolio instrument under procedures adopted by the Board of Trustees.
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. Dividends and distributions may differ between classes of shares of the portfolio.
Federal income taxation of separate accounts of insurance companies, variable annuity contracts and variable life insurance contracts is discussed in the prospectuses of participating insurance companies. Generally, distributions by the Fund will not be taxable to holders of variable annuity contracts or variable life insurance policies if the insurance company separate accounts to which those distributions are made meet certain requirements, including certain diversification requirements that the Fund has undertaken to meet, under the Internal Revenue Code. Participants in 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 from their plan accounts. Generally, distributions from plan accounts 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.
CLASSES OF FUND SHARES
The portfolio offers two classes of shares: Class O shares and Class S shares. Only Class O shares are offered in this prospectus. Both classes are offered only to separate accounts of insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies and to qualified pension and retirement plans. The classes differ only in that Class S shares are subject to a distribution and shareholder servicing fee, while Class O shares are not.
PURCHASING AND REDEEMING FUND SHARES
Because 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 Fund or its designated 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 seven days after it accepts a redemption request.
OTHER INFORMATION
The Fund may redeem some of your shares "in kind," which means that some of the proceeds will be paid with securities the portfolio owns instead of cash.
Shares may be worth more or less when you redeem them than they were at the time you bought them.
The Board of Trustees has determined that the Fund may reject purchase orders, on a temporary or permanent basis, from investors that the Manager is able to determine, consistent with its compliance procedures and its reasonable business judgment, are exhibiting a pattern of frequent or short-term trading in Fund shares or shares of other funds sponsored by the Manager.
The Fund might not be able to detect frequent or short-term trading conducted by the underlying owners of shares held in omnibus accounts, and therefore might not be able to effectively prevent frequent or short-term trading in those accounts. There is no guarantee that the Fund's compliance procedures will be successful to identify investors who engage in excessive trading activity or to curtail that activity.
The portfolio posts its month-end full portfolio with a 60-day lag, on its website, www.alger.com. The Fund reserves the right to change the policy for posting portfolio holdings on the website without further notice to shareholders. Following publication of portfolio holdings information on the Fund's website, it may be sent by the Fund to any party.
The Fund and Transfer Agent have reasonable procedures in place to determine that instructions submitted by telephone are genuine. They include requesting personal identification and recording calls. If the Fund and Transfer Agent follow these procedures, they are not liable for acting in good faith on telephone instructions.
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FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the portfolio's financial performance for the periods shown. Certain information reflects financial results for a single portfolio share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in the portfolio (assuming reinvestment of all dividends and distributions). Information for the periods shown from the Year ended December 31, 2002 through the Year ended December 31, 2004 has been audited by Ernst & Young LLP, the Fund's independent registered public accounting firm, whose report, along with the Fund's financial statements, is included in the Annual Report, which is available upon request. Information for the periods prior thereto has been audited by Arthur Andersen LLP.
Note that the Financial Highlights do 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.
INCOME FROM INVESTMENT OPERATIONS LESS DIVIDENDS AND DISTRIBUTIONS
--------------------------------- --------------------------------
NET ASSET NET REALIZED DISTRIBUTIONS
VALUE AND UNREALIZED TOTAL FROM DIVIDENDS FROM FROM NET
BEGINNING NET INVESTMENT GAIN (LOSS) INVESTMENT NET INVESTMENT REALIZED
OF PERIOD INCOME (LOSS) ON INVESTMENTS OPERATIONS INCOME GAINS
----------- -------------- --------------- ------------ -------------- -------------
ALGER AMERICAN INCOME & GROWTH PORTFOLIO
CLASS O
Year ended 12/31/04 ............. $ 9.37 $0.10 $ 0.63 $ 0.73 $(0.05) $ --
Year ended 12/31/03 ............. 7.24 0.05 2.11 2.16 (0.03) --
Year ended 12/31/02 ............. 10.57 0.02 (3.29) (3.27) (0.06) --
Year ended 12/31/01 ............. 13.26 0.05 (1.86) (1.81) (0.05) (0.83)
Year ended 12/31/00 ............. 17.58 0.05 (0.44) (0.39) (0.01) (3.92)
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RATIOS/SUPPLEMENTAL DATA
-------------------------------------
RATIO OF
NET
RATIO OF INVESTMENT
NET ASSET NET ASSETS, EXPENSES INCOME (LOSS) PORTFOLIO
TOTAL VALUE, END END OF PERIOD TO AVERAGE TO AVERAGE TURNOVER
DISTRIBUTIONS OF PERIOD TOTAL RETURN (000'S OMITTED) NET ASSETS NET ASSETS RATE
------------- ---------- ------------ --------------- ----------- ------------- ---------
ALGER AMERICAN INCOME & GROWTH PORTFOLIO
CLASS O
Year ended 12/31/04 ............. $ (0.05) $10.05 7.85% $ 93,554 0.78% 0.97% 96.49%
Year ended 12/31/03 ............. (0.03) 9.37 29.84 101,255 0.78 0.60 175.67
Year ended 12/31/02 ............. (0.06) 7.24 (31.10) 85,066 0.79 0.25 276.12
Year ended 12/31/01 ............. (0.88) 10.57 (14.32) 144,006 0.72 0.52 110.04
Year ended 12/31/00 ............. (3.93) 13.26 (1.27) 150,783 0.70 0.43 142.43
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FOR FUND INFORMATION:
By telephone: (800) 992-3863
By mail: Boston Financial Data Services, Inc.
Attn: The Alger American Fund
P.O. Box 8480 Boston, MA 02266-8480
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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, at the Fund's website at http://www. alger.com 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 of the Fund, by calling the Fund's toll-free number, at the Fund's website at http://www. alger.com or by writing to the address above.
Another way you can review and copy Fund documents is by visiting the SEC's Public Reference Room in Washington, DC. Copies can also be obtained, for a duplicating fee, by E-mail request to publicinfo@sec.gov or by writing to the SEC's Public Reference Section, Washington, DC 20549-0102. Information on the operation of the Public Reference Room is available by calling (202) 942-8090. Fund documents are also available on the EDGAR database on the SEC's internet site at http://www.sec.gov.
QUARTERLY FUND HOLDINGS
The portfolio files its complete schedule of portfolio holdings with the SEC for the first and third quarter of each fiscal year on Form N-Q. Forms N-Q are available online on the Fund's website at http://www.alger.com or on the SEC's website at http://www.sec.gov. The Fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330. A copy of the most recent quarterly holdings may also be obtained from the Fund by calling (800) 992-3863.
DISTRIBUTOR: FRED ALGER & COMPANY, INCORPORATED
THE ALGER AMERICAN FUND
SEC FILE #811-5550
FRED ALGER & COMPANY, INCORPORATED PRIVACY POLICY
YOUR PRIVACY IS OUR PRIORITY
At Fred Alger & Company, Incorporated ("Alger") we value the confidence you have placed in us. In trusting us with your assets, you provide us with personal and financial data. Alger is committed to maintaining the confidentiality of the personal nonpublic information ("personal information") entrusted to us by our customers. Your privacy is very important to us, and we are dedicated to safeguarding your personal information as we serve your financial needs.
OUR PRIVACY POLICY
We believe you should know about Alger's Privacy Policy and how we collect and protect your personal information. This Privacy Policy ("Policy") describes our practices and policy for collecting, sharing and protecting the personal information of our prospective, current and former customers. The Policy is applicable to Alger and its affiliates, Fred Alger Management, Inc., Alger National Trust Company and Alger Shareholder Services, Inc. as well as the following funds: The Alger Funds, The Alger Institutional Funds, The Alger American Fund, The China-U.S. Growth Fund, Spectra Fund and Castle Convertible Fund, Inc. We are proud of our Policy and hope you will take a moment to read about it.
INFORMATION WE COLLECT
The type of personal information we collect and use varies depending on the Alger products or services you select. We collect personal information that enables us to serve your financial needs, develop and offer new products and services, and fulfill legal and regulatory requirements. Depending on the products or services you request, we obtain personal information about you from the following sources:
o Information, such as your name, address and social security number, provided on applications and other forms we receive from you or your representative;
o Information from your communications with Alger employees or from your representative, which may be provided to us by telephone, in writing or through Internet transactions; and
o Information about your transactions, such as the purchase and redemption of fund shares, account balances and parties to the transactions, which we receive from our affiliates or other third parties.
SHARING OF PERSONAL INFORMATION
We may share your personal information with our affiliates so that they may process and service your transactions.
However, Alger never sells customer lists to any third party. Further, we do not disclose personal information to nonaffiliated third parties, except as required by law or as permitted by law to service your account, such as follows:
o To third-party service providers that assist us in servicing your accounts (e.g. securities clearinghouses);
o To governmental agencies and law enforcement officials (e.g. valid subpoenas, court orders); and
o To financial institutions that perform marketing services on our behalf or with whom we have joint marketing agreements that provide for the confidentiality of personal information.
OUR SECURITY PRACTICES
We protect your personal information by maintaining physical, electronic and procedural safeguards. When you visit Alger's Internet sites your information is protected by our systems that utilize 128-bit data encryption, Secure Socket Layer (SSL) protocol, user names, passwords and other precautions. We have implemented safeguards to ensure that access to customer information is limited to employees, such as customer service representatives, who require such information to carry out their job responsibilities. Our employees are aware of their strict responsibility to respect the confidentiality of your personal information.
Thank you for choosing to invest with Alger. We value your relationship with us and assure you we will abide by our policy to protect your information.
THIS POLICY STATEMENT IS NOT PART OF THE PROSPECTUS.
THE ALGER AMERICAN FUND
CLASS S SHARES
A POOLED FUNDING VEHICLE FOR:
o VARIABLE ANNUITY CONTRACTS
o VARIABLE LIFE INSURANCE POLICIES
o QUALIFIED PENSION PLANS
o QUALIFIED RETIREMENT PLANS
PROSPECTUS
MAY 1, 2005
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.
[ALGER LOGO OMITTED]
THE ALGER
AMERICAN FUND
ALGER AMERICAN
INCOME & GROWTH PORTFOLIO
CLASS S SHARES
PROSPECTUS
MAY 1, 2005
TABLE OF CONTENTS
2 ............Risk/Return Summary: Investments,
Risks & Performance
4 ............Fees and Expenses
4 ............Management and Organization
6 ............Shareholder Information
Distributor .......................6
Transfer Agent ....................6
Net Asset Value ...................6
Dividends and Distributions .......6
Classes of Fund Shares ............6
Purchasing and Redeeming
Fund Shares .....................6
Other Information .................7
8 ............Financial Highlights
Back Cover: How to obtain more information
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THE ALGER AMERICAN FUND
ALGER AMERICAN INCOME & GROWTH PORTFOLIO
RISK/RETURN SUMMARY: INVESTMENTS, RISKS & PERFORMANCE
INVESTMENT GOAL AND APPROACH
The Alger American Income & Growth Portfolio primarily seeks to provide a high level of dividend income; its secondary goal is to provide capital appreciation.
The portfolio invests primarily in equity securities, such as common or preferred stocks, which are listed on U.S. exchanges or in the over-the-counter market. The portfolio invests primarily in "growth" stocks. The portfolio's Manager, Fred Alger Management, Inc., believes that these companies tend to fall into one of two categories:
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.
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.
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PRINCIPAL RISKS
As with any fund that invests in stocks, your investment will fluctuate 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. 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 objectives, an investment in it may be better suited to investors who seek long-term capital growth and can tolerate fluctuations in their investments' values.
The portfolio's trading in some stocks may be relatively short-term, meaning the portfolio may buy a security and sell it a short time later 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 and thereby adversely affect portfolio performance.
There may be additional risks applicable to the portfolio because of its investment approach.
To the extent that the portfolio invests in securities other than those that are its primary focus, the principal risks associated with such other investments, described in the Fund's Prospectus and Statement of Additional Information, are pertinent.
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.
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PERFORMANCE
The following bar chart and the table beneath it give you some indication of the risks of an investment in the portfolio by showing changes in the portfolio's performance from year to year and by showing how the portfolio's average annual returns for the indicated periods compare with those of an appropriate benchmark index. They 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 the chart does not reflect separate account charges which, if reflected, would lower returns.
The index used in the table is a broad index designed to track a particular market or market segment. No expenses or fees are reflected in the returns for the index, which is unmanaged. All returns for the index assume reinvestment of dividends and interest on the underlying securities that make up the index. Investors cannot invest directly in the index.
o Russell 1000 Growth Index: An index of common stocks designed to track performance of large capitalization companies with greater than average growth orientation.
Annual Total Return as of December 31 (%) Class S
[THE DATA LISTED BELOW REPRESENTS A GRAPH IN THE PRINTED PIECE]
29.63 7.47 ----- ----- 03 04 |
Best Quarter: 16.13% Q2 2003 Worst Quarter: -6.22% Q3 2004
Average Annual Total Return as of December 31, 2004
Class S
Since
Inception
1 Year (5/1/02)
------------------------------------------------------
American
Income & Growth 7.47% 2.10%
Russell 1000
Growth Index 6.30% 4.05%
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The portfolio also offers Class O shares. Class S and Class O shares differ only in that Class S shares are subject to a distribution and shareholder servicing fee, whereas Class O s hares are not. Because of the distribution and shareholder servicing fee, returns will be lower for Class S shares.
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FEES AND EXPENSES
Investors incur certain fees and expenses in connection with an investment in the portfolio. The following table shows the fees and expenses that you may incur if you buy and hold Class S shares of the portfolio. The numbers below are based on the portfolio's expenses during its fiscal year ended December 31, 2004
------------------------------------------------------------------------------------------------
ANNUAL FUND OPERATING
EXPENSES
(expenses that are deducted
from Fund assets)
---------------------------------------------------
SHAREHOLDER FEES TOTAL ANNUAL
(fees paid directly Management Distribution Other FUND OPERATING
from your investment) Fees (12b-1) Fees Expenses EXPENSES
===================== ====================== =========== ============= ========= ===============
ALGER AMERICAN None .625% .25% .165% 1.04%
INCOME & GROWTH
PORTFOLIO
------------------------------------------------------------------------------------------------
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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 portfolio with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in Class S shares of 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 $106 $331 $574 $1,271
INCOME & GROWTH
PORTFOLIO
--------------------------------------------------------------------
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The example above does not reflect charges and deductions which are, or may be, imposed under variable annuity contracts, variable life insurance policies, or pension or retirement plans. Such charges and deductions are described in the prospectus for the contract or policy accompanying this prospectus or in the plan documents.
ADDITIONAL INFORMATION ABOUT
THE FUND'S INVESTMENTS
Other securities the portfolio may invest in are discussed in the Fund's Statement of Additional Information (see back cover of this Prospectus).
In times of adverse or unstable market, economic or political conditions, the portfolio may invest up to 100% of its assets in cash, high-grade bonds, or cash equivalents (such as commercial paper or money market instruments) for temporary defensive reasons. 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 also hold these types of securities pending the investment of proceeds from the sale of portfolio securities or to meet anticipated redemptions of portfolio shares. The portfolio may not achieve its objective while in a temporary defensive or interim position.
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MANAGEMENT AND ORGANIZATION
MANAGER
Fred Alger Management, Inc.
111 Fifth Avenue
New York, NY 10003
The Manager has been an investment adviser since 1964, and manages investments totaling (at 12/31/04) $8.2 billion in mutual fund assets as well as $1.5 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 an annual rate based on a percentage of average daily net assets of .625%.
PORTFOLIO MANAGERS
Fred M. Alger III is the chief market strategist for the portfolio, overseeing the investments of the portfolio since September 2001. Mr. Alger, who founded Fred Alger Management, Inc., has served as Chairman of the Board since 1964, and co-managed the portfolio prior to 1995. Dan C. Chung, CFA, and Kevin Collins, CFA, are the individuals responsible for the day-to-day management of portfolio investments.
o Mr. Chung, co-manager of the portfolio since September 2003 (and manager prior thereto from September 2001), has been employed by the Manager since 1994 as a Vice President and analyst from 1996 to 1999, as a Senior Vice President and senior analyst until 2000, as an Executive Vice President until 2003, as portfolio manager since 2000, as Chief Investment Officer since September 2001 and as President since 2003.
o Mr. Collins, co-manager of the portfolio since September 2003, has been employed by the Manager as a Senior Vice President, portfolio manager and senior analyst since September 2003, prior to which period he was employed by the Manager as an analyst and later as a Vice President and senior analyst from 1996 until September 2003.
LEGAL PROCEEDINGS
Alger Management has been responding to inquiries, document requests and/or subpoenas from regulatory authorities, including the United States Securities and Exchange Commission ("SEC"), the Office of the New York State Attorney General, and the Attorney General of New Jersey, in connection with their investigation of practices in the mutual fund industry identified as "market timing" and "late trading." Alger Management has assured the Board of the Fund that if it be determined that improper trading practices in the Fund detrimentally affected its performance, Alger Management will make appropriate restitution.
Certain civil actions have developed out of the regulatory investigations. Several purported class actions and shareholder derivative suits have been filed against various parties; including, depending on the lawsuit, Alger Management, certain of the mutual funds managed by Alger Management (the "Alger Mutual Funds"), and certain current and former Alger Mutual Fund trustees and officers, alleging wrongful market-timing and late-trading activities. These cases have been transferred to the U.S. District Court of Maryland by the Judicial Panel on Multidistrict Litigation for consolidated pre-trial proceedings. On September 29, 2004, consolidated amended complaints involving these cases - a Consolidated Amended Fund Derivative Complaint (the "Derivative Complaint") and two substantially identical Consolidated Amended Class Action Complaints (together, the "Class Action Complaint") - were filed in the Maryland federal district court under the caption number 1:04-MD-15863 (JFM).
The Derivative Complaint, brought on behalf of the Alger Mutual Funds and Castle
Convertible Fund, Inc., a registered closed-end fund managed by Alger
Management, alleges (i) violations, by Alger Management and, depending on the
specific offense alleged, by its immediate parent the Distributor (Fred Alger &
Company, Incorporated) and/or the fund trustee defendants, of Sections 36(a),
36(b), 47, and 48 of the Investment Company Act of 1940 and of Sections 206 and
215 of the Investment Advisers Act of 1940, breach of fiduciary duty, and breach
of contract, (ii) various offenses by other, unrelated, third-party defendants,
and (iii) unjust enrichment by all the named defendants, all by virtue of the
alleged wrongful market-timing and late-trading activities. The complaint seeks,
among other things, removal of the trustee defendants and of Alger Management,
certain rescissory relief, disgorgement of management fees and allegedly
unlawful profits, compensatory and punitive monetary damages, and plaintiffs'
fees and expenses (including attorney and expert fees). The Class Action
Complaint names the Alger-related defendants named in the Derivative Complaint
as well as certain defendants not named in the Derivative Complaint,
including certain entities affiliated with Alger Management, certain Alger
Mutual Funds, including the Fund, and certain additional former trustees and a
former officer of the defendant Alger Mutual Funds. It alleges, on the basis of
factual allegations similar to those of the Derivative Complaint with respect to
the Alger defendants, (i) offenses by the Alger defendants similar to those
alleged in the Derivative Complaint, (ii) violations, by Alger Management, the
Distributor, their affiliates, the funds named as defendants, and the current
and former fund trustees and officers, of Sections 11, 12(a)(2) and 15 of the
Securities Act of 1933, Sections 10(b) (and Rule 10b-5 thereunder) and 20(a) of
the Securities Exchange Act of 1934, and Section 34(b) of the Investment Company
Act of 1940, (iii) breach of contract by the funds named as defendants, and (iv)
unjust enrichment by all of the named defendants. It seeks relief similar to
that sought in the Derivative Complaint.
Alger Management does not believe that the foregoing lawsuits will materially affect its ability to perform its management contracts with any of the funds that it manages, and the management of the Fund believes that the Fund will not be materially adversely affected by the pending lawsuits.
[GRAPHIC OMITTED]
SHAREHOLDER INFORMATION
DISTRIBUTOR
Fred Alger & Company, Incorporated
30 Montgomery Street
Jersey City, NJ 07302
TRANSFER AGENT
State Street Bank and Trust Company
c/o Boston Financial Data Services, Inc.
Attn: The Alger American Fund
P.O. Box 8480
Boston, MA 02266-8480
NET ASSET VALUE
The value 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 reliable or 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.
In determining whether market quotations are reliable and readily available, the Manager monitors information it routinely receives for significant events it believes will affect market prices of portfolio instruments held by the Fund. Significant events may affect a particular company (for example, a trading halt in the company's securities on an exchange during the day) or may affect securities markets (for example, a natural disaster such as an earthquake causes a market to close early). If the Manager is aware of a significant event that has occurred after the close of the market where a portfolio instrument is primarily traded, but before the close of the New York Stock Exchange, and the Manager believes that such event has affected or is likely to affect the price of the instrument, the Manager will use its best judgment to determine a fair value for that portfolio instrument under procedures adopted by the Board of Trustees.
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. Dividends and distributions may differ between classes of shares of the portfolio.
Federal income taxation of separate accounts of insurance companies, variable annuity contracts and variable life insurance contracts is discussed in the prospectuses of participating insurance companies. Generally, distributions by the Fund will not be taxable to holders of variable annuity contracts or variable life insurance policies if the insurance company separate accounts to which those distributions are made meet certain requirements, including certain diversification requirements that the Fund has undertaken to meet, under the Internal Revenue Code. Participants in 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 from their plan accounts. Generally, distributions from plan accounts 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.
CLASSES OF FUND SHARES
The portfolio offers two classes of shares: Class O shares and Class S shares. Only Class S shares are offered in this prospectus. Both classes are offered only to separate accounts of insurance companies for the purpose of funding variable annuity contracts and variable life insurance policies and to qualified pension and retirement plans. The classes differ in that, pursuant to a plan adopted under Rule 12b-1 under the Investment Company Act, Class S shares pay a distribution and shareholder servicing fee out of their assets on an ongoing basis to compensate insurance companies and pension and retirement plan service providers for distribution assistance and shareholder services. Over time, these fees will increase the cost of an investment in Class S shares and may cost an investor more than paying other types of sales charges.
PURCHASING AND REDEEMING FUND SHARES
Because 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 Fund or its designated 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 seven days after it accepts a redemption request.
OTHER INFORMATION
The Fund may redeem some of your shares "in kind," which means that some of the proceeds will be paid with securities the portfolio owns instead of cash.
Shares may be worth more or less when you redeem them than they were at the time you bought them.
The Board of Trustees has determined that the Fund may reject purchase orders, on a temporary or permanent basis, from investors that the Manager is able to determine, consistent with its compliance procedures and its reasonable business judgment, are exhibiting a pattern of frequent or short-term trading in Fund shares or shares of other funds sponsored by the Manager.
The Fund might not be able to detect frequent or short-term trading conducted by the underlying owners of shares held in omnibus accounts, and therefore might not be able to effectively prevent frequent or short-term trading in those accounts. There is no guarantee that the Fund's compliance procedures will be successful to identify investors who engage in excessive trading activity or to curtail that activity.
The portfolio posts its month-end full portfolio with a 60-day lag, on its website, WWW.ALGER.COM. The Fund reserves the right to change the policy for posting portfolio holdings on the website without further notice to shareholders. Following publication of portfolio holdings information on the Fund's website, it may be sent by the Fund to any party.
The Fund and Transfer Agent have reasonable procedures in place to determine that instructions submitted by telephone are genuine. They include requesting personal identification and recording calls. If the Fund and Transfer Agent follow these procedures, they are not liable for acting in good faith on telephone instructions.
[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 portfolio share. The total returns in the table represent the rate that an investor would have earned or lost on an investment in the portfolio (assuming reinvestment of all dividends and distributions). Because Class S shares have been outstanding only since 2002, information is provided also with respect to Class O shares. Class S shares have higher expense ratios and lower total returns. Information shown from the period ended December 31, 2002 through the year ended December 31, 2004 has been audited by Ernst & Young LLP, the Fund's independent registered public accounting firm, whose report, along with the Fund's financial statements, is included in the Annual Report, which is available upon request. Information for the periods prior thereto has been audited by Arthur Andersen LLP.
Note that the Financial Highlights do 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.
INCOME FROM INVESTMENT OPERATIONS LESS DIVIDENDS AND DISTRIBUTIONS
--------------------------------- --------------------------------
NET ASSET NET REALIZED DISTRIBUTIONS
VALUE AND UNREALIZED TOTAL FROM DIVIDENDS FROM FROM NET
BEGINNING NET INVESTMENT GAIN (LOSS) INVESTMENT NET INVESTMENT REALIZED
OF PERIOD INCOME (LOSS) ON INVESTMENTS OPERATIONS INCOME GAINS
----------- -------------- --------------- ------------ -------------- -------------
ALGER AMERICAN INCOME &
GROWTH PORTFOLIO
CLASS S
Year ended 12/31/04 ............. $ 9.41 $ 0.07 $ 0.63 $ 0.70 $(0.03) $ --
Year ended 12/31/03 ............. 7.27 0.03 2.12 2.15 (0.01) --
Eight months ended
12/31/02(i)(ii) ................. 9.58 0.01 (2.32) (2.31) -- --
CLASS O
Year ended 12/31/04 ............. $ 9.37 $ 0.10 $ 0.63 $ 0.73 $(0.05) $ --
Year ended 12/31/03 ............. 7.24 0.05 2.11 2.16 (0.03) --
Year ended 12/31/02 ............. 10.57 0.02 (3.29) (3.27) (0.06) --
Year ended 12/31/01 ............. 13.26 0.05 (1.86) (1.81) (0.05) (0.83)
Year ended 12/31/00 ............. 17.58 0.05 (0.44) (0.39) (0.01) (3.92)
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(i) Ratios have been annualized; total return has not been annualized.
(ii) Commenced operations May 1, 2002.
RATIOS/SUPPLEMENTAL DATA
-------------------------------------
RATIO OF
NET
RATIO OF INVESTMENT
NET ASSET NET ASSETS, EXPENSES INCOME (LOSS) PORTFOLIO
TOTAL VALUE, END END OF PERIOD TO AVERAGE TO AVERAGE TURNOVER
DISTRIBUTIONS OF PERIOD TOTAL RETURN (000'S OMITTED) NET ASSETS NET ASSETS RATE
------------- ---------- ------------ --------------- ----------- ------------- ---------
ALGER AMERICAN INCOME &
GROWTH PORTFOLIO
CLASS S
Year ended 12/31/04 ............. $ (0.03) $10.08 7.47% $ 11 1.04% 0.76% 96.49%
Year ended 12/31/03 ............. (0.01) 9.41 29.63 10 1.01 0.35 175.67
Eight months ended
12/31/02(i)(ii) ................. -- 7.27 (24.11) 7 1.05 0.16 276.12
CLASS O
Year ended 12/31/04 ............. $ (0.05) $10.05 7.85% $ 93,554 0.78% 0.97% 96.49%
Year ended 12/31/03 ............. (0.03) 9.37 29.84 101,255 0.78 0.60 175.67
Year ended 12/31/02 ............. (0.06) 7.24 (31.10) 85,066 0.79 0.25 276.12
Year ended 12/31/01 ............. (0.88) 10.57 (14.32) 144,006 0.72 0.52 110.04
Year ended 12/31/00 ............. (3.93) 13.26 (1.27) 150,783 0.70 0.43 142.43
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|
FOR FUND INFORMATION:
By telephone: (800) 992-3863
By mail: Boston Financial Data Services, Inc.
Attn: The Alger American Fund
P.O. Box 8480 Boston, MA 02266-8480
|
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, at the Fund's website at http://www.alger.com 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 of the Fund, by calling the Fund's toll-free number, at the Fund's website at http://www.alger.com or by writing to the address above.
Another way you can review and copy Fund documents is by visiting the SEC's Public Reference Room in Washington, DC. Copies can also be obtained, for a duplicating fee, by E-mail request to publicinfo@sec.gov or by writing to the SEC's Public Reference Section, Washington, DC 20549-0102. Information on the operation of the Public Reference Room is available by calling (202) 942-8090. Fund documents are also available on the EDGAR database on the SEC's internet site at http://www.sec.gov.
QUARTERLY FUND HOLDINGS
The portfolio files its complete schedule of portfolio holdings with the SEC for the first and third quarter of each fiscal year on Form N-Q. Forms N-Q are available online on the Fund's website at http://www.alger.com or on the SEC's website at http://www.sec.gov. The Fund's Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling (800) SEC-0330. A copy of the most recent quarterly holdings may also be obtained from the Fund by calling (800) 992-3863.
DISTRIBUTOR: FRED ALGER & COMPANY, INCORPORATED
THE ALGER AMERICAN FUND
SEC FILE #811-5550
FRED ALGER & COMPANY, INCORPORATED PRIVACY POLICY
YOUR PRIVACY IS OUR PRIORITY
At Fred Alger & Company, Incorporated ("Alger") we value the confidence you have placed in us. In trusting us with your assets, you provide us with personal and financial data. Alger is committed to maintaining the confidentiality of the personal nonpublic information ("personal information") entrusted to us by our customers. Your privacy is very important to us, and we are dedicated to safeguarding your personal information as we serve your financial needs.
OUR PRIVACY POLICY
We believe you should know about Alger's Privacy Policy and how we collect and protect your personal information. This Privacy Policy ("Policy") describes our practices and policy for collecting, sharing and protecting the personal information of our prospective, current and former customers. The Policy is applicable to Alger and its affiliates, Fred Alger Management, Inc., Alger National Trust Company and Alger Shareholder Services, Inc. as well as the following funds: The Alger Funds, The Alger Institutional Funds, The Alger American Fund, The China-U.S. Growth Fund, Spectra Fund and Castle Convertible Fund, Inc. We are proud of our Policy and hope you will take a moment to read about it.
INFORMATION WE COLLECT
The type of personal information we collect and use varies depending on the Alger products or services you select. We collect personal information that enables us to serve your financial needs, develop and offer new products and services, and fulfill legal and regulatory requirements. Depending on the products or services you request, we obtain personal information about you from the following sources:
o Information, such as your name, address and social security number, provided on applications and other forms we receive from you or your representative;
o Information from your communications with Alger employees or from your representative, which may be provided to us by telephone, in writing or through Internet transactions; and
o Information about your transactions, such as the purchase and redemption of fund shares, account balances and parties to the transactions, which we receive from our affiliates or other third parties.
SHARING OF PERSONAL INFORMATION
We may share your personal information with our affiliates so that they may process and service your transactions. However, Alger never sells customer lists to any third party. Further, we do not disclose personal information to nonaffiliated third parties, except as required by law or as permitted by law to service your account, such as follows:
o To third-party service providers that assist us in servicing your accounts (e.g. securities clearinghouses);
o To governmental agencies and law enforcement officials (e.g. valid subpoenas, court orders); and
o To financial institutions that perform marketing services on our behalf or with whom we have joint marketing agreements that provide for the confidentiality of personal information.
OUR SECURITY PRACTICES
We protect your personal information by maintaining physical, electronic and procedural safeguards. When you visit Alger's Internet sites your information is protected by our systems that utilize 128-bit data encryption, Secure Socket Layer (SSL) protocol, user names, passwords and other precautions. We have implemented safeguards to ensure that access to customer information is limited to employees, such as customer service representatives, who require such information to carry out their job responsibilities. Our employees are aware of their strict responsibility to respect the confidentiality of your personal information.
Thank you for choosing to invest with Alger. We value your relationship with us and assure you we will abide by our policy to protect your information.
THIS POLICY STATEMENT IS NOT PART OF THE PROSPECTUS.
STATEMENT OF May 1, 2005
THE ALGER
AMERICAN FUND
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
This Statement of Additional Information is not a Prospectus. This document contains additional information about the Fund and supplements information in the Prospectuses dated May 1, 2005 for the Fund's portfolios. It should be read together with a Prospectus which may be obtained free of charge by writing the Fund c/o Boston Financial Data Services, Inc., Attn: The Alger American Fund, P.O. 8480, Boston, MA 02266-8480 or by calling (800) 992-3863 or at the Fund's website at http://www.alger.com
[ALGER LOGO]
MAY 1, 2005
THE ALGER
AMERICAN FUND
* 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 Independent Registered Public Accounting Firm .............................. 17 Code of Ethics ............................................................. 18 Expenses ................................................................... 18 Dividends and Distributions ................................................ 18 Taxes ...................................................................... 18 Custodian .................................................................. 19 Transfer Agent ............................................................. 19 Counsel to the Fund ........................................................ 19 Certain Shareholders ....................................................... 19 Organization ............................................................... 23 Proxy Voting Policies and Procedures ....................................... 24 Investor and Shareholder Information ....................................... 25 Financial Statements ....................................................... 25 Appendix ................................................................... A-1 |
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. Under normal circumstances, 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 that are rated in one of the four highest rating categories by any established rating agency or, if not rated, 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. Under normal circumstances, the Portfolio invests at least 80% of its net 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 or the S&P SmallCap 600 Index, updated quarterly. Both indices are broad indexes of small capitalization stocks. This policy will not be changed without 60 days notice to shareholders. The Portfolio may invest the remainder of its 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) in money market instruments and repurchase agreements under abnormal circumstances.
ALGER AMERICAN GROWTH PORTFOLIO
The investment objective of the Portfolio is long-term capital appreciation. Under normal circumstances, 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. Under normal circumstances, the Portfolio invests at least 80% of its net 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 Russell Midcap Growth Index or S&P MidCap 400 Index, updated quarterly. Both indices are designed to track the performance of medium capitalization companies. This policy will not be changed without 60 days notice to shareholders. The Portfolio may invest the remainder of its 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) in money market instruments and repurchase agreements under abnormal circumstances.
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
The investment objective of the Portfolio is long-term capital appreciation. Except during temporary defensive periods, the Portfolio invests at least 85% of its net assets in equity securities of companies of any size.
The Portfolio may purchase put and call options and sell (write) covered call and put options on securities and securities indexes to increase gains and to hedge against the risk of unfavorable price movements, and may enter into futures contracts on securities indexes and purchase and sell call and put options on these futures contracts. The Portfolio may also borrow money for the purchase of additional securities. The Portfolio may borrow only from banks and may not borrow in excess of one-third of the market value of its total assets, less liabilities other than such borrowing. These practices are deemed to be speculative and
may cause the Portfolio's net asset value to be more volatile than the net asset value of a fund that does not engage in these activities.
IN GENERAL
Alger American Small Capitalization Portfolio, Alger American MidCap Growth Portfolio, Alger American Growth Portfolio, Alger American Leveraged AllCap Portfolio, Alger American Income & Growth Portfolio and the equity portion of Alger American Balanced Portfolio seek to achieve their objectives by investing in equity securities, such as common or preferred stocks, or securities convertible into or exchangeable for equity securities, including warrants and rights. The Portfolios will invest primarily in companies whose securities are traded on domestic stock exchanges or in the over-the-counter market. These companies may be in the development stage, may be older companies that appear to be entering a new stage of growth progress owing to factors such as management changes or development of new technology, products or markets or may be companies providing products or services with a high unit-volume growth rate. In order to afford the Portfolios the flexibility to take advantage of new opportunities for investments in accordance with their investment objectives and to meet redemptions, they may hold up to 15% of their net assets (35% of total assets, in the case of Alger American Balanced Portfolio and Alger American Income & Growth Portfolio) in money market instruments and repurchase agreements and in excess of that amount (up to 100% of their assets) during temporary defensive periods. This amount may be higher than that maintained by other funds with similar investment objectives.
There is no guarantee that any Portfolio's objectives will be achieved.
TEMPORARY DEFENSIVE AND INTERIM INVESTMENTS
When market conditions are unstable, or Alger Management believes it is otherwise appropriate to reduce holdings in stocks, the Portfolios can invest in a variety of debt securities for defensive purposes. The Portfolios can also purchase these securities for liquidity purposes to meet cash needs due to the redemption of Portfolio shares, or to hold while waiting to reinvest cash received from the sale of other portfolio securities. The Portfolios can buy:
o high-quality, short-term money market instruments, including those issued by the U.S. Treasury or other government agencies;
o commercial paper (short-term, unsecured, promissory notes of domestic or foreign companies);
o short-term debt obligations of corporate issuers, certificates of deposit and bankers' acceptances of domestic and foreign banks and savings and loan associations; and
o repurchase agreements.
Short-term debt securities would normally be selected for defensive or cash management purposes because they can normally be disposed of quickly, are not generally subject to significant fluctuations in principal value and their value will be less subject to interest rate risk than longer-term debt securities.
INVESTMENT STRATEGIES AND POLICIES
CERTAIN SECURITIES AND INVESTMENT TECHNIQUES
The Prospectuses discuss the investment objectives of the Portfolios 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 the Alger American Small Capitalization Portfolio may not be appropriate for all investors. These risks may also apply to investments in smaller companies by all other Portfolios.
CONVERTIBLE SECURITIES
Each Portfolio may invest in convertible securities, which are debt instruments or preferred stocks that make fixed dividend or interest payments and are convertible into common stock. Generally, the market prices of convertible securities tend to reflect price changes in their underlying common stocks, but also tend to respond inversely to changes in interest rates. Convertible securities typically entail less market risk than investments in the common stock of the same issuers. Declines in their market prices are typically not as pronounced as those of their underlying common stocks. Like all fixed income securities, convertible securities are subject to the risk of default on their issuers' payment obligations.
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
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, of an investment quality comparable to other debt securities which
may be purchased by the Portfolios. These limitations do not prohibit
investments in securities issued by foreign branches of U.S. banks, provided
such U.S. banks meet the foregoing requirements.
FOREIGN BANK OBLIGATIONS
Investments by the Portfolios in foreign bank obligations and obligations of foreign branches of domestic banks present certain risks, including the impact of future political and economic developments, the possible imposition of withholding taxes on interest income, the possible seizure or nationalization of foreign deposits, the possible establishment of exchange controls and/or the addition of other foreign governmental restrictions that might affect adversely the payment of principal and interest on these obligations. In addition, there may be less publicly available and reliable information about a foreign bank than about domestic banks owing to different accounting, auditing, reporting and recordkeeping standards. In view of these risks, Alger Management will carefully evaluate these investments on a case-by-case basis.
SHORT-TERM CORPORATE DEBT SECURITIES
These are outstanding nonconvertible corporate debt securities (e.g., bonds and debentures) which have one year or less remaining to maturity. Corporate notes may have fixed, variable or floating rates.
COMMERCIAL PAPER
These are short-term promissory notes issued by corporations primarily to finance short-term credit needs.
VARIABLE RATE MASTER DEMAND NOTES
These are unsecured instruments that permit the indebtedness thereunder to vary and provide for periodic adjustments in the interest rate. Because these notes are direct lending arrangements between the Portfolio and the issuer, they are not normally traded. Although no active secondary market may exist for these notes, the Portfolio may demand payment of principal and accrued interest at any time or may resell the note to a third party. While the notes are not typically rated by credit rating agencies, issuers of variable rate master demand notes must satisfy Alger Management that the same criteria for issuers of commercial paper are met. In addition, when purchasing variable rate master demand notes, Alger Management will consider the earning power, cash flows and other 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, as authorized and directed by 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 its obligations under reverse repurchase agreements. The Portfolio will invest the proceeds in money market instruments or repurchase agreements maturing not later than the expiration of the reverse repurchase agreement. Reverse repurchase agreements involve the risk that the market value of the securities sold by the Portfolio may decline below the repurchase price of the securities. Under the Investment Company Act of 1940, as amended (the "Act"), reverse repurchase agreements may be considered borrowings by the seller; accordingly, the Portfolio will limit its investments in reverse repurchase agreements and other borrowings to no more than one-third of its total assets less liabilities other than the repurchase obligation.
FIRM COMMITMENT AGREEMENTS AND
WHEN-ISSUED PURCHASES
Firm commitment agreements and "when-issued" purchases call for the purchase of securities at an agreed price on a specified future date and would be used, for example, when a decline in the yield of securities of a given issuer is anticipated and a more advantageous yield may be obtained by committing currently to purchase securities to be issued later. When a Portfolio purchases a security under a firm commitment agreement or on a when-issued basis it assumes the risk of any decline in value of the security occurring between the date of the agreement or purchase and the settlement date of the transaction. A Portfolio will not use these transactions for leveraging purposes and, accordingly, will segregate cash or liquid securities in an amount sufficient at all times to meet its purchase obligations under these agreements.
WARRANTS AND RIGHTS
Each Portfolio may invest in warrants and rights. A warrant is a type of security that entitles the holder to buy a proportionate amount of common stock at a specified price, usually higher than the market price at the time of issuance, for a period of years or to perpetuity. In contrast, rights, which also represent the right to buy common shares, normally have a subscription price lower than the current market value of the common stock and a life of two to four weeks. Warrants are freely transferable and are traded on the major securities exchanges.
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 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 re-
duce 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.
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 more than the premium received from writing the option or 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 indices 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 indices 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 indices 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 trading by the Portfolio in put 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 indices 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, if 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, immediately thereafter, the sum of the amount of its initial margin and premiums on open futures contracts and options thereon would exceed 5% of the Portfolio's total assets (taken at current value); however, in the case of an option that is in-the-money at the time of the purchase, the in-the-money amount may be excluded in calculating the 5% limitation.
INVESTMENT RESTRICTIONS
The investment restrictions numbered 1 through 12 below have been adopted by 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 percent of the value of the Portfolio's total assets would be invested in the securities of the issuer, except that up to 25% 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, 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; provided that there shall be no limit on the purchase of U.S. Government securities.
10. Investing in commodities, except that the Alger American Leveraged AllCap Portfolio may purchase or sell stock index futures contracts and related options thereon if, thereafter, no more than 5% of its total assets are invested in margin and premiums.
11. Investing more than 10 percent (15 percent in the case of Alger American Leveraged AllCap Portfolio) of its net assets in securities which are illiquid by virtue of legal or contractual restrictions on resale or the absence of a readily available market. However, securities with legal and contractual restrictions on resale may be purchased if they are determined to be liquid, and such purchases would not be subject to the limit stated above.
12. Issuing senior securities, except that the Alger American Leveraged AllCap Portfolio may borrow from banks for investment purposes so long as the Portfolio maintains the required asset coverage.
13. Purchasing or selling real estate, except that the Portfolio may purchase and sell securities secured by real estate, mortgages or interests therein and securities that are issued by companies that invest or deal in real estate.
14. Writing or selling puts, calls, straddles, spreads or combinations thereof, except that Alger American Leveraged AllCap Portfolio may buy and sell (write) options.
15. Investing in oil, gas or other mineral exploration or development programs, except that the Portfolio may invest in the securities of companies that invest in or sponsor those programs.
16. Purchasing any security if, as a result, the Portfolio would then have more than 5% of its total assets invested in securities of issuers (including predecessors) that have been in continual operation for less than three years. This limitation shall not apply to investments in U.S. Government securities.
17. Making investments for the purpose of exercising control or management.
18. Investing in warrants, except that the Portfolio may invest in warrants if, as a result, the investments (valued at the lower of cost or market) would not exceed five percent of the value of the Portfolio's net assets, of which not more than 2% of the Portfolio's net assets may be invested in warrants not listed on a recognized domestic stock exchange. Warrants acquired by the Portfolio as part of a unit or attached to securities at the time of acquisition are not subject to this limitation.
19. Purchasing or retaining the securities of any issuer if, to the knowledge of the Fund, any of the officers, directors or trustees of the Fund or Alger Management individually owns more than 0.5% 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 also may 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 most cases effected on U.S. stock exchanges or in over-the-counter markets and involve the payment of negotiated brokerage commissions. Where there is no stated commission, as in the case of certain securities traded in the over-the-counter markets, the prices of those securities include undisclosed commissions or mark-ups. Purchases and sales of money market instruments and debt securities usually are principal transactions. These securities are normally purchased directly from the issuer or from an underwriter or market maker for the securities. The cost of securities purchased from underwriters includes an underwriting commission or concession and the prices at which securities are purchased from and sold to dealers include a dealer's mark-up or mark-down. U.S. Government securities are generally purchased from underwriters or dealers, although certain newly issued U.S. Government securities may be purchased directly from the U.S. Treasury or from the issuing agency or instrumentality.
"Portfolio turnover" describes the rate at which a Portfolio traded its portfolio securities during its last fiscal year. For example, if a Portfolio sold all of its
securities during the year, its portfolio turnover rate would have been 100%. Each Portfolio can engage in active and frequent trading to try to achieve its objective, and may have a high portfolio turnover rate. Increased portfolio turnover creates higher brokerage and transaction costs for the Portfolio. The Financial Highlights table in the Prospectus shows each Portfolio's portfolio turnover rate during prior fiscal years. During the fiscal year ended December 31, 2004, each Portfolio other than Alger American Income & Growth Portfolio had a portfolio turnover in excess of 100%. If a Portfolio realizes capital gains when it sells its portfolio investments, it must generally pay those gains out to shareholders to avoid excise taxes under the Internal Revenue Code, thereby increasing shareholders' taxable distributions.
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 generally 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. 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, 2002, the Fund paid an aggregate of approximately $18,921,996in commissions to broker-dealers in connection with portfolio transactions, of which $12,608,652 was paid to Alger Inc. During the fiscal year ended December 31, 2003, the Fund paid an aggregate of approximately $14,409,055 in commissions to broker-dealers in connection with portfolio transactions, of which $8,526,465 was paid to Alger Inc. During the fiscal year ended December 31, 2004, the Fund paid an aggregate of approximately $15,036,845 in commissions to broker-dealers in connection with portfolio transactions, of which $7,392,283 was paid to Alger Inc. The commissions paid to Alger Inc. during the fiscal year ended December 31, 2004 constituted 49% of the aggregate brokerage commissions paid by the Fund; during that year, 56% of the aggregate dollar amount of transactions by the Fund involving the payment of brokerage commissions was 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. During the fiscal year ended December 31, 2004, $431,072,380 in portfolio transactions, including $969,985 in commissions, was allocated to brokers who supplied research to the Fund or Alger Management.
NET ASSET VALUE
The price of one share of a class is its "net asset value." Net asset value is computed by adding the value of the Portfolio's investments plus cash and other assets allocable to the class, deducting applicable liabilities and then dividing the result by the number of shares of the class outstanding. Shares of the two classes may differ in 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.
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.
Valuations of money market instruments with maturities of 60 days or less held by the Portfolios are 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 fees and other charges may be assessed by Participating Insurance Companies under the VA contracts or VLI policies. These fees should be described in the Participating Insurance Companies' prospectuses. Any charges assessed by the Plans should be described in the Plan documents. 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 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.
DISTRIBUTION AND SHAREHOLDER SERVICING PLAN
Under a distribution and shareholder servicing plan (the "Plan") adopted in accordance with Rule 12b-1 under the 1940 Act, each Portfolio may pay Alger Inc. a fee, at an annual rate of up to 0.25% of the average daily net assets of the Portfolio allocable to Class S shares of the Portfolio, for remittance to insurance companies and qualified plan service providers as compensation for distribution assistance and shareholder services with respect to Class S shares. The Plan is a "compensation" type plan and permits the payment at an annual rate of up to 0.25% of the average daily net assets allocable to the Class S shares of a Portfolio for recordkeeping and administrative services as well as activities that are primarily intended to result in sales of Class S shares of the Portfolio, including but not limited to preparing, printing and distributing prospectuses, Statements of Additional Information, shareholder reports, and educational materials to prospective and existing contract owners and plan participants; compensating agents;
responding to inquiries by contract owners and plan participants; receiving and answering correspondence; contract owner and participant-level recordkeeping and administrative services; and similar activities. The Trustees unanimously approved the Plan on February 5, 2002, and it became effective on May 1, 2002. The Plan and any related agreement that is entered into by the Fund in connection with the Plan will continue in effect for a period of more than one year only so long as continuance is specifically approved at least annually by a vote of a majority of the Trustees and of a majority of the Trustees who are not interested persons (as defined in the 1940 Act) of the Fund and who have no direct or indirect financial interest in the operation of the Plan or any related agreements ("Independent Trustees"). All material amendments to the Plan must be approved by a majority vote of the Trustees, including a majority of the Independent Trustees, at a meeting called for that purpose. The Plan may not be amended to increase materially the amount to be spent with respect to a Portfolio without the approval of the Class S shareholders of the Portfolio. In addition, the Plan may be terminated with respect to any Portfolio at any time, without penalty, by vote of a majority of the outstanding Class S shares of the Portfolio or by vote of a majority of the Independent Trustees. During the fiscal year ended December 31, 2004, the Fund paid $168,814 to Alger Inc. under the Class S 12b-1 Plan. Alger Inc.'s selling expenses during that period were as follows for the Portfolios:
COMPENSATION TOTAL SELLING
THE ALGER AMERICAN FUNDS - CLASS S SHARES TO DEALERS EXPENSES
----------------------------------------- ------------ -------------
ALGER AMERICAN GROWTH PORTFOLIO $13,167 $13,167
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO $30,591 $30,591
ALGER AMERICAN INCOME & GROWTH PORTFOLIO $25 $25
ALGER AMERICAN BALANCED PORTFOLIO $94,619 $94,619
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO $3,546 $3,546
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO $26,866 $26,866
-------- --------
TOTAL $168,814 $168,814
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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 their 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.
The Board of Trustees has one standing committee, the Audit Committee, which oversees (a) the Fund's accounting and financial reporting policies and practices and its internal controls and (b) the quality and objectivity of the Fund's financial statements and the independent audit thereof. The members of the Committee, which met four times during the Fund's last fiscal year, are Stephen E. O'Neil and Nathan E. Saint-Amand.
Information about the Trustees and officers of the Fund is set forth below. In the following tables, the term "Alger Fund Complex" refers to the Fund and the five other registered investment companies managed by Fred Alger Management, Inc. ("Alger Management"). Each Trustee serves until an event of termination, such as death or resignation, or until his successor is duly elected; each officer's term of office is one year. The address of Mr. Alger and Mr. Chung is 111 Fifth Avenue, New York, NY 10003; that of Mr. Blum and Ms. Feld is 30 Montgomery Street, Jersey City, NJ 07302. The address of each of the non-interested Trustees is c/o The Alger American Fund, 111 Fifth Avenue, New York, NY 10003.
NUMBER OF
PORTFOLIOS
IN THE ALGER
FUND COMPLEX OTHER
TRUSTEE WHICH ARE DIRECTORSHIPS
NAME, AGE, POSITION WITH AND/OR OVERSEEN HELD BY
THE FUND AND ADDRESS PRINCIPAL OCCUPATIONS OFFICER SINCE BY TRUSTEE TRUSTEE
------------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE
Fred M. Alger III (70) Chairman of the Board of Alger Associates, Inc. 1988 22 None.
Chairman of the Board ("Associates"), Fred Alger & Company, Incorporated
("Alger Inc."), Alger Management, Alger
Properties, Inc. ("Properties"), Alger Shareholder
Services, Inc. ("Services"), Alger Life Insurance
Agency, Inc. ("Agency"), Fred Alger International
Advisory S.A. ("International"), five of the six
investment companies in the Alger Fund Complex,
Alger SICAV ("SICAV") and Analysts Resources, Inc.
("ARI").
NON-INTERESTED TRUSTEES
Stephen E. O'Neil (72) Attorney; Private investor since 1981; Trustee/ 1988 23 Brown Forman
Trustee Director of the six investment companies in the Corporation.
Alger Fund Complex; formerly of Counsel to the law
firm of Kohler & Barnes.
Nathan E. Saint-Amand, Medical doctor in private practice; Member of the 1988 23 None.
M.D. (67) Board of the Manhattan Institute; Trustee/Director
Trustee of the six investment companies in the Alger Fund
Complex. Formerly Co-Chairman Special Projects
Committee of Memorial Sloan Kettering.
OFFICERS
Dan C. Chung (42) President since September 2003 and Chief 2001 16
President Investment Officer and Director since 2001 of
Alger Management; President since 2003 and
Director since 2001 of Associates, Properties,
Services, Agency, International (Director since
2003), Alger National Trust Company ("Trust") and
ARI; President of the other five investment
companies in the Alger Fund Complex since
September 2003; Trustee/Director of four of the
six investment companies in the Alger Fund Complex
since 2001; senior analyst with Alger Management
1998-2001.
Frederick A. Blum (51) Executive Vice President and Treasurer of Alger Inc., 1996 N/A
Treasurer and Alger Management, Properties, Associates, ARI,
Assistant Secretary Services and Agency since September 2003 and
Senior Vice President prior thereto; Treasurer or
Assistant Treasurer, and Assistant Secretary, of
the six investment companies in the Alger Fund
Complex; Director of SICAV and International and
Chairman of the Board (and prior thereto Senior
Vice President) and Treasurer of Trust since 2003.
Katherine P. Feld (46) Senior Vice President, Chief Compliance Officer 2004 N/A
Chief Compliance Officer and Counsel of Fred Alger Management, Inc. and
Fred Alger & Company, Incorporated since February
2004; previously Associate Counsel (November 1983
- July 1999), Senior Counsel (July 1999 - February
2004) and Vice President (June 1990 - February
2004) of OppenheimerFunds, Inc.
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Mr. Alger is an "interested person" (as defined in the Investment Company Act) of the Fund because of his affiliations with Alger Management and Alger Inc., the Fund's principal underwriter.
No director, officer or employee of Alger Management or its affiliates receives any compensation from the Fund for serving as an officer or Trustee of the Fund. The Fund pays each independent Trustee $1,500 for each meeting he attends, to a maximum of $6,000, plus travel expenses incurred for attending the meeting.
The Fund did not offer its Trustees any pension or retirement benefits during or prior to the fiscal year ended December 31, 2004. The following table provides compensation amounts paid to current independent Trustees of the Fund for the fiscal year ended December 31, 2004. The amounts listed for Mr. O' Neil include $3,000 and $14,000 currently payable by the Fund and the Alger Fund Complex, respectively.
COMPENSATION TABLE
AGGREGATE
COMPENSATION TOTAL COMPENSATION
FROM PAID TO TRUSTEES FROM
NAME OF PERSON, POSITION THE ALGER AMERICAN FUND THE ALGER FUND COMPLEX
------------------------ ----------------------- ----------------------
STEPHEN E. O'NEIL $6,000 $44,000
NATHAN E. SAINT-AMAND $6,000 $44,000
|
The following table shows each Trustee's beneficial ownership as of April 4,
2005, by dollar range, of equity securities of the Fund and of the funds in the
Alger Fund Complex overseen by that Trustee. The table also reports each
portfolio manager's beneficial ownership, by dollar range, of the Portfolios for
which he/she is the portfolio manager. The ranges are as follows:
A = none; B = $1-$10,000; C = $10,000-$50,000; D = $50,000-$100,000; E = over
$100,000.
None of the non-interested Trustees and none of their immediate family members owns any securities issued by Alger Management, Alger Inc., or any company (other than a registered investment company) controlling, controlled by or under common control with Alger Management or Alger Inc.
EQUITY SECURITIES
OF EACH PORTFOLIO
------------------------------------------------------------------
AGGREGATE EQUITY SECURITIES
SMALL MIDCAP LEVERAGED INCOME & OF FUNDS IN ALGER FUND
NAME OF TRUSTEE CAPITALIZATION GROWTH GROWTH BALANCED ALLCAP GROWTH COMPLEX OVERSEEN BY TRUSTEE
------------------------ ------------------------------------------------------------------ ---------------------------
Interested Trustees
-------------------
Fred M. Alger III E A E A A A E
Non-interested Trustees
-----------------------
Stephen E. O'Neil A A A A A A A
Nathan E. Saint-Amand A A A A A A E
Portfolio Manager
-----------------
Dan C. Chung A A A A A A E
Kevin Collins A A A A A A D
John Curry A A A A A A B
Jill Greenwald A A A A A A E
Patrick Kelly A A A A A A C
Teresa McRoberts A A A A A A E
Andrew Silverberg A A A A A A B
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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 most 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, 2002, 2003 and 2004, Alger Management earned under the terms of the Management Agreements $711,969, $560,496 and $604,640 respectively, in respect of Alger American Income & Growth Portfolio; $3,810,001, $3,702,497 and $4,161,133 respectively, in respect of Alger American Small Capitalization Portfolio; $8,770,630, $7,273,659 and $7,921,825 respectively, in respect of Alger American Growth Portfolio; $1,887,444, $2,172,537 and $2,582,718 respectively, in respect of Alger American Balanced Portfolio; $2,409,650, $2,495,822 and $3,490,676 respectively, in respect of Alger American MidCap Growth Portfolio; $2,988,448, $2,777,390 and $3,268,233 respectively, in respect of Alger American Leveraged AllCap Portfolio.
At their meeting called to consider the annual renewal of the Portfolios' Investment Management Agreements with Alger Management, the Trustees considered the nature and quality of the services provided in relation to the fees paid by the Portfolios and the other benefits received by Alger Management by virtue of its relationship with the Fund. In their deliberations, the Trustees considered materials, which they had reviewed in advance of the meeting, regarding the Portfolios' performance and expenses, including advisory fees and brokerage commissions, and Alger Management's financial condition, overall investment advisory operations, brokerage practices with respect to the Portfolios, and profits from its mutual fund operations (reflecting not only advisory fees but also receipt by an affiliate of fund brokerage commissions and by another affiliate of transfer agency fees). The Trustees had also received a memorandum discussing certain factors generally regarded as appropriate to consider in evaluating advisory arrangements and representative samples of the Investment Management Agreements themselves. In considering the Management Agreements, the Trustees also drew upon prior discussions with representatives of Alger Management, at each quarterly meeting, of the Portfolios' performance and expenses and their familiarity with the personnel and resources of Alger Management and its affiliates. To consider the renewals, the non-interested Trustees met in executive session with independent counsel. In considering the nature and quality of the services provided by Alger Management in relation to its fees and other benefits received, they concluded that the overall investment performance of the Portfolios had been reasonably satisfactory in the light of market conditions and noted that the general fund administrative services also provided by Alger Management under the terms of its Management Agreements were of high quality; in this connection they noted, for example, that the most recent regulatory inspections had produced no material adverse comments on the Fund's operations. The Trustees considered the fact that, in addition to its management fees, Alger Management benefits from its affiliate's providing most of the brokerage for the Portfolios; they concluded that, even in light of this fact and of other tangible and intangible benefits arising from Alger
Management's relationship with the Fund, the management fees paid by the Portfolios were fair and reasonable in relation to the services rendered and that the services rendered were satisfactory.
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, who holds in excess of 25% of the outstanding voting securities of Alger Associates, Inc., may be deemed to control that company and its subsidiaries. Mr. Alger holds his shares through a limited liability company, of which he is president and majority shareholder. Mr. Alger and the officers of the Fund are affiliated persons of the Fund and Alger Management by reason of their positions with these entities.
DESCRIPTION OF PORTFOLIO MANAGER COMPENSATION STRUCTURE
An Alger portfolio manager's compensation generally consists of salary, an annual bonus and eligibility for payments under Alger Management's incentive compensation program. In addition, portfolio managers are eligible for standard health and retirement benefits available to all Alger employees, including a 401(k) plan sponsored by Alger Management. A portfolio manager's base salary is typically a function of the portfolio manager's experience (with consideration given to type, investment style and size of investment portfolios previously managed), performance of his or her job responsibilities, and financial services industry peer comparisons. Base salary is generally a fixed amount that may change following an annual review. The annual bonus is typically a percentage of the base salary. The percentage is variable from year to year, and considers various factors, including:
o the firm's overall financial results and profitability;
o the firm's overall investment management performance;
o current year's and prior years' investment performance (both relative and absolute) of the portfolios for which the individual is responsible; and
o the individual's leadership contribution within the firm.
Incentive compensation is based on factors comparable to those considered in determining the annual bonus, is designed to retain key talent, and typically includes a cash bonus payment and investments in Alger fund(s) selected by the portfolio manager that vest in increments over a period of time. The proportion of incentive compensation allocated to the cash bonus payment and to investments in Alger funds is subject to change.
POTENTIAL CONFLICTS OF INTEREST
Alger Management's portfolio managers are often responsible for managing several accounts for several clients. In addition to Alger mutual funds, these other accounts may include separate accounts and mutual funds sub-advised by Alger Management. Potential conflicts of interest may arise when a portfolio manager has responsibility for more than one account and makes investment decisions involving the same security for two or more accounts. Investment decisions for accounts are made with consideration of their respective investment objectives, availability of cash for investment, current holdings and size of investment positions. A particular security may be bought or sold for only one account, or in different amounts and at different times for one account but not another account. Alger Management has developed trade allocation policies and procedures to avoid action that would result in an improper advantage or disadvantage to any one account managed by Alger Management. Transactions are allocated among accounts in a manner believed by Alger Management to be most equitable to each account, generally using a pro-rata allocation methodology. Exceptions to pro-rata allocation may be made to recognize the investment needs of each individual account, including but not limited to consideration of issuer concentration, industry exposure, asset class exposure, credit exposure, available cash, desire to eliminate de minimis positions, and to give priority to accounts with specialized investment policies and objectives.
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 REGISTERED PUBLIC ACCOUNTING FIRM
Ernst & Young LLP serves as independent registered public accounting firm for the Fund.
CODE OF ETHICS
Alger Management personnel ("Access Persons") are permitted to engage in personal securities transactions, including transactions in securities that may be purchased or held by the Fund, 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.
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 & 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 or 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 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
State Street Bank and Trust Company ("State Street"), 225 Franklin Street, Boston, Massachusetts 02110 serves as transfer agent for the Fund pursuant to a transfer agency agreement with transfer agent services provided by State Street's affiliate, Boston Financial Data Services, Inc. ("Boston Financial"). Under the transfer agency agreement, Boston Financial 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 Portfolios.
Pursuant to the transfer agency agreement, Boston Financial is compensated on a per-account and, for certain transactions, a per-transaction basis. The Fund has entered into a Shareholder Administrative Services Agreement with Alger Shareholder Services, Inc. (an affiliate of Alger Inc. and the Fund's transfer agent prior to November 22, 2004) to compensate Alger Shareholder Services Inc. on a per account basis for its liaison and administrative oversight of Boston Financial and related services.
COUNSEL TO THE FUND
The law firm Hollyer Brady Barrett & Hines 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 4, 2005. Allmerica Life Insurance and Annuity Company and Kemper Investors Life Insurance Co. owned beneficially or of record more than 25%, respectively, of Alger American Balanced Portfolio. Sun Life of Canada (US) and Lincoln Benefit Life owned beneficially or of record more than 25%, respectively of Alger American Income &Growth Portfolio. New York Life Investment Management owned beneficially or of record more than 25% of Alger American Small Capitalization 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 4, 2005, 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 a class of any Portfolio. All holdings are expressed as a percentage of a Portfolio's outstanding shares of a class as of April 4, 2005 and record and beneficial holdings are in each instance denoted as follows: record/beneficial.
Class O Shares
-----------------------------------------------------------------------------------
Alger Alger
American American Alger Alger
Income Small Alger Alger American American
& 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)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Allmerica Financial */-- */-- */-- 28.23%/-- */-- 9.40%/--
Life Insurance and
Annuity Company
440 Lincoln Street
Worcester, MA01653
Ameritas Variable */-- */-- */-- 11.19%/-- */-- 7.03%/--
Life Insurance Co.
Separate Acct. VA-2
Variable Annuity Product
P.O. Box 82550
Lincoln, NE 68501
AUL American Unit Trust */-- */-- 8.69%/-- */-- */-- */--
One American Square
P.O. Box 1995
Indianapolis, IN 46206
AULGroup Retirement Annuity */-- */-- 14.76%/-- 7.50%/-- */-- */--
Separate Account II
One American Square
P.O. Box 1995
Indianapolis, IN 46206
CNA/Phoenix */-- */-- */-- */-- 5.20%/-- */--
Variable Unit
P.O. Box 627
Hartford, CT 06142-0627
GE Life & Annuity Assurance Co. */-- 16.62%/-- 12.65%/-- */-- */-- */--
Separate Acct. III
6610 W. Broad St.
Richmond, VA 23230
ING Life Insurance 5.63%/-- */-- */-- */-- */-- */--
and Annuity Company
151 Farmington Avenue
Hartford, CT 06156-0001
Jefferson National */-- */-- */-- */-- 5.51%/-- 8.34%/--
Insurance Company
Attn: Separate Accounts C1B
9420 Corporate Campus Suite 1000
Louisville, KY 40223-4051
Kemper Investors Life Insurance Co. */-- */-- */-- 36.63%/-- 6.47%/-- 18.41%/--
Variable Annuity Separate Account
1600 McConnor Drive
Schaumburg, IL 60196-6801
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Class O Shares
-----------------------------------------------------------------------------------
Alger Alger
American American Alger Alger
Income Small Alger Alger American American
& 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)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Lincoln Benefit Life 26.06%/-- */-- */-- */-- 7.37%/-- 5.05%/--
Variable Annunity
P.O. Box 80469
Lincoln, NE 68501-0469
Lincoln Benefit Life 6.01%/-- */-- */-- */-- */-- */--
Variable Life
PO Box 80469
Lincoln, NE 68501-0469
Met Life Investors USA */-- 13.25%/-- */-- */-- */-- */--
Insurance Co.
Separate Account A
4700 Westown Parkway, Suite 200
West Des Moines, IA 50266
MONY America Variable */-- */-- */-- */-- 5.21%/-- */--
Account A-VA
1740 Broadway MD6-36
New York, NY 10019-4315
Nationwide Life Insurance Co. */-- 6.63%/-- */-- */-- */-- */--
(NLICA) PMLIC-VLI
c/o IPO Portfolio Accounting
P.O. Box 182029
Columbus, OH 43218-2029
New York Life Investment */-- 28.39%/-- */-- */-- */-- */--
Management LLC
169 Lackawanna Ave.
Parsippany, NJ 07054
Reliastar Life Insurance Co. */-- xx.x%/-- 11.60%/-- */-- 19.70%/-- 10.52%/--
c/o ING
151 Farmington Ave.
Hartford, CT 06156-1506
Security Life of Denver */-- */-- 5.01%/-- */-- 10.68%/-- 7.00%/--
America Equities Inc.
Separate A/C
c/o ING
151 Farmington Avenue
Hartford, CT 06156-1506
Sun Life of Canada (US) 27.49%/-- */-- */-- */-- */-- */--
Retirement Products
P.O. Box 9134
Wellesley Hills, MA 02481
Transamerica 14.73%/-- */-- */-- */-- */-- */--
Life Ins. & Annuity Co.
Separate Account VA6
401 N. Tryon St. Suite 700
Charlotte, NC 28210
|
Class S Shares
-----------------------------------------------------------------------------------
Alger Alger
American American Alger Alger
Income Small Alger Alger American American
& 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)
---------- ---------- ---------- ---------- ---------- ---------- ----------
Fred Alger & Company, 100.00%/-- */-- */-- */-- xxx%/-- */--
Incorporated
30 Montgomery Street
Jersey City, NJ 07302
Guardian Insurance */-- */-- */-- */-- */-- 8.09%/--
& Annuity Co. Inc.
3900 Burgess Place
Bethlehem, PA 18017
Lincoln Benefit Life */-- */-- 99.76%/-- */-- 95.53%/-- 8.94%/--
c/o Allstate Financial
544 Lakeview Pkwy
Vernon Hills, IL 60061-1826
Manufacturers Life */-- */-- */-- 9.90%/-- */-- 7.76%/--
Insurance Co. (NY)
Boston, MA 02116
Manufacturers Life */-- */-- */-- 73.49%/-- */-- 62.22%/--
Insurance Co. (USA)
500 Boylston Street
Boston, MA 02116-3739
NYLife Investment */-- 99.95%/-- */-- */-- */-- */--
Management, LLC
169 Lackawanna Ave
Parsippany, NJ 07054
Travelers Insurance Company */-- */-- */-- 7.64%/-- */-- 6.02%/--
Attn: Shareholder Accounting
P.O. Box 990027
Hartford, CT 06199-0027
Travelers Life */-- */-- */-- 7.90%/-- */-- 6.84%/--
and Annuity Company
P.O. Box 990027
Hartford, CT 06199-0027
|
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.
On April 30, 2002, Class S shares were added to all of the Fund's Portfolios. The previously existing shares were designated Class O shares on that date. Shares of each Portfolio are thus divided into two classes, Class O and Class S. The classes differ in that (a) each class has a different class designation; (b) only the Class S shares are subject to a distribution and shareholder servicing fee under a plan adopted pursuant to rule 12b-1 under the Investment Company Act; and (c) to the extent that one class alone is affected by a matter submitted to a shareholder vote, then only that class has voting power on the matter. Neither class of shares has a conversion feature.
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 rights, 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 an independent registered public accounting firm. 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 Portfoli-
os. 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.
PROXY VOTING POLICIES AND PROCEDURES
The Board of Trustees of The Alger American Fund has delegated authority to vote all proxies related to the Fund's portfolio securities to Alger Management, Inc., the Fund's investment manager. Alger Management, an investment adviser registered under the Investment Advisers Act of 1940, as amended, maintains discretionary authority over client accounts, including the Fund, and is responsible for voting proxies of all foreign and domestic securities held in the Portfolios of the Fund. Alger Management views the responsibility its clients have entrusted to it seriously and has adopted and implemented written policies and procedures designed to ensure that proxies are voted in the best interests of its clients.
Alger Management delegates its proxy voting authority for all foreign and domestic securities held in the Portfolios to Institutional Shareholder Services, Inc. ("ISS") a leading proxy voting service provider and registered investment adviser. ISS votes proxies strictly in accordance with pre-determined proxy voting guidelines in order to minimize conflicts of interest. The pre-determined proxy voting guidelines, which are summarized below, address matters such as operations, board of directors, proxy contests, anti-takeover defenses, mergers and corporate restructuring, state of incorporation, capital structure, executive and director compensation, social and environmental issues and mutual fund proxies. ISS will recuse itself from voting proxies should it have a material conflict of interest with the company whose proxies are at issue. Alger Management monitors ISS' proxy voting policies and procedures on a quarterly basis to ensure that the proxies are voted in the best interests of the applicable Portfolio.
Alger Management maintains records of its proxy voting policies and procedures. Alger Management or ISS, on Management's behalf, maintains proxy statements received regarding securities held by the Portfolios; records of votes cast on behalf of each Portfolio; records of requests for proxy voting information; and any documents prepared that were material to making a voting decision.
No later than August 31st each year, the Fund's proxy voting record for the most recent 12 months ended June 30th will be available upon request by calling (800) 992-3863 and on the Securities and Exchange Commission's website at HTTP://WWW.SEC.GOV.
The following is a summary of the pre-determined voting guidelines used by Alger Management or ISS, on Alger Management's behalf, to vote proxies of securities held by the Portfolios. Except as otherwise addressed by the pre-determined voting guidelines, the proxy will typically be voted per the recommendation of the company's management.
OPERATIONAL ISSUES
Vote FOR proposals to ratify auditors, unless an auditor has a financial interest in the company, fees for non-audit services are excessive or there is reason to believe that the auditor's opinion is inaccurate.
BOARD OF DIRECTORS
Votes on director nominees in uncontested elections are made on a CASE-BY-CASE basis, examining such factors as the independence of the board and key board committees, attendance at board meetings, corporate governance provisions and takeover activity.
PROXY CONTESTS
Votes in a contested election of directors are evaluated on a CASE-BY-CASE basis considering such factors as the management's track record, qualifications of director nominees and an evaluation of what each side is offering shareholders.
ANTI-TAKEOVER DEFENSES
Vote FOR shareholder proposals that ask a company to submit its poison pill for shareholder ratification.
MERGERS AND CORPORATE RESTRUCTURINGS
Vote on a CASE-BY-CASE basis on mergers and corporate restructurings based on factors such as financial issues and terms of the offer.
STATE OF INCORPORATION
Proposals for changing a company's state of incorporation are evaluated on a CASE-BY-CASE basis, giving consideration to both financial and corporate governance concerns, including the reasons for reincorporating.
CAPITAL STRUCTURE
Vote AGAINST proposals at companies with dual-class capital structures to increase the number of authorized shares of the class of stock that has superior
voting rights; Vote FOR proposals to approve increases beyond the allowable increase when a company's shares are in danger of being de-listed.
EXECUTIVE AND DIRECTOR COMPENSATION
Votes are determined on a CASE-BY-CASE basis analyzing the estimated dollar cost for the proposed plan.
SOCIAL AND ENVIRONMENTAL ISSUES
Votes are determined on a CASE-BY-CASE basis, with a focus on how the proposal will enhance the economic value of the company.
MUTUAL FUND PROXIES
Votes to elect directors are determined on a CASE-BY-CASE basis, considering factors such as board structure and director independence and qualifications.
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.
IN GENERAL
Current performance information for the Portfolios may be obtained by calling the Fund at (800) 992-3863. Quoted performance may not be indicative of future performance. The performance will depend upon factors such as its expenses and the types and maturities of securities held by the Portfolio.
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 Portfolio, 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 indices, such as the S&P 500 Index, the Russell 2000 Growth Index, the S&P SmallCap 600 Index, the Wilshire Small Company Growth Index, or the S&P MidCap 400 Index. In addition, evaluations of the Portfolio 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 the Portfolio's performance for any future period.
FINANCIAL STATEMENTS
The Fund's financial statements for the year ended December 31, 2004 are contained in the Annual Report to Shareholders for that period, and are hereby incorporated by reference. A copy of the Annual Report to Shareholders may be obtained by telephoning the Fund at (800) 992-3863.
APPENDIX
CORPORATE BOND RATINGS
Bonds rated Aa by Moody's Investors Service, Inc. ("Moody's") are judged by Moody's to be of high quality by all standards. Together with bonds rated Aaa (Moody's highest rating), they comprise what are generally known as high-grade bonds. Aa bonds are rated lower than Aaa bonds because margins of protection may not be as large as those of Aaa bonds, or fluctuation of protective elements may be of greater amplitude, or there may be other elements present that make the long-term risks appear somewhat larger than those applicable to Aaa securities. Bonds that are rated A by Moody's possess many favorable investment attributes and are to be considered as upper medium-grade obligations. Factors giving security to principal and interest are considered adequate, but elements may be present that suggest a susceptibility to impairment in the future.
Moody's Baa rated bonds are considered as medium-grade obligations, i.e., they are neither highly protected nor poorly secured. Interest payments and principal security appear adequate for the present, but certain protective elements may be lacking or may be characteristically unreliable over any great length of time. Such bonds lack outstanding investment characteristics and, in fact, have speculative characteristics as well.
Bonds rated Ba by Moody's are judged to have speculative elements; their future cannot be considered as well assured. Often the protection of interest and principal payments may be very moderate and thereby not well safeguarded during both good and bad times in the future. Uncertainty of position characterizes bonds in this class. Bonds which are rated B by Moody's generally lack characteristics of a desirable investment. Assurance of interest and principal payments or of maintenance of other terms of the contract over any period of time may be small.
Moody's applies the numerical modifiers 1, 2 and 3 to each generic rating classification from Aa through B. The modifier 1 indicates that the security ranks in the higher end of its generic rating category; the modifier 2 indicates a mid-range ranking; and the modifier 3 indicates that the issue ranks in the lower end of its generic rating category.
Bonds rated AA by Standard & Poor's Corporation ("S&P") are judged by S&P to be high-grade obligations and in the majority of instances differ only in small degree from issues rated AAA (S&P's highest rating). Bonds rated AAA are considered by S&P to be the highest grade obligations and possess the ultimate degree of protection as to principal and interest. With A bonds, as with AAA bonds, prices move with the long-term money market. Bonds rated A by S&P have a strong capacity to pay principal and interest, although they are somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions. S&P's BBB rated bonds, or medium-grade category bonds, are borderline between definitely sound obligations and those where the speculative elements begin to predominate. These bonds have adequate asset coverage and normally are protected by satisfactory earnings. Their susceptibility to changing conditions, particularly to depressions, necessitates constant watching. These bonds generally are more responsive to business and trade conditions than to interest rates. This group is the lowest-rated that qualifies for commercial bank investment. Bonds rated BB and B by S&P are regarded, on balance, as predominantly speculative with respect to capacity to pay interest and repay principal in accordance with the terms of the obligation. These ratings may be modified by the addition of a plus or minus sign to show relative standing within the major rating categories. Debt rated BB has less near-term vulnerability to default than other speculative issues. However, it faces major ongoing uncertainties or exposure to adverse business, financial or economic conditions that could lead to inadequate capacity to meet timely interest and principal payments. The BB rating category is also used for debt subordinated to senior debt that is assigned an actual or implied BBB- rating. Debt rated B has a greater vulnerability to default but currently has the capacity to meet interest payments and principal repayments. Adverse business, financial or economic conditions will likely impair capacity or willingness to pay interest and repay principal. The B rating category is also used for debt subordinated to senior debt that is assigned an actual or implied BB or BB- rating.
Bonds rated AAA by Fitch Investors Service, Inc. ("Fitch") are judged by Fitch to be strictly high-grade, broadly marketable, suitable for investment by trustees and fiduciary institutions and liable to but slight market fluctuation other than through changes in the money rate. The prime feature of an AAA bond is a showing 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
APPENDIX
(CONTINUED)
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 punctually repay 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 hav ing 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.
INVESTMENT MANAGER:
Fred Alger Management, Inc.
111 Fifth Avenue
New York, New York 10003
Fred Alger & Company, Incorporated
30 Montgomery Street
Jersey City, New Jersey 07302
State Street Bank and Trust Company
c/o Boston Financial Data Services, Inc.
ATTN: The Alger American Fund
P.O. Box 8480
Boston, MA 02266-8480
Custodial Trust Company
101 Carnegie Center
Princeton, NJ 08540
Ernst & Young LLP
5 Times Square
New York, New York 10036
Hollyer Brady Barrett & Hines LLP
551 Fifth Avenue
New York, NY 10176
THE ALGER
AMERICAN FUND
|
STATEMENT |
OF ADDITIONAL | MAY 1, 2005
INFORMATION |
|
[ALGER LOGO]
OTHER INFORMATION
Item 23. Exhibits
EXHIBIT NO. DESCRIPTION OF EXHIBIT
---------- ----------------------
(a-1) Agreement and Declaration of Trust (1) [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]
(a-6) Certificate of designation relating to the Alger American Money
Market Portfolio (9)
(a-7) Amendment to Agreement and Declaration of Trust (10)
(b) By-laws of Registrant (1) [EDGAR 4/98]
(c) See Exhibits (a-1) and (b)
(b-1) Amended and Restated By-laws of Registrant filed 12/7/2004 --
herewith
C-1
|
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]
(d-8) Investment Management Agreement for the Alger American Money
Market Portfolio (9)
(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)
(g-4) Amendment to Custodial Agreement dated as of February 2, 2005
between Custodial Trust Company and the Registrant -- Filed
herewith
(g-5) Foreign Custodial Manager Agreement dated as of February 11, 2005
between Custodial Trust Company and the Registrant -- Filed
herewith
(h) Transfer Agency Agreement (7)
(i-1) Opinion and Consent of Sullivan & Worcester (9)
|
EXHIBIT NO. DESCRIPTION OF EXHIBIT
---------- ----------------------
(h-1) Transfer Agency and Services Agreement Between Certain Investment
Companies Managed by Fred Alger Management, Inc. (including
Registrant) and State Street Bank and Trust Company 11/22/2004 --
Filed herewith
(h-2) Shareholder Administrative Services Agreement among Alger
Shareholder Services, Inc., the Registrant, et al. effective
2/28/05 -- Filed herewith
(j) Consent of Ernst & Young LLP -- Filed herewith
(1-1) Purchase Agreement relative to the shares of the Alger American
Money Market, Income and Growth, Small Capitalization and Growth
Portfolios (2) [EDGAR 4/98]
(1-2) 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]
(m) Rule 12b-1 Distribution Plan (10)
(n) Rule 18f-3 Plans (10)
|
(p) Powers of Attorney executed by Joseph S. Nye, Jr., Frederick A.
Blum, Stephen E. O'Neil and Nathan E. Saint-Amand (11)
(q) Code of Ethics (9)
(q-1) Amended and Restated Code of Ethics 5/11/2004 -- Filed herewith
(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 Amemdment No. 1 to the Registration Statement ("Post-Effective Amendment No. 1") filed with the SEC on January 23, 1989.
(4) Incorporated by reference to Post-Effective Amendment No. 5 to the Registration Statement ("Post-Effective Amendment No. 5") filed with the SEC on August 3, 1992.
(5) Incorporated by reference to Post-Effective Amendment No. 7 to the Registration Statement ("Post-Effective Amendment No. 7") filed with the SEC on March 5, 1993.
(6) Incorporated by reference to Post-Effective Amendment No. 9 to the Registration Statement ("Post-Effective Amendment No. 9") filed with the SEC on April 17, 1994.
(7) Incorporated by reference to Post-Effective Amendment No. 15 to the Registration Statement ("Post-Effective Amendment No. 15") filed with the SEC on April 9, 1998.
(8) Incorporated by reference to Post-Effective Amendment No. 16 to the Registration Statement ("Post-Effective No. 16") filed with the SEC on March 2, 1999.
(9) Incorporated by reference to Post-Effective Amendment No. 20 filed with the SEC on April 30, 2001.
(10) Incorporated by reference to Post-Effective Amendment No. 22 filed with the SEC on May 1, 2002.
(11) Incorporated by reference to Post-Effective Amendment No. 24 filed with the SEC on April 23, 2004.
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
authorized under the Agreement and Declaration of Trust and either (i) the Covered Person provides security for such undetaking, (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 four 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 Institutional Funds, Spectra Fund, The Alger Funds and The China-U.S. Growth Fund and has acted as subscription agant 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.
Item 28. Location of Accounts and Records
All accounts and records of Registrant are maintained by Mr. Frederick A. Blum, Fred Alger & Company, Incorporated, 30 Montgomery Street, Jersey City, NJ 07302.
Item 29. Management Services
Not applicable.
Item 30. Undertakings
Not applicable.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, and the Investment Company Act of 1940, as amended, Registrant certifies that this Amendment to its Registration Statement meets all of the requirements for effectiveness pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused this Amendment to be signed on its behalf by the undersigned, thereto duly authorized, in the City of New York and State of New York on the 11th day of April, 2005.
THE ALGER AMERICAN FUND
By: /s/ Dan C. Chung
---------------------------
Dan C. Chung, President
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Pursuant to the requirements of the Securities Act, this Amendment has been signed below by the following persons in the capacities and on the dates indicated:
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Fred M. Alger III* Chairman of the Board April 11, 2005
-------------------------
Fred M. Alger III
/s/ Dan C. Chung President April 11, 2005
------------------------- (Chief Executive Offficer)
Dan C. Chung
/s/ Frederick A. Blum Treasurer
------------------------- (Chief Financial and April 11, 2005
Frederick A. Blum Accounting Officer)
/s/ Nathan E. Saint-Amand* Trustee April 11, 2005
-------------------------
Nathan E. Saint-Amand
/s/ Stephen E. O'Neil* Trustee April 11, 2005
-------------------------
Stephen E. O'Neil
*By: /s/ Dan C. Chung
--------------------------
Dan C. Chung
Attorney-In-Fact
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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. 25 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment no. 27 [X]
(Check appropriate box or boxes)
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INDEX TO EXHIBITS
Page Number in Sequential
Exhibit No. Number System
---------- -------------------------
(b-1) Amended and Restated By-laws of
Registrant
(g-4) Amendment No. 2 to Custody Agreement
(g-5) Foreign Custody Manager Agreement
(h-1) Transfer Agency and Services
Agreement
(h-2) Shareholder Administrative Services
Agreement
(j) Consent of Ernst & Young LLP
(p-1) Amended and Restated Code of Ethics
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THE ALGER AMERICAN FUNDS
AMENDED AND RESTATED
BY-LAWS
THE ALGER AMERICAN FUND
By-Laws
Index
Page No.
RECITALS 1
ARTICLE 1 - SHAREHOLDERS AND SHAREHOLDERS' MEETINGS 1
Section 1.1 Meetings 1
Section 1.2 Presiding Officer; Secretary 1
Section 1.3 Authority of Chairman of Meeting to Interpret
Declaration and By-Laws 1
Section 1.4 Voting; Quorum 1
Section 1.5 Inspectors 2
Section 1.6 Shareholders' Action in Writing 2
ARTICLE 2 - TRUSTEES AND TRUSTEES' MEETINGS 2
Section 2.1 Number of Trustees 2
Section 2.2 Regular Meetings of Trustees 2
Section 2.3 Special Meetings of Trustees 2
Section 2.4 Notice of Meetings 2
Section 2 5 Quorum 3
Section 2.6 Participation by Telephone 3
Section 2.7 Location of Meetings 3
Section 2.8 Votes 3
Section 2.9 Rulings of Chairman 3
Section 2.10 Trustees' Action in Writing 3
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Section 2.11 Resignations 3 ARTICLE 3 - OFFICERS 3 Section 3.1 Officers of the Trust 3 Section 3.2 Time and Terms of Election 4 Section 3.3 Resignation and Removal 4 Section 3.4 Fidelity Bond 4 Section 3.5 Chairman of the Trustees 4 Section 3.6 Vice Chairmen 4 Section 3.7 President 4 Section 3.8 Vice Presidents 5 Section 3.9 Treasurer and Assistant Treasurers 5 Section 3.10 Controller and Assistant Controllers 5 Section 3.11 Secretary and Assistant Secretaries 5 Section 3.11.5 Chief Compliance Officer 6 Section 3.12 Substitutions 6 Section 3.13 Execution of Deeds, etc 6 Section 3.14 Power to Vote Securities 6 ARTICLE 4 - COMMITTEES 6 Section 4.1 Power of Trustees to Designate Committees 6 Section 4.2 Rules for Conduct of Committee Affairs 7 Section 4.3 Trustees may Alter, Abolish, etc., Committees 7 Section 4.4 Minutes; Review by Trustees 7 ARTICLE 5 - SEAL 7 ARTICLE 6 - SHARES 7 Section 6.1 Issuance of Shares 7 Section 6.2 Uncertificated Shares 7 |
PAGE NO.
Section 6.3 Share Certificates 7
Section 6.4 Lost, Stolen, etc., Certificates 8
Section 6.5 Record Transfer of Pledged Shares 8
ARTICLE 7 - CUSTODIAN 8
ARTICLE 8 - AMENDMENTS 8
Section 8.1 By-Laws Subject to Amendment 8
Section 8.2 Notice of Proposal to Amend By-Laws Required 9
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THE ALGER AMERICAN FUND
BY-LAWS
These Articles are the Amended and Restated By-Laws of The Alger American Fund (formerly known as The Alger Variable Insurance Products Fund), a trust with transferable shares established under the laws of The Commonwealth of Massachusetts (the "TRUST"), pursuant to an Agreement and Declaration of Trust of the Trust (the "DECLARATION") made the 6th day of April, 1988, and filed in the office of the Secretary of the Commonwealth. These By-Laws have been amended by the Trustees pursuant to the authority granted by Section 3.1 of the Declaration.
All words and terms capitalized in these By-Laws, unless otherwise defined herein, shall have the same meanings as they have in the Declaration.
ARTICLE 1
SHAREHOLDERS AND SHAREHOLDERS' MEETINGS
SECTION 1.1. MEETINGS. A meeting of the Shareholders of the Trust shall be held whenever called by the Trustees and whenever election of a Trustee or Trustees by Shareholders is required by the provisions of the 1940 Act. Meetings of Shareholders shall also be called by the Trustees when requested in writing by Share-holders holding at least ten percent (10%) of the Shares then out-standing for the purpose of voting upon removal of any Trustee, or if the Trustees shall fail to call or give notice of any such meeting of Shareholders for a period of thirty (30) days after such application, then Shareholders holding at least ten percent (10%) of the Shares then outstanding may call and give notice of such meeting. Notice of Shareholders' meetings shall be given as provided in the Declaration.
SECTION 1.2. PRESIDING OFFICER; SECRETARY. The Chairman of the Trustees, or in his absence the Vice Chairman or Chairmen, if any, in the order of their seniority or as the Trustees shall otherwise determine, and in the absence of the Chairman and all Vice Chairmen, if any, the President, shall preside at each Share-holders' meeting as chairman of the meeting, or in the absence of the Chairman, all Vice Chairmen and the President, the Trustees present at the meeting shall elect one of their number as chairman of the meeting. Unless otherwise provided for by the Trustees, the Secretary of the Trust shall be the secretary of all meetings of Shareholders and shall record the minutes thereof.
SECTION 1.3. AUTHORITY OF CHAIRMAN OF MEETING TO INTERPRET DECLARATION AND BY-LAWS. At any Shareholders' meeting the chairman of the meeting shall be empowered to determine the construction or interpretation of the Declaration or these By-laws, or any part thereof or hereof, and his ruling shall be final.
SECTION 1.4. VOTING; QUORUM. At each meeting of Shareholders, except as otherwise provided by the Declaration, every, holder of record of Shares entitled to vote shall be entitled to a number of votes equal to the number of Shares standing in his name on the Share register of the Trust. Shareholders may vote by proxy and the form of any such proxy may be prescribed from time to time by the Trustees. A quorum shall exist if the
holders of a majority of the outstanding Shares of the Trust entitled to vote without regard to Series are present in person or by proxy, but any lesser number shall be sufficient for adjournments. At all meetings of the Shareholders, votes shall be taken by ballot for all matters which may be binding upon the Trustees pursuant to Section 7.1 of the Declaration. On other matters, votes of Share-holders need not be taken by ballot unless otherwise provided for by the Declaration or by vote of the Trustees, or as required by the Act or the Regulations, but the chairman of the meeting may in his discretion authorize any matter to be voted upon by ballot.
SECTION 1.5. INSPECTORS. At any meeting of Shareholders, the chairman of the meeting may appoint one or more Inspectors of Election or Balloting to supervise the voting at such meeting or any adjournment thereof. If Inspectors are not so appointed, the chairman of the meeting may, and on the request of any Shareholder present or represented and entitled to vote shall, appoint one or more Inspectors for such purpose. Each Inspector, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of Inspector of Election or Balloting, as the case may be, at such meeting with strict impartiality and according to the best of his ability. If appointed, Inspectors shall take charge of the polls and, when the vote is completed, shall make a certificate of the result of the vote taken and of such other facts as may be required by law.
SECTION 1.6. SHAREHOLDERS' ACTION IN WRITING. Nothing in this Article I shall limit the power of the Shareholders to take any action by means of written instruments without a meeting, as permitted by Section 7.6 of the Declaration.
ARTICLE 2
TRUSTEES AND TRUSTEES' MEETINGS
SECTION 2.1. NUMBER OF TRUSTEES. There shall initially be one (1) Trustee, and the number of Trustees shall thereafter be such number, authorized by the Declaration, as from time to time shall be fixed by a vote adopted by a Majority of the Trustees.
SECTION 2.2. REGULAR MEETINGS OF TRUSTEES. Regular meetings of the Trustees may be held without call or notice at such places and at such times as the Trustees may from time to time determine; provided, that notice of such determination, and of the time, place and purposes of the first regular meeting thereafter, shall be given to each absent Trustee in accordance with Section 2.4 hereof.
SECTION 2.3. SPECIAL MEETINGS OF TRUSTEES. Special meetings of the Trustees may be held at any time and at any place when called by the Chairman of the Trustees, any Vice Chairman, the President or the Treasurer or by two (2) or more Trustees, or if there shall be fewer than three (3) Trustees, by any Trustee; provided, that notice of the time, place and purposes thereof is given to each Trustee in accordance with Section 2.4 hereof by the Secretary or an Assistant Secretary or by the officer or the Trustees calling the meeting.
SECTION 2.4. NOTICE OF MEETINGS. Notice of any regular or special meeting of the Trustees shall be sufficient if given in writing to each Trustee, and if sent by mail at least five (5) days, or by telegram, Federal Express or other similar delivery service at least twenty-four (24) hours, before
the meeting, addressed to his usual or last known business or residence address, or if delivered to him in person at least twenty-four (24) hours before the meeting. Notice of a special meeting need not be given to any Trustee who was present at an earlier meeting, not more than thirty-one (31) days prior to the subsequent meeting, at which the subsequent meeting was called. Notice of a meeting may be waived by any Trustee by written waiver of notice, executed by him before or after the meeting, and such waiver shall be filed with the records of the meeting Attendance by a Trustee at a meeting shall constitute a waiver of notice, except where a Trustee attends a meeting for the purpose of protesting prior thereto or at its commencement the lack of notice
SECTION 2.5. QUORUM; PRESIDING OFFICER. At any meeting of the Trustees, a Majority of the Trustees shall constitute a quorum. Any meeting may be adjourned from time to time by a majority of the votes cast upon the question, whether or not a quorum is present, and the meeting may be held as adjourned without further notice. Unless the Trustees shall otherwise elect, generally or in a particular case, the Chairman of the Trustees, or in his absence the Vice Chairman or Vice Chairmen, if any, in the order of their seniority or as the Trustees shall otherwise determine, or in the absence of the Chairman and all Vice Chairmen, if any, the President, shall preside at each meeting of the Trustees as chairman of the meeting.
SECTION 2.6. PARTICIPATION BY TELEPHONE. One or more of the Trustees may participate in a meeting thereof or of any Committee of the Trustees by means of a conference telephone or similar communications equipment allowing all persons participating in the meeting to hear each other at the same time. Participation by such means shall constitute presence in person at a meeting.
SECTION 2.7. LOCATION OF MEETINGS. Trustees' meetings may be held at any place, within or without Massachusetts.
SECTION 2.8. VOTES. Voting at Trustees' meetings may be conducted orally, by show of hands or, if requested by any Trustee, by written ballot. The results of all voting shall be recorded by the Secretary in the minute book.
SECTION 2.9. RULINGS OF CHAIRMAN. All other rules of conduct adopted and used at any Trustees' meeting shall be determined by the chairman of such meeting, whose ruling on all procedural matters shall be final.
SECTION 2.10. TRUSTEES' ACTION IN WRITING. Nothing in this Article II shall limit the power of the Trustees to take action by means of a written instrument without a meeting, as provided in Section 4.2 of the Declaration.
SECTION 2.11. RESIGNATIONS. Any Trustee may resign at any time by written instrument signed by him and delivered to the Chairman, the President or the Secretary or to a meeting of the Trustees. Such resignation shall be effective upon receipt unless specified to be effective at some other time.
ARTICLE 3
OFFICERS
SECTION 3.1. OFFICERS OF THE TRUST. The officers of the Trust shall consist of a Chairman of the Trustees, a President, a Treasurer, a Secretary, and a Chief Compliance
Officer, and may include one or more Vice Chairmen, Vice Presidents, Assistant Treasurers and Assistant Secretaries, and such other officers as the Trustees may designate. Any person may hold more than one office. Except for the Chairman and any Vice Chairmen, no officer need be a Trustee.
SECTION 3.2. TIME AND TERMS OF ELECTION. The Chairman, the President, the
Treasurer and the Secretary shall be elected by the Trustees at their first
meeting and thereafter at the annual meeting of the Trustees, as provided in
Section 4.2 of the Declaration. Such officers shall hold office until the next
annual meeting of the Trustees and until their successors shall have been duly
elected and qualified, and may be removed at any meeting by the affirmative vote
of a Majority of the Trustees. All other officers of the Trust may be elected or
appointed at any meeting of the Trustees. Such officers shall hold office for
any term, or indefinitely, as determined by the Trustees, and shall be subject
to removal, with or without cause, at any time by the Trustees.
SECTION 3.3. RESIGNATION AND REMOVAL. Any officer may resign at any time by giving written notice to the Trustees. Such resignation shall take effect at the time specified therein, and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. If the office of any officer or agent becomes vacant by reason of death, resignation, retirement, disqualification, removal from office or otherwise, the Trustees may choose a successor, who shall hold office for the unexpired term in respect of which such vacancy occurred. Except to the extent expressly provided in a written agreement with the Trust, no officer resigning or removed shall have any right to any compensation for any period following such resignation or removal, or any right to damage on account of such removal.
SECTION 3.4. FIDELITY BOND. The Trustees may, in their discretion, direct any officer appointed by them to furnish at the expense of the Trust a fidelity bond approved by the Trustees, in such amount as the Trustees may prescribe.
SECTION 3.5. CHAIRMAN OF THE TRUSTEES. Unless the Trustees otherwise provide, the Chairman of the Trustees shall preside at all meetings of the Shareholders and of the Trustees. The Chairman, subject to the supervision of the Trustees, shall have general charge and supervision of the business, property and affairs of the Trust and such other powers and duties as the Trustees may prescribe, and unless otherwise provided by law, the Declaration, these By-Laws or specific vote of the Trustees, shall have and may exercise all of the powers given to the Trustees by the Declaration and by these By-Laws.
SECTION 3.6. VICE CHAIRMEN. If the Trustees shall elect one or more Vice Chairmen, the Vice Chairman or if there shall be more than one, such Vice Chairmen in the order of their seniority or as otherwise designated by the Trustees, shall preside at meetings of the Shareholders and of the Trustees, and shall exercise such other powers and duties of the Chairman as the Trustees shall determine.
SECTION 3.7. PRESIDENT. The President shall be the chief administrative officer of the Trust and, subject to the super-vision of the Chairman, shall have general charge of the operations of the Trust and general supervision of the personnel of the Trust, and such other powers and duties as the Trustees or the Chairman shall prescribe. In the absence or disability of the Chairman, the President shall exercise the powers and duties of the Chairman, except to the extent that the Trustees shall have delegated such powers and duties to the Vice Chairman or Chairmen, and except that he shall not preside at meetings of the Trustees if he is not himself a Trustee.
SECTION 3.8. VICE PRESIDENTS. In the absence or disability of the President, the Vice President or, if there shall be more than one, the Vice Presidents in the order of their seniority or as otherwise designated by the Trustees, shall exercise all of the powers and duties of the President. The Vice Presidents shall have the power to execute bonds, notes, mortgages and ocher contracts, agreements and instruments in the name of the Trust, and shall do and perform such other duties as the Trustees, the Chairman or the President shall direct.
SECTION 3.9. TREASURER AND ASSISTANT TREASURERS. The Treasurer shall be the chief financial officer of the Trust, and shall have the custody of the Trust's funds and Securities, and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Trust and shall deposit all moneys, and other valuable effects in the name and to the credit of the Trust, in such depositories as may be designated by the Trustees, taking proper vouchers for such disbursements, shall have such other duties and powers as may be prescribed from time to time by the Trustees or the Chairman, and shall render to the Trustees, whenever they may require it, an account of all his transactions as Treasurer and of the financial condition of the Trust. If no Controller is elected, the Treasurer shall also have the duties and powers of the Controller, as provided in these By-Laws. Any Assistant Treasurer shall have such duties and powers as shall be prescribed from time to time by the Trustees or the Treasurer, and shall be responsible to and shall report to the Treasurer. In the absence or disability of the Treasurer, the Assistant Treasurer or, if there shall be more than one, the Assistant Treasurers in the order of their seniority or as otherwise designated by the Trustees or the Chairman, shall have the powers and duties of the Treasurer.
SECTION 3.10. CONTROLLER AND ASSISTANT CONTROLLERS. If a Controller is elected, he shall be the chief accounting officer of the Trust and shall be in charge of its books of account and accounting records and of its accounting procedures, and shall have such duties and powers as are commonly incident to the office of a controller, and such other duties and powers as may be prescribed from time to time by the Trustees. The Controller shall be responsible to and shall report to the Trustees, but in the ordinary conduct of the Trust's business, shall be under the supervision of the Treasurer. Any Assistant Controller shall have such duties and powers as shall be prescribed from time to time by the Trustees or the Controller, and shall be responsible to and shall report to the Controller. In the absence or disability of the Controller, the Assistant Controller or, if there shall be more than one, the Assistant Controllers in the order of their seniority or as otherwise designated by the Trustees or the Chairman, shall have the powers and duties of the Controller.
SECTION 3.11. SECRETARY AND ASSISTANT SECRETARIES. The Secretary shall, if and to the extent requested by the Trustees, attend all meetings of the Trustees, any Committee of the Trustees and/or the Shareholders and record all votes and the minutes of proceedings in a book to be kept for that purpose, shall give or cause to be given notice of all meetings of the Trustees, any Committee of the Trustees, and of the Shareholders and shall perform such other duties as may be prescribed by the Trustees. The Secretary, or in his absence any Assistant Secretary, shall affix the Trust's seal to any instrument requiring it, and when so affixed, it shall be attested by the signature of the Secretary or an Assistant Secretary. The Secretary shall be the custodian of the Share records and all other books, records and papers of the Trust (other than financial) and shall see that all books, reports, statements, certificates and other documents and records required by law are properly kept and filed. In the absence or disability of the Secretary, the Assistant Secretary or, if there shall be more
than one, the Assistant Secretaries in the order of their seniority or as otherwise designated by the Trustees or the Chairman, shall have the powers and duties of the Secretary.
SECTION 3.11.5. CHIEF COMPLIANCE OFFICER. The Chief Compliance Officer shall adopt and implement written policies and procedures reasonably designed to prevent violation of the federal securities laws by the Trust, including policies and procedures that provide for the oversight of compliance by each investment adviser, principal underwriter, administrator, and transfer agent of the Trust. Furthermore, the Chief Compliance Officer shall, no less frequently than annually, provide a written report to the board that, at a minimum, addresses: the operation of the policies and procedures of the Trust and each investment adviser, principal underwriter, administrator, and transfer agent of the Trust, any material changes made to those policies and procedures since the date of the last report, and any material changes to the policies and procedures recommended as a result of the annual review conducted pursuant to Rule 38a-1 under the Investment Company Act of 1940; and each material compliance matter, as defined in the rule, that occurred since the date of the last report; and shall, no less frequently than annually, meet separately with the Trust's independent Trustees.
SECTION 3.12. SUBSTITUTIONS. In case of the absence or disability of any officer of the Trust, or for any other reason that the Trustees may deem sufficient, the Trustees may delegate for the time being the powers or duties, or any of them, of such officer to any other officer, or to any Trustee.
SECTION 3.13. EXECUTION OF DEEDS, ETC. Except as the Trustees may generally or in particular cases otherwise authorize or direct, all deeds, leases, transfers, contracts, proposals, bonds, notes, checks, drafts and other obligations made, accepted or endorsed by the Trust shall be signed or endorsed on behalf of the Trust by the Chairman, the President, one of the Vice Presidents or the Treasurer.
SECTION 3.14. POWER TO VOTE SECURITIES. Unless otherwise ordered by the Trustees, the Treasurer and the Secretary each shall have full power and authority on behalf of the Trust to give proxies for and/or to attend and to act and to vote at any meeting of stockholders of any corporation in which the Trust may hold stock, and at any such meeting the Treasurer or the Secretary, as the case may be, his proxy shall possess and may exercise any and all rights and powers incident to the ownership of such stock which, as the owner thereof, the Trust might have possessed and exercised if present. The Trustees, by resolution from time to time, or, in the absence thereof, either the Treasurer or the Secretary, may confer like powers upon any other person or persons as attorneys and proxies of the Trust.
ARTICLE 4
COMMITTEES
SECTION 4.1. POWER OF TRUSTEES TO DESIGNATE COMMITTEES. The Trustees, by vote of a Majority of the Trustees, may elect from their number an Executive Committee and any other Committees and may delegate thereto some or all of their powers except those which by law, by the Declaration or by these By-Laws may not be delegated; provided, that the Executive Committee shall not be empowered to elect the Chairman of the Trustees, the President, the Treasurer or the Secretary, to amend the By-Laws, to exercise the powers of the Trustees under this Section 4.1 or under Section 4.3 hereof, or to perform any act for which the action
of a Majority of the Trustees is required by law, by the Declaration or by these By-Laws. The members of any such Committee shall serve at the pleasure of the Trustees.
SECTION 4.2. RULES FOR CONDUCT OF COMMITTEE AFFAIRS. Except as otherwise provided by the Trustees, each Committee elected or appointed pursuant to this Article IV may adopt such standing rules and regulations for the conduct of its affairs as it may deem desirable, subject to review and approval of such rules and regulations by the Trustees at the next succeeding meeting of the Trustees, but in the absence of any such action or any contrary provisions by the Trustees, the business of each Committee shall be conducted, so far as practicable, in the same manner as provided herein and in the Declaration for the Trustees
SECTION 4.3. TRUSTEES MAY ALTER, ABOLISH, ETC., COMMITTEES. The Trustees may at any time alter or abolish any Committee, change the membership of any Committee, or revoke, rescind or modify any action of any Committee or the authority of any Committee with respect to any matter or class of matters; provided, that no such action shall impair the rights of any third parties.
SECTION 4.4. MINUTES; REVIEW BY TRUSTEES. Any Committee to which the Trustees delegate any of their powers or duties shall keep records of its meetings and shall report its actions to the Trustees.
ARTICLE 5
SEAL
The seal of the Trust shall consist of a flat-faced circular die with the word "Massachusetts", together with the name of the Trust, the words "Trust Seal", and the year of its organization cut or engraved thereon, but, unless otherwise required by the Trustees, the seal shall not be necessary to be placed on, and its absence shall not impair the validity of, any document, instrument or other paper executed and delivered by or on behalf of the Trust.
ARTICLE 6
SHARES
SECTION 6.1. ISSUANCE OF SHARES. The Trustees may issue Shares of any or all Series either in certificated or uncertificated form, they may issue certificates to the holders of Shares of a Series which was originally issued in uncertificated form, and if they have issued Shares of any Series in certificated form, they may at any time discontinue the issuance of Share certificates for such Series and may, by written notice to such Shareholders of such Series require the surrender of their Share certificates to the Trust for cancellation, which surrender and cancellation shall not affect the ownership of Shares for such Series.
SECTION 6.2. UNCERTIFICATED SHARES. For any Series of Shares for which the Trustees issue Shares without certificates, the Trust or the Transfer Agent may either issue receipts there for or may keep accounts upon the books of the Trust for the record holders of such Shares, who shall in either case be deemed, for all purposes hereunder, to be the holders of such Shares as if they had received certificates therefor and shall be held to have expressly assented and agreed to the terms hereof and of the Declaration.
SECTION 6.3. SHARE CERTIFICATES. For any Series of Shares for which the Trustees shall issue Share certificates, each Shareholder of such Series shall be entitled to a certificate stating the number of Shares owned by him in such form as shall be prescribed
from time to time by the Trustees. Such certificate shall be signed by the Chairman or a Vice Chairman, or the President or a Vice-President, and by the Treasurer or an Assist-ant Treasurer or the Secretary or an Assistant Secretary of the Trust. Such signatures may be facsimiles if the certificate is countersigned by a Transfer Agent, or by a Registrar, other than a Trustee, officer or employee of the Trust. In case any officer who has signed or whose facsimile signature has been placed on such certificate shall cease to be such officer before such certificate is issued, it may be issued by the Trust with the same effect as if he were such officer at the tire of its issue.
SECTION 6.4. LOST, STOLEN, ETC., CERTIFICATES. If any certificate for certificated Shares shall be lost, stolen, destroyed or mutilated, the Trustees may authorize the issuance of a new certificate of the same tenor and for the same number of Shares in lieu thereof. The Trustees shall require the surrender of any mutilated certificate in respect of which a new certificate is issued, and may, in their discretion, before the issuance of a new certificate, require the owner of a lost, stolen or destroyed certificate, or the owner's legal representative, to make an affidavit or affirmation setting forth such facts as to the loss, theft or destruction as they deem necessary, and to give the Trust a bond in such reasonable sum as the Trustees direct, in order to indemnify the Trust.
SECTION 6.5. RECORD TRANSFER OF PLEDGED SHARES. A pledgee of Shares pledged as collateral security shall be entitled to a new certificate in his name as pledgee, in the case of certificated Shares, or to be registered as the holder in pledge of such Shares in the case of uncertificated Shares; provided, that the instrument of pledge substantially describes the debt or duty that is intended to be secured thereby. Any such new certificate shall express on its face that it is held as collateral security, and the name of the pledgor shall be stated thereon, and any such registration of uncertificated Shares shall be in a form which indicates that the registered holder holds such Shares in pledge. After such issue or registration, and unless and until such pledge is released, such pledgee and his successors and assigns shall alone be entitled to the rights of a Shareholder, and entitled to vote such Shares.
ARTICLE 7
CUSTODIAN
The Trust shall at all times employ a bank or trust company having a capital, surplus and undivided profits of at least Two Million Dollars ($2,000,000) as Custodian of the capital assets of the Trust. The Custodian shall be compensated for its services by the Trust upon such basis as shall be agreed upon from time to time between the Trust and the Custodian.
ARTICLE 8
AMENDMENTS
SECTION 8.1. BY-LAWS SUBJECT TO AMENDMENT. These By-Laws may be altered, amended or repealed, in whole or in part, at any time by vote of the holders of a majority of the Shares (or whenever there shall be more than one Series of Shares, of the holders of a majority of the Shares of each Series) issued, out-standing and entitled to vote. The Trustees, by vote of a Majority of the Trustees, may alter, amend or repeal these By-Laws, in whole or in part, including By-Laws adopted by the Shareholders, except with respect to
any provision hereof which by law, the Declaration or these By-Laws requires action by the Shareholders. By-Laws adopted by the Trustees may be altered, amended or repealed by the Shareholders.
SECTION 8.2. NOTICE OF PROPOSAL TO AMEND BY-LAWS REQUIRED. No proposal to amend or repeal these By-Laws or to adopt new By-Laws shall be acted upon at a meeting unless either (i) such proposal is stated in the notice or in the waiver of notice, as the case may be, of the meeting of the Trustees or Shareholders at which such action is taken, or (ii) all of the Trustees or Share-holders, as the case may be, are present at such meeting and all agree to consider such proposal without protesting the lack of notice.
AMENDMENT NO. 2 TO
CUSTODY AGREEMENT
AMENDMENT NO. 2 dated as of February 4, 2005, to the Custody Agreement, dated as of July 22, 1988 and amended as of July 1, 1991, between THE ALGER AMERICAN FUND (the "Fund") and CUSTODIAL TRUST COMPANY (the "Custodian").
The Fund and the Custodian hereby agree as follows:
1. DEFINITIONS. Article I is amended by supplementing it with the following additional definitions beginning with Article I.5 and renumbering the remaining definitions accordingly:
"(5) 'DOMESTIC SECURITIES DEPOSITORY' means The Depository Trust Company and (provided that Custodian has received a copy of a resolution of the Board of Trustees, certified by an Officer, specifically approving the use of such clearing agency as a depository for the Fund) any other clearing agency registered with the Securities and Exchange Commission under Section 17A of the Securities Exchange Act of 1934, which acts as a system for the central handling of Securities where all Securities of any particular class or series of any issuer deposited within the system are treated as fungible and may be transferred or pledged by bookkeeping entry without physical delivery of the Securities."
(6) 'ELIGIBLE DOMESTIC BANK' means a bank as defined in the 1940 Act.
(7) 'ELIGIBLE FOREIGN CUSTODIAN' means any banking institution, trust company or other entity organized under the laws of a country other than the United States which is eligible under the 1940 Act and Rule 17f-5 thereunder to act as a custodian for securities and other assets of a Portfolio held outside the United States.
(8) 'ELIGIBLE FOREIGN SECURITIES DEPOSITORY' means an Eligible Securities Depository as defined in Rule 17f-7 under the 1940 Act.
(9) 'FOREIGN CUSTODY MANAGER' has the same meaning as in Rule 17f-5 under the 1940 Act.
(10) 'FOREIGN ASSETS' has the same meaning as in Rule 17f-5 under the 1940 Act."
In addition, the definition of "Securities Depository" (formerly Article I.12, renumbered as Article I.18) is replaced by the following:
"(18) 'SECURITIES DEPOSITORY' means any Domestic Securities Depository or Eligible Foreign Securities Depository."
2. ELIGIBLE SECURITIES DEPOSITORY. The Custody Agreement is amended by replacing the term "Securities Depository" with the term "Domestic Securities Depository" in Article III.5, 6(a), and 7(b).
3. ELIGIBLE DOMESTIC BANK. Article III.3 is amended by replacing the term "domestic bank or trust company" with "Eligible Domestic Bank".
4. APPOINTMENT OF FOREIGN SUB-CUSTODIANS. Article III.3 is amended by supplementing it with a new paragraph (d), as follows:
"(d)(A) Unless otherwise instructed in Written Instructions, Custodian is authorized to hold any Foreign Asset of a Portfolio in any country in which all or a portion of the primary market for such Foreign Asset is situated.
(B) At any time and from time to time, Custodian in its discretion may appoint and employ in accordance with the 1940 Act, and in its reasonable discretion but with 30 days'prior written notice to the Fund (unless, in Custodian's sole reasonable discretion, market, political or other conditions do not permit the delay such notice entails) may also cease to employ, (I) any overseas branch of any Eligible Domestic Bank, or (II) any Eligible Foreign Custodian selected by the Foreign Custody Manager, in each case as a foreign sub-custodian for Foreign Assets of a Portfolio, provided, however, that the employment of any such overseas branch has been approved by the Fund and, provided further, that, in the case of any such Eligible Foreign Custodian, the Foreign Custody Manager has approved the agreement pursuant to which Custodian employs such Eligible Foreign Custodian.
(C) Set forth on Exhibit C hereto, with respect to each Portfolio, are
the foreign sub-custodians that Custodian may employ pursuant to Article
III.3(d)(B) above. Exhibit C shall be revised from time to time as
foreign sub-custodians are added or deleted.
(D) If the Fund proposes to have a Portfolio make an investment which is to be held in a country in which Custodian does not have appropriate arrangements in place with either an overseas branch of an Eligible Domestic Bank or an Eligible Foreign Custodian selected by the Foreign Custody Manager, then the Fund shall inform Custodian sufficiently in advance of such investment to allow Custodian to make such arrangements.
(E) Notwithstanding anything to the contrary in Article IX.1 and Article X.1 below and provided that Custodian has used reasonable commercial efforts in good faith to obtain from a foreign sub-custodian appointed pursuant to this Agreement such indemnification as is provided for in the agreement pursuant to which Custodian employs such foreign sub-custodian, Custodian shall have no greater liability to any Portfolio or the Fund for the actions or omissions of such foreign sub-custodian than any such foreign sub-custodian has to Custodian pursuant to such agreement, and Custodian shall not be required to discharge any such liability which may be imposed on it unless and until such foreign sub-custodian has effectively indemnified Custodian against it or has otherwise discharged its liability to Custodian in full. In the event that Custodian does not institute legal proceedings based on a foreign sub-custodian's liability to Custodian, the Fund shall, to the extent of any loss by the Fund and to the extent permitted by applicable law and not prohibited by contract, be subrogated to all of the rights of recovery of Custodian against such foreign sub-custodian. To the extent permitted by law, Custodian shall execute and deliver any and all such instruments and documents as the Fund shall reasonably request and take such other actions
as necessary or appropriate to assist the Fund in the exercise of such rights of recovery and to enable the Fund to recover against such foreign sub-custodian, and the Fund shall reimburse the Custodian for any reasonable out-of-pocket costs incurred in connection therewith.
(F) Upon the request of the Foreign Custody Manager, Custodian shall furnish to the Foreign Custody Manager information concerning all foreign sub-custodians employed pursuant to this Agreement which shall be similar in kind and scope to any such information that may have been furnished to the Foreign Custody Manager in connection with the initial approval by the Foreign Custody Manager of the agreements pursuant to which Custodian employs such foreign sub-custodians or as otherwise required by the 1940 Act."
5. ELIGIBLE FOREIGN SECURITIES DEPOSITORIES. Article III.5 is amended by supplementing it with a new paragraph (g), as follows:
"(g)(A)(i) Unless otherwise instructed in Written Instructions, Custodian may place and maintain Foreign Assets of a Portfolio with an Eligible Foreign Securities Depository, provided that it has delivered to the Fund an analysis of the custody risks associated with maintaining assets with such Eligible Foreign Securities Depository. Custodian shall monitor such custody risks on a continuing basis and promptly notify the Fund of any material change in such risks.
(ii) In performing its obligations under Article III.5 (g)(A)(i) above, Custodian shall exercise reasonable care, prudence and diligence. In the exercise of such care, prudence and diligence, Custodian may rely upon assessments, determinations and monitoring made and performed with respect to an Eligible Foreign Securities Depository by Citibank, N.A. or such other operator of a global custody system as from time to time may be employed by Custodian and approved by the Fund."
6. RELATIONSHIP WITH SECURITIES DEPOSITORIES. Article III.5 is further amended by supplementing it with a new paragraph (h), as follows:
"No Book-Entry System, Securities Depository, or other securities depository or clearing agency (whether foreign or domestic) which it is or may become standard market practice to use for the comparison and settlement of trades in securities shall be an agent or sub-contractor of Custodian for purposes of Article III.3(a) above or otherwise."
7. EFFECTIVE DATE. This Amendment No. 2 shall be effective as of the date hereof.
IN WITNESS WHEREOF, each of the parties hereto has caused this Amendment No. 2 to be executed by its representative thereunto duly authorized, all as of the day and year first above written.
THE ALGER AMERICAN FUND CUSTODIAL TRUST COMPANY
By:_________________________________ By:________________________________
Frederick A. Blum Authorized Officer
Treasurer
|
CITIBANK SUB-CUSTODIAN NETWORK
------------------------------------- -----------
Branches/subsidiaries 44
------------------------------------- -----------
Third-party agents 28
------------------------------------- -----------
ICSDs 2
------------------------------------- -----------
TOTAL 74
------------------------------------- -----------
--------------------------------------------------------------------------------
SUB-CUSTODIAN NETWORK
----------------- ------------------------------------------- ------------------
COUNTRY SUB-CUSTODIAN STATUS
----------------- ------------------------------------------- ------------------
Argentina Citibank, N.A. Branch
----------------- ------------------------------------------- ------------------
Australia Subsidiary
CITIBANK PTY LIMITED
----------------- ------------------------------------------- ------------------
Austria Citibank N.A (through Milan) Branch
----------------- ------------------------------------------- ------------------
Bahrain Agent
HSBC BANK MIDDLE EAST
----------------- ------------------------------------------- ------------------
Bangladesh Standard Chartered Bank Agent
----------------- ------------------------------------------- ------------------
Belgium Fortis Bank (Nederland) NV Agent
----------------- ------------------------------------------- ------------------
Bermuda Bank of Bermuda Agent
----------------- ------------------------------------------- ------------------
Botswana Barclays Bank of Botswana Limited Agent
----------------- ------------------------------------------- ------------------
Brazil Citibank, N.A. Branch
----------------- ------------------------------------------- ------------------
Bulgaria ING NV Sofia Branch Agent
----------------- ------------------------------------------- ------------------
Canada Citibank Canada Subsidiary
----------------- ------------------------------------------- ------------------
Chile Citibank, N.A. Branch
----------------- ------------------------------------------- ------------------
China Citibank, N.A. Branch
----------------- ------------------------------------------- ------------------
Colombia Cititrust Colombia S.A Subsidiary
----------------- ------------------------------------------- ------------------
Costa Rica Banco BCT Agent
----------------- ------------------------------------------- ------------------
Croatia Privredna Banka Zagreb Dd. Agent
----------------- ------------------------------------------- ------------------
Cyprus Hellenic Bank Ltd Agent
----------------- ------------------------------------------- ------------------
Czech Republic Citibank, AS Subsidiary
----------------- ------------------------------------------- ------------------
Denmark Nordea Bank Danmark A/S Agent
----------------- ------------------------------------------- ------------------
Dubai (U.A.E.) The Hongkong & Shanghai Banking Corp Agent
----------------- ------------------------------------------- ------------------
Egypt Citibank, N.A. Branch
----------------- ------------------------------------------- ------------------
Estonia Hansabank Ltd Agent
----------------- ------------------------------------------- ------------------
Finland Nordea Bank Finland Plc Agent
----------------- ------------------------------------------- ------------------
France Citibank International Plc. Subsidiary
----------------- ------------------------------------------- ------------------
Germany Citigroup Global Markets
Deutschland AG & Co. KgaA Subsidiary
----------------- ------------------------------------------- ------------------
Greece Citibank International Plc. Subsidiary
----------------- ------------------------------------------- ------------------
Hong Kong Citibank, N.A. Branch
----------------- ------------------------------------------- ------------------
Hungary Citibank Rt Subsidiary
----------------- ------------------------------------------- ------------------
Iceland Kaupthing Bank (Arion Custody Services) Agent
----------------- ------------------------------------------- ------------------
India Citibank, N.A. Branch
----------------- ------------------------------------------- ------------------
|
----------------- ------------------------------------------- ------------------
Indonesia Citibank, N.A. Branch
----------------- ------------------------------------------- ------------------
Ireland Citibank International Plc Branch
----------------- ------------------------------------------- ------------------
Israel Bank Hapoalim Agent
----------------- ------------------------------------------- ------------------
Italy Citibank, N.A. Branch
----------------- ------------------------------------------- ------------------
Japan Citibank N.A. Branch
----------------- ------------------------------------------- ------------------
Jordan Arab Bank. Agent
----------------- ------------------------------------------- ------------------
Kazakhstan SB HSBC Kazakhstan JSC Agent
----------------- ------------------------------------------- ------------------
Korea Citibank Korea, Inc. Subsidiary
----------------- ------------------------------------------- ------------------
Latvia Hansabank Agent
----------------- ------------------------------------------- ------------------
Lithuania HansaBank Agent
----------------- ------------------------------------------- ------------------
Malaysia Citibank Berhad Subsidiary
----------------- ------------------------------------------- ------------------
Malaysia Citibank Berhad Subsidiary
----------------- ------------------------------------------- ------------------
Malta HSBC Bank Malta plc Agent
----------------- ------------------------------------------- ------------------
Mexico Banamex S.A. Subsidiary
----------------- ------------------------------------------- ------------------
Morocco Banque Commerciale du Maroc Agent
----------------- ------------------------------------------- ------------------
Netherlands Citibank, N.A. Branch
----------------- ------------------------------------------- ------------------
New Zealand Citibank Nominees (New Zealand) Limited Subsidiary
----------------- ------------------------------------------- ------------------
Norway Nordea Bank Norge ASA Agent
----------------- ------------------------------------------- ------------------
Pakistan Citibank, N.A. Branch
----------------- ------------------------------------------- ------------------
Peru Citibank del Peru S.A. Subsidiary
----------------- ------------------------------------------- ------------------
Philippines Citibank, N.A. Branch
----------------- ------------------------------------------- ------------------
Poland Bank Handlowy w Warszawie S.A. Subsidiary
----------------- ------------------------------------------- ------------------
Portugal Citibank International Plc Subsidiary
----------------- ------------------------------------------- ------------------
Puerto Rico Citibank, N.A. Branch
----------------- ------------------------------------------- ------------------
Romania Citibank Romania S.A Subsidiary
----------------- ------------------------------------------- ------------------
Russia ZAO Citibank Subsidiary
----------------- ------------------------------------------- ------------------
Singapore Citibank, N.A. Branch
----------------- ------------------------------------------- ------------------
Slovak Republic Ceskoslovenska Obchodni Banka A.S (CSOB) Agent
----------------- ------------------------------------------- ------------------
Slovenia Bank Austria Agent
----------------- ------------------------------------------- ------------------
South Africa First National Bank of
South Africa Limited Agent
----------------- ------------------------------------------- ------------------
Spain Citibank International Plc Subsidiary
----------------- ------------------------------------------- ------------------
Sri Lanka Citibank, N.A. Branch
----------------- ------------------------------------------- ------------------
Sweden SEB Agent
----------------- ------------------------------------------- ------------------
Switzerland Citibank, N.A. Branch
----------------- ------------------------------------------- ------------------
Taiwan Citibank, N.A. Branch
----------------- ------------------------------------------- ------------------
Thailand Citibank, N.A. Branch
----------------- ------------------------------------------- ------------------
Turkey Citibank A.S. Subsidiary
----------------- ------------------------------------------- ------------------
Ukraine ING Bank Agent
----------------- ------------------------------------------- ------------------
United Kingdom Citibank, N.A. Branch
----------------- ------------------------------------------- ------------------
United States Citibank, N.A. Branch
----------------- ------------------------------------------- ------------------
Venezuela Citibank, N.A. Branch
----------------- ------------------------------------------- ------------------
Zimbabwe Barclays Bank of Zimbabwe Limited Agent
----------------- ------------------------------------------- ------------------
|
--------------------------------------------------------------------------------
INTERNATIONAL CENTRAL SECURITIES DEPOSITORIES
----------------- ------------------------------------------- ------------------
Euroclear Depository
----------------- ------------------------------------------- ------------------
Clearstream Depository
----------------- ------------------------------------------- ------------------
|
FOREIGN CUSTODY MANAGER AGREEMENT
AGREEMENT dated as of February 4, 2005, between The Alger American Fund (the "Trust"), an unincorporated business trust formed and existing under the laws of the Commonwealth of Massachusetts, acting on behalf of each of the series of the Trust identified on Exhibit A hereto (each, a "Fund") and Custodial Trust Company ("CTC"), a bank organized and existing under the laws of the State of New Jersey.
WHEREAS, CTC serves as custodian for the assets of each Fund pursuant to the Custody Agreement, dated as of July 22, 1988, between the Trust and CTC (the "Custody Agreement");
WHEREAS, the Trust desires that the Funds maintain their Foreign Assets (as hereinafter defined) in one or more foreign countries;
WHEREAS, the Trust wishes to appoint CTC as a Foreign Custody Manager on the terms and conditions contained herein;
WHEREAS, CTC wishes to serve as a Foreign Custody Manager and perform the duties set forth herein on the term and conditions contained herein;
NOW THEREFORE, in consideration of the agreements made herein, the Trust and CTC hereby agrees as follows:
1.1 SPECIFIC DEFINITIONS. Whenever used in this Agreement, the following terms, unless the context otherwise requires, shall mean:
(a) "BOARD" means the Board of Trustees of the Trust.
(b) "ELIGIBLE FOREIGN CUSTODIAN" has the same meaning as in Rule 17f-5.
(c) "ELIGIBLE SECURITIES DEPOSITORY" means a system for the central handling of securities within the meaning of Section (b)(1) of Rule 17f-7.
(d) "FOREIGN ASSETS" of any Fund means investments of such Fund (including foreign currencies) for which the primary market is outside the United States, and such cash and cash equivalents as such Fund considers necessary to effect its transactions in such investments.
(e) "QUALIFIED FOREIGN BANK" has the same meaning as in Rule 17f-5.
(f) "RULE 17f-5" means Rule 17f-5 under the Investment Company Act of 1940, as amended.
(g) "RULE 17f-7" means Rule 17f-7 under the Investment Company Act of 1940, as amended.
(h) "SPECIFIED COUNTRY" means any country listed on Exhibit B hereto (as amended from time to time) in which Foreign Assets of any Fund are or are to be held in custody.
1.2 OTHER DEFINITIONS. Capitalized terms used in this Agreement and not otherwise defined in this Agreement shall have the meanings given such terms in the Rule.
2.1 DELEGATION AND ACCEPTANCE. The Trust hereby delegates to CTC, and CTC hereby accepts such delegation and agrees to perform, with respect to each Specified Country, the duties of Foreign Custody Manager set forth in this Agreement.
2.2 STANDARD OF CARE. In performing the duties of Foreign Custody Manager set forth in this Agreement, CTC shall exercise reasonable care, prudence and diligence such as a person having responsibility for the safekeeping of the assets of the Funds would exercise.
3.1 SELECTION OF ELIGIBLE FOREIGN CUSTODIANS. (a) For each Specified Country in which Foreign Assets of the Funds are not held (or are not to be held) in custody solely by an overseas branch of a U.S. Bank, CTC shall select from among the Eligible Foreign Custodians in such Specified Country (if there are any) one or more Eligible Foreign Custodians in whose care Foreign Assets held or to be held in custody in such Specified Country may be placed and maintained, provided that CTC has determined with respect to each such selected Eligible Foreign Custodian (I) that Foreign Assets placed and maintained with it will be subject to reasonable care based on the standards applicable to custodians in the relevant market, and (II) that any custody arrangement with such Eligible Foreign Custodian will be governed by a written contract containing the provisions specified in Section 3.1(c) below which will provide reasonable care for such Foreign Assets based on the standards applicable to custodians in the relevant market.
(b) In making with respect to any Eligible Foreign Custodian the determination required by Section 3.1(a)(i) above, CTC shall consider all factors that it deems relevant to the safekeeping of Foreign Assets by such Eligible Foreign Custodian including, without limitation:
(i) such Eligible Foreign Custodian's practices, procedures and internal controls, including, but not limited to, the physical protection available for certificated securities, the method of keeping custodial records, and security and data protection practices;
(ii) whether such Eligible Foreign Custodian has the requisite financial strength to provide reasonable care for the Foreign Assets of the Funds placed in its care;
(iii) the general standing and reputation of such Eligible Foreign Custodian; and
(iv) whether each Fund whose Foreign Assets are placed in the care of such Eligible Foreign Custodian will have jurisdiction over and be able to enforce judgments against it, due to, for example, such Eligible Foreign Custodian having an office in the United States, or having otherwise submitted to jurisdiction in the United States, or having appointed an agent for the service of process in the United States.
(c) CTC shall not with respect to any written contract with any Eligible Foreign Custodian make the determination required by Section 3.1(a)(ii) above unless such contract contains at least (I) provisions that provide:
(A) for indemnification or insurance (or any combination of the foregoing) such that the Funds will be adequately protected against the risk of loss of Foreign Assets held in accordance with such contract;
(B) that Foreign Assets in the care of such Eligible Foreign Custodian will not be subject to any right, charge, security interest, lien or claim of any kind in favor of such Eligible Foreign Custodian except a claim of payment for their safe custody or administration or, in the case of cash deposits, liens or rights in favor of creditors of such Eligible Foreign Custodian arising under bankruptcy, insolvency or similar laws;
(C) that beneficial ownership of Foreign Assets in the care of such Eligible Foreign Custodian will be freely transferable without the payment of money or value to such Eligible Foreign Custodian other than for safe custody or administration;
(D) that adequate records will be maintained identifying the Foreign Assets of the Funds in the care of such Eligible Foreign Custodian either as belonging to the Funds or as being held by a third party for their benefit;
(E) that the independent public accountants of any Fund whose Foreign Assets are in the care of such Eligible Foreign Custodian will be given access to such records (concerning such Foreign Assets) or confirmation of the contents of such records; and
(F) that such Eligible Foreign Custodian will provide, for delivery to any Fund whose Foreign Assets are in its care, sufficient and timely periodic reports with respect to the safekeeping of such Foreign Assets, including, but not limited to, notification of any transfer to or from such Fund's account or a third party account containing such Foreign Assets;
or (II) in lieu of any or all of the foregoing provisions (the "Omitted Provisions"), such other provisions as CTC may determine will provide, in their entirety, the same or greater level of care for
the Foreign Assets in the care of such Eligible Foreign Custodian as the Omitted Provisions in their entirety.
3.2 CONDITIONS OF SELECTION PROCESS. (a) In selecting an Eligible Foreign Custodian in any Specified Country in the manner provided for in Section 3.1 above, CTC need not examine all Eligible Foreign Custodians in such Specified Country, but may select the first Eligible Foreign Custodian with respect to which it makes the determinations required by Section 3.1(a) above.
(b) The Trust understands that in making any selection of an Eligible Foreign Custodian pursuant to Section 3.1 above, CTC may, without independent examination on its part but subject to the standard of care to which it is held in Section 2.2 above, rely upon examinations performed and determinations made by Citibank, N.A. or such other operator of a global custody system as the Trust may from time to time approve.
3.3 MONITORING. By means of a system established either by CTC or by Citibank, N.A. or such other operator of a global custody system as the Trust may from time to time approve, and subject to Section 3.4 below, CTC shall monitor at reasonable intervals (but at least annually) (A) based on factors that include those specified in Section 3.1 (b) above, the continuing appropriateness of maintaining the Foreign Assets of each Fund with each Eligible Foreign Custodian in whose care the Foreign Assets of such Fund have been placed pursuant to Section 3.1 above and (B) based on the factors specified in Section 3.1(c) above, the continuing appropriateness of the written contract that governs each Fund's custody arrangement with each such Eligible Foreign Custodian.
3.4 APPROPRIATENESS. In making any determination of appropriateness pursuant to Section 3.3 above, CTC shall not be required to consider or evaluate any prevailing country risk associated with investment in a particular country. Country risk includes, but is not limited to (A) nationalization, expropriation or other governmental actions, (B) market conditions which affect the orderly execution of securities transactions or affect the value of securities, (C) currency devaluations and other currency fluctuations, and (D) systemic risks of holding assets in a particular country such as
(I) financial infrastructure, (II) prevailing custody and settlement practices (including the use of Eligible Securities Depositories ), (III) regulation of the banking and securities industries (including laws and regulations relating to the safekeeping and recovery of assets held pursuant to custody agreements), and (IV) currency controls and restrictions.
3.5 REPORTING. (a) Upon the request of the Trust, CTC shall provide the Board with written reports of (I) the placement of any Foreign Assets of any Fund with a particular Eligible Custodian at the end of the calendar quarter in which such placement occurs, and (II) any material change in the custody arrangements of any Fund with any Eligible Foreign Custodian promptly after the occurrence of such material change.
(b) CTC shall promptly advise the Trust whenever a custody arrangement of any Fund with any Eligible Foreign Custodian selected by CTC pursuant to Section 3.1 above no longer meets the requirements of the Rule.
3.6 LIMITATION REGARDING ELIGIBLE SECURITIES DEPOSITORIES. Notwithstanding anything in this Agreement to the contrary, CTC's duties as Foreign Custody Manager under this Agreement shall not apply to Eligible Securities Depositories or to any custody arrangement with any of them.
3.7. PRIOR NOTICE. The Trust understands that CTC in order to perform its duties with respect to custody arrangements in a particular Specified Country may require reasonable advance notice of a Fund's intention to invest in such Specified Country.
4.1 REPRESENTATIONS OF THE TRUST. The Trust represents and warrants (A) that this Agreement has been duly authorized, executed and delivered by the Trust, and constitutes a valid and legally binding obligation of the Trust enforceable in accordance with its terms, (B) that no statute,
regulation, rule, order, judgement or contract binding on the Trust prohibits the Trust's execution or performance of this Agreement, and (C) that the Board and/or the investment adviser of each Fund has or will have considered the country risks (as described in part in Section 3.4 above) associated with investment in each Specified Country in which such Fund has or will have invested.
4.2 REPRESENTATIONS OF CTC. CTC represents and warrants (A) that it is duly
organized and existing under the laws of the State of New Jersey, with full
corporate power to carry on its businesses as now conducted, to enter into this
Agreement and to perform its obligations hereunder, (B) that this Agreement has
been duly authorized, executed and delivered by CTC, and constitutes a valid and
legally binding obligation of CTC enforceable in accordance with its terms, and
(C) that no statute, regulation, rule, order, judgement or contract binding on
CTC prohibits its execution or performance of this Agreement.
5.1 LIMITATION ON CTC LIABILITY. CTC shall be without liability to any Fund or the Trust for any loss, damage, cost, expense (including attorneys' fees and disbursements), liability or claim which does not arise from CTC's failure to adhere to the standard of care imposed in Section 2.2 above. In no event shall CTC be liable (I) for any such loss, damage, cost, expense, liability or claim arising from war, riots, civil commotion, strikes, labor disputes, governmental actions, laws or regulations, embargoes, natural disasters, or any other such cause or contingency (whether constituting a form of country risk or not) beyond the control of CTC or any Eligible Foreign Custodian selected by it pursuant to this Agreement, or (II) for special, incidental or consequential damages, even if CTC has been advised of the possibility of such damages.
5.2 INDEMNIFICATION BY CTC. CTC shall indemnify and hold harmless the Trust and each Fund from and against any and all costs, expenses, damages, liabilities or claims (including reasonable attorney's and accountants' fees) arising from any failure by CTC to perform its obligations under
this Agreement at the standard of care to which it is held in Section 2.2 above if such failure arises from bad faith, willful misconduct or negligence on the part of CTC, provided that neither the Trust nor any Fund shall be indemnified and held harmless from and against special, incidental or consequential damages, even if CTC has been advised of the possibility of such damages.
5.3 INDEMNIFICATION BY FUNDS. Each Fund, severally and not jointly, shall indemnify and hold harmless CTC from and against any and all costs, expenses, damages, liabilities or claims (including reasonable attorneys' and accountants' fees) arising from CTC's performance of its obligations under this Agreement with respect to such Fund, provided that CTC shall not be indemnified and held harmless from and against (A) any such costs, expenses, damages, liabilities or claims arising from bad faith, willful misconduct or negligence on the part of CTC, or (b) special, incidental or consequential damages, even if the Trust or any Fund has been advised of the possibility of such damages.
5.4 EXPRESS DUTIES ONLY. CTC shall have no duties or obligations whatsoever as Foreign Custody Manager except such duties and obligations as are specifically set forth in this Agreement, and no covenant or obligation shall be implied in this Agreement against CTC. CTC shall have no discretion whatsoever as Foreign Custody Manager with respect to the management, disposition or investment of the assets of any Fund and is not a fiduciary to the Trust or any Fund under this Agreement. In no event shall CTC be liable for any country risks (as described in part in Section 3.4 above) associated with investments in a particular country.
6.1 ADDRESS FOR NOTICES. Unless otherwise specified herein, all demands, notices, instructions, and other communications to be given hereunder shall be sent, delivered or given to the recipient at the address, or the relevant telephone number, set forth after its name hereinbelow:
If to the Trust:
c/o Fred Alger & Company, Incorporated
30 Montgomery Street
Jersey City, NJ 07302
Attention: COMPLIANCE DEPARTMENT
Telephone: (201) 547-3600
Facsimile: (201) 547-8219
If to CTC:
CUSTODIAL TRUST COMPANY
101 Carnegie Center
Princeton, New Jersey 08540-6231
Attention: SENIOR VICE PRESIDENT - COMPLIANCE
Telephone: (609) 951-2313
Facsimile: (609) 951-2317
or at such other address as either party hereto shall have provided to the other by notice given in accordance with this Section 6.1.
6.2 NO WAIVER. No failure by either party hereto to exercise, and no delay by such party in exercising, any right hereunder shall operate as a waiver thereof. The exercise by either party hereto of any right hereunder shall not preclude the exercise of any other right, and the remedies provided herein are cumulative and not exclusive of any remedies provided at law or in equity.
6.3 AMENDMENTS. This Agreement and the Exhibits hereto cannot be changed orally and no amendment to this Agreement or any of such Exhibits shall be effective unless evidenced by an instrument in writing executed by the parties hereto.
6.4 COUNTERPARTS. This Agreement may be executed in one or more counterparts, and by the parties hereto on separate counterparts, each of which shall be deemed an original but all of which together shall constitute but one and the same instrument.
6.5 SEVERABILITY. If any provision of this Agreement shall be invalid, illegal or unenforceable in any respect under any applicable law, the validity, legality and enforceability of the remaining provisions shall not be affected or impaired thereby.
6.6 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and assigns; PROVIDED, HOWEVER, that this Agreement shall not be assignable by either party hereto without the written consent of the other party. Any purported assignment in violation of this Section 6.6 shall be void.
6.7 GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to the conflict of law principles thereof.
6.8 JURISDICTION. Any suit, action or proceeding with respect to this Agreement may be brought in the Supreme Court of the State of New York, County of New York, or in the United States District Court for the Southern District of New York, and the parties hereto hereby submit to the non-exclusive jurisdiction of such courts for the purpose of any such suit, action or proceeding, and hereby waive for such purpose any other preferential jurisdiction by reason of their present or future domicile or otherwise.
6.9 HEADINGS. The headings of sections in this Agreement are for convenience of reference only and shall not affect the meaning or construction of any provision of this Agreement.
6.10 TERMINATION. This Agreement shall automatically terminate as soon as the Custody Agreement ceases to be in effect, and may otherwise be terminated by either party giving to the other party a notice in writing specifying the date of such termination, which shall not be less than thirty (30) days after the date of the giving of such notice.
6.11 FEES. In consideration of the services provided by CTC hereunder, each Fund shall pay to CTC such compensation and out-of-pocket expenses as may be agreed upon from time to time.
6.12 CONFLICTS WITH CUSTODY AGREEMENTS. In the event of any conflict between this Agreement and the Custody Agreement, the terms of this Agreement shall prevail.
6.13 SEPARATE FUNDS. Every reference in this Agreement to a Fund shall be deemed a reference solely to the particular Fund referred to. Under no circumstances shall the rights, obligations or remedies with respect to a particular Fund constitute a right, obligation or remedy applicable to any other Fund. In particular, and without otherwise limiting the scope of this Section 6.13, CTC shall have no right to set off claims against one Fund by applying thereto the property of any other Fund.
6.14 LIMITATION OF LIABILITY. The Trust represents that a copy of its Agreement and Declaration of Trust, dated APRIL 6, 1988, together with all amendments thereto, is on file in the office of the Secretary of the Commonwealth of Massachusetts. This Agreement has been executed on behalf of the Trust by the undersigned officer of the Trust in his capacity as an officer of the Trust. The obligations of this Agreement shall be binding upon the assets and property of the applicable Fund only and shall not be binding upon any trustee, officer or shareholder of the Trust individually.
IN WITNESS WHEREOF, the Trust, on behalf of each Fund individually and not jointly, and CTC have caused this Agreement to be executed by their respective officers thereunto duly authorized, all as of the date first above written.
CUSTODIAL TRUST COMPANY THE ALGER AMERICAN FUND By:________________________ By:__________________________ Name: Name: Frederick A. Blum Title: Title: Treasurer |
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
EXHIBIT B
---------
COUNTRIES
CITIBANK SUB-CUSTODIAN NETWORK
------------------------------------- -----------
Branches/subsidiaries 44
------------------------------------- -----------
Third-party agents 28
------------------------------------- -----------
ICSDs 2
------------------------------------- -----------
TOTAL 74
------------------------------------- -----------
--------------------------------------------------------------------------------
SUB-CUSTODIAN NETWORK
------------------ ------------------------------------------ ------------------
COUNTRY SUB-CUSTODIAN STATUS
------------------ ------------------------------------------ ------------------
Argentina Citibank, N.A. Branch
------------------ ------------------------------------------ ------------------
Australia Subsidiary
CITIBANK PTY LIMITED
------------------ ------------------------------------------ ------------------
Austria Citibank N.A (through Milan) Branch
------------------ ------------------------------------------ ------------------
Bahrain Agent
HSBC BANK MIDDLE EAST
------------------ ------------------------------------------ ------------------
Bangladesh Standard Chartered Bank Agent
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Belgium Fortis Bank (Nederland) NV Agent
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Bermuda Bank of Bermuda Agent
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Botswana Barclays Bank of Botswana Limited Agent
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Brazil Citibank, N.A. Branch
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Bulgaria ING NV Sofia Branch Agent
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Canada Citibank Canada Subsidiary
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Chile Citibank, N.A. Branch
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China Citibank, N.A. Branch
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Colombia Cititrust Colombia S.A Subsidiary
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Costa Rica Banco BCT Agent
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Croatia Privredna Banka Zagreb Dd. Agent
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Cyprus Hellenic Bank Ltd Agent
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Czech Republic Citibank, AS Subsidiary
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Denmark Nordea Bank Danmark A/S Agent
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Dubai (U.A.E.) The Hongkong & Shanghai Banking Corp Agent
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Egypt Citibank, N.A. Branch
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Estonia Hansabank Ltd Agent
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Finland Nordea Bank Finland Plc Agent
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France Citibank International Plc. Subsidiary
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Germany Citigroup Global Markets
Deutschland AG & Co. KgaA Subsidiary
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Greece Citibank International Plc. Subsidiary
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Hong Kong Citibank, N.A. Branch
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Hungary Citibank Rt Subsidiary
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Iceland Kaupthing Bank (Arion Custody Services) Agent
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India Citibank, N.A. Branch
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Indonesia Citibank, N.A. Branch
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Ireland Citibank International Plc Branch
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Israel Bank Hapoalim Agent
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Italy Citibank, N.A. Branch
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Japan Citibank N.A. Branch
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Jordan Arab Bank. Agent
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Kazakhstan SB HSBC Kazakhstan JSC Agent
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Korea Citibank Korea, Inc. Subsidiary
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Latvia Hansabank Agent
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Lithuania HansaBank Agent
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Malaysia Citibank Berhad Subsidiary
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Malaysia Citibank Berhad Subsidiary
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Malta HSBC Bank Malta plc Agent
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Mexico Banamex S.A. Subsidiary
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Morocco Banque Commerciale du Maroc Agent
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Netherlands Citibank, N.A. Branch
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New Zealand Citibank Nominees (New Zealand) Limited Subsidiary
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Norway Nordea Bank Norge ASA Agent
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Pakistan Citibank, N.A. Branch
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Peru Citibank del Peru S.A. Subsidiary
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Philippines Citibank, N.A. Branch
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Poland Bank Handlowy w Warszawie S.A. Subsidiary
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Portugal Citibank International Plc Subsidiary
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Puerto Rico Citibank, N.A. Branch
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Romania Citibank Romania S.A Subsidiary
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Russia ZAO Citibank Subsidiary
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Singapore Citibank, N.A. Branch
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Slovak Republic Ceskoslovenska Obchodni Banka A.S (CSOB) Agent
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Slovenia Bank Austria Agent
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South Africa First National Bank of
South Africa Limited Agent
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------------------ ------------------------------------------ ------------------ Spain Citibank International Plc Subsidiary ------------------ ------------------------------------------ ------------------ Sri Lanka Citibank, N.A. Branch ------------------ ------------------------------------------ ------------------ Sweden SEB Agent ------------------ ------------------------------------------ ------------------ Switzerland Citibank, N.A. Branch ------------------ ------------------------------------------ ------------------ Taiwan Citibank, N.A. Branch ------------------ ------------------------------------------ ------------------ Thailand Citibank, N.A. Branch ------------------ ------------------------------------------ ------------------ Turkey Citibank A.S. Subsidiary ------------------ ------------------------------------------ ------------------ Ukraine ING Bank Agent ------------------ ------------------------------------------ ------------------ United Kingdom Citibank, N.A. Branch ------------------ ------------------------------------------ ------------------ United States Citibank, N.A. Branch ------------------ ------------------------------------------ ------------------ Venezuela Citibank, N.A. Branch ------------------ ------------------------------------------ ------------------ Zimbabwe Barclays Bank of Zimbabwe Limited Agent ------------------ ------------------------------------------ ------------------ |
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INTERNATIONAL CENTRAL SECURITIES DEPOSITORIES
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Euroclear Depository
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Clearstream Depository
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Exhibit h-1
SHAREHOLDER ADMINISTRATIVE SERVICES AGREEMENT
This Agreement is made and entered into between each of the investment companies listed in Schedule A hereto (each, a "Fund" and collectively, the "Funds") and Alger Shareholder Services, Inc. as the same may be amended by the parties from time to time.
WHEREAS, effective November 22, 2004, State Street Bank and Trust Company ("State Street") is the transfer agent for each Fund pursuant to the Transfer Agency and Service Agreement dated November 22, 2004 between State Street and each Fund (the "Transfer Agent Agreement");
WHEREAS, transfer agent services will be provided to the Funds other than Castle Convertible Fund, Inc. by State Street's affiliate, Boston Financial Data Services, Inc. and by EquiServe or its successor for Castle Convertible Fund, Inc.; and
WHEREAS, each Fund desires that Alger Shareholder Services, Inc., the former transfer agent for each Fund, will supervise certain aspects of the Fund's transfer agent operations under the Transfer Agency and Service Agreement with State Street and provide certain shareholder administrative services to the Funds, other than as provided by Fred Alger Management, Inc. under its investment advisory agreement(s) with the respective Fund; and
WHEREAS the Boards of the Funds have each made the following findings at a meeting held on December 7, 2004:
A. The administrative services to be performed by Alger Shareholder Services, Inc. under this Agreement are required for the operation of the Fund;
B. The administrative services to be performed by Alger Shareholder Services, Inc. under this Agreement are in the best interests of the Fund and its shareholders;
C. The administrative services to be performed by Alger Shareholder Services, Inc. under this Agreement are at least equal in quality to those provided by other service organizations offering the same or similar services; and
D. The fees charged by Alger Shareholder Services, Inc. for the administrative services to be performed are fair and reasonable in light of the usual and customary charges made by other service organizations for services of the same nature and quality;
NOW, THEREFORE, in consideration of the foregoing and the terms and conditions set forth below, the parties agree as follows:
1. Each Fund hereby appoints Alger Shareholder Services, Inc. to provide the
shareholder administrative services to the Fund as described in paragraph
2. Alger Shareholder Services, Inc. accepts such appointment and agrees
to furnish the services in return for the compensation described in
paragraph 3.
2. Alger Shareholder Services, Inc. hereby undertakes to provide the following shareholder administrative services for the Funds:
(a) Monitor service level standards and participate in continuous improvement sessions;
(b) Provide on-going information and training to State Street regarding Fred Alger Management, Inc.'s new products, modifications, and initiatives as they relate to the Funds;
(c) Periodically monitor State Street's phone representatives to ensure high quality service standards and product knowledge;
(d) Review and implement jointly with State Street new system functionality;
(e) Recommend, review and approve any procedural changes necessary to meet regulatory changes, to improve shareholder servicing, or to maintain competitive edge within the shareholder servicing industry;
(f) Facilitate responses to information requests from regulatory bodies, trustees, or other internal departments;
(g) Provide problem resolution and approval for exception processing;
(h) Coordinate delivery of trade confirmations, statements, prospectuses, annual/semi-annual reports and similar documents with Boston Financial Data Services, Inc. ("BFDS"), PFPC, ADP, and Fred Alger Management, Inc.'s marketing department;
(i) Confirm transfer agent regulatory compliance, including compliance with the USA Patriot Act of 2001, per oversight of State Street's performance under the Transfer Agency and Service Agreement;
(j) Review and approve payment of transfer agency invoices; and
(k) Ensure all reporting requirements are met under the Transfer Agency and Service Agreement, including standard reports and ad-hoc report requests.
3. For the services provided by Alger Shareholder Services, Inc. under this Agreement, effective February 28, 2005, each Fund will pay Alger Shareholder Services, Inc. the following fee per account, plus out-of-pocket expenses incurred by Alger Shareholder Services, Inc. in performing its responsibilities under this Agreement, within 10 days of the first day of each month:
$3.75 per account
4. This Agreement shall be governed by the laws of the State of New York.
5. This Agreement shall be effective for an initial period of not more than one year from its effective date and shall continue in full force and effect with respect to a Fund continuously thereafter if its continuance is approved annually by the Board of the Fund. The effective date of this Agreement shall be February 28, 2005. This Agreement may be terminated with respect to a Fund by Alger Shareholder Services, Inc. or the Fund at any time upon sixty (60) days' prior written notice.
6. STANDARD OF CARE. Alger Shareholder Services, Inc. shall exercise its best judgment in rendering the services listed in paragraph 2., above. Alger Shareholder Services shall not be liable for any error of judgment or mistake of law or for any loss suffered by a Fund in connection with matters to which this Agreement relates, provided that nothing herein shall protect or purport to protect Alger Shareholder Services, Inc. against any liability to the Fund or its shareholders to which Alger would otherwise be subject by reason of willful misfeasance, bad faith or gross negligence on its part in the performance of its duties or by reason of Alger's reckless disregard of its obligations and duties under this Agreement.
7. MODIFICATION. This Agreement may be modified or amended, and the terms of this Agreement may be waived, only by a writing signed by each of the parties.
8. LIMITATION OF LIABLITY. This Agreement has been executed on behalf of the respective Fund by the undersigned officer of the Fund in his capacity as an officer of the Fund. The obligations of this Agreement shall be binding on the assets and property of the respective Fund, only, and shall not be binding on any Trustee or Director, officer or shareholder of the Fund individually.
ALGER SHAREHOLDER SERVICES, INC. THE ALGER AMERICAN FUND
By: /s/ Gary N. Palais By: /s/ Frederick A. Blum
Name: Gary N. Palais Name: Frederick A. Blum
Title: Senior Vice President Title: Treasurer
Attest: /s/ Katherine P. Feld Attest /s/ Katherine P. Feld
Name: Katherine P. Feld Name: Katherine P. Feld
THE ALGER INSTITUTIONAL FUNDS
By: /s/ Frederick A. Blum
Name: Frederick A. Blum
Title: Treasurer
Attest: /s/ Katherine P. Feld
Name: Katherine P. Feld
|
SPECTRA FUND
By: /s/ Frederick A. Blum Name: Frederick A. Blum Title: Treasurer Attest: /s/ Katherine P. Feld Name: Katherine P. Feld |
THE CHINA-U.S. GROWTH FUND
By: /s/ Frederick A. Blum Name: Frederick A. Blum Title: Treasurer Attest: /s/ Katherine P. Feld Name: Katherine P. Feld |
CASTLE CONVERTIBLE FUND, INC.
By: /s/ Frederick A. Blum Name: Frederick A. Blum Title: Treasurer Attest: /s/ Katherine P. Feld Name: Katherine P. Feld |
THE ALGER FUNDS
By: /s/ Frederick A. Blum Name: Frederick A. Blum Title: Treasurer Attest: /s/ Katherine P. Feld Name: Katherine P. Feld |
EXHIBIT A
Castle Convertible Fund, Inc.
Spectra Fund
The Alger American Fund
The Alger Funds
The Alger Institutional Funds
The China-U.S. Growth Fund
Exhibit h-2
TRANSFER AGENCY AND SERVICE AGREEMENT
BETWEEN
CERTAIN INVESTMENT COMPANIES MANAGED BY FRED ALGER
MANAGEMENT INC., AS LISTED ON SCHEDULE A HERETO
AND
STATE STREET BANK AND TRUST COMPANY
TABLE OF CONTENTS
PAGE
1. Terms of Appointment and Duties ...................................... 1
2. Third Party Administrators for Defined Contribution Plans ............ 8
3. Service Levels ....................................................... 8
4. Fees and Expenses .................................................... 10
5. Representations and Warranties of the Transfer Agent ................. 11
6. Representations and Warranties of the Funds .......................... 11
7. Wire Transfer Operating Guidelines/Articles 4A
of the Uniform Commercial Code ....................................... 12
8. Data Access and Proprietary Information .............................. 14
9. Indemnification ...................................................... 17
10. Standard of Care ..................................................... 18
11. Covenants of the Funds and the Transfer Agent ........................ 19
12. Termination of Agreement ............................................. 19
13. Assignment and Third Party Beneficiaries ............................. 21
14. Subcontractors ....................................................... 22
15. Miscellaneous ........................................................ 22
16. Additional Funds ..................................................... 24
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TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the 22nd day of November, 2004, by and between certain investment companies managed by Fred Alger Management INC., as listed on Schedule A hereto (each, a "Fund" and collectively, the "Funds"), each having its principal office and place of business at 30 Montgomery Street, Jersey City, New Jersey 07302, and STATE STREET BANK AND TRUST COMPANY, a Massachusetts trust company having its principal office and place of business at 225 Franklin Street, Boston, Massachusetts 02110 (the "Transfer Agent").
WHEREAS, the Funds are authorized to issue shares in separate series, with each such series representing interests in a separate portfolio of securities and other assets;
WHEREAS, the Funds currently have shares outstanding in twenty three (23) series, three of which are synonymous with the respective Fund. and each such series shall be named in the attached Schedule A which may be amended by the parties from time to time (each such series, together with any other series subsequently established by the Funds and made subject to this Agreement in accordance with SECTION 16, being herein referred to AS a "Portfolio", and collectively as the "Portfolios"); and
WHEREAS, each Fund, on behalf of its Portfolios, desires to appoint the Transfer Agent as its transfer agent, dividend disbursing agent, recordkeeper for certain retirement plans and agent in connection with certain other activities, each Fund desires to contract individually for such services and the Transfer Agent desires to accept such appointment.
NOW, THEREFORE, in consideration of the mutual covenants herein contained, the parties hereto agree as follows:
1. TERMS OF APPOINTMENT AND DUTIES
1.1 TRANSFER AGENCY SERVICES. Subject to the terms and conditions set forth in this Agreement, each Fund, on behalf of its Portfolios, hereby appoints the Transfer Agent to act as, and the Transfer Agent agrees to act as its transfer agent for the Fund's authorized and issued shares of beneficial interest ("Shares"), dividend disbursing agent, recordkeeper for certain retirement plans and agent in connection with ANY accumulation, open-account or similar plan provided to the shareholders of each of the respective Portfolios of the Fund ("Shareholders") and set out in the currently effective prospectus and statement of additional information ("prospectus") of the Fund on behalf of the applicable Portfolio, including without limitation any periodic investment plan or periodic withdrawal program. In accordance with procedures established from time to time by agreement between each Fund, on behalf of each of its Portfolios, as applicable, and the Transfer Agent, the Transfer Agent agrees that it will perform the following services for each Fund:
(a) Receive for acceptance, orders for the purchase of Shares, and promptly deliver payment and appropriate documentation thereof to the Custodian of the Fund
authorized pursuant to the applicable Articles of Incorporation or Declaration of Trust, as the case may be, of the Fund (the "Custodian").
(b) Pursuant to purchase orders, issue the appropriate number of Shares and hold such Shares in the appropriate Shareholder account.
(c) Send to the vendor designated by the Fund a file consisting of information the vendor will use to generate confirmation statements in such form as the Fund and the Transfer Agent agree upon from time to time.
(d) Receive for acceptance redemption requests and redemption directions and deliver the appropriate documentation thereof to the Custodian setting forth the number of shares of the applicable Fund and Portfolio thereof to be redeemed. Such redemptions shall be reflected on appropriate accounts maintained by the Transfer Agent reflecting outstanding shares of the Fund and Shares attributed to individual accounts.
(e) In respect of the transactions in items (a), (b) and (d) above, execute transactions directly with broker-dealers authorized by the Funds.
(f) At the appropriate time as and when it receives monies paid to it by the Custodian with respect to any redemption, pay over or cause to be paid over in the appropriate manner such monies as instructed by the redeeming Shareholders in accordance with procedures described in the Fund's prospectus as most recently provided by the Fund to the Transfer Agent.
(g) Promptly after Transfer Agent has received written instructions from the Fund that the sale of Shares of the Fund has been suspended or discontinued, the Transfer Agent shall prohibit the issuance of any Shares of the Fund.
(h) Effect transfers of Shares by the registered owners thereof upon receipt of appropriate instructions.
(i) Prepare and transmit payments for dividends and distributions declared by the Fund, on behalf of the applicable Portfolio. The Transfer Agent will, on the designated payment date, automatically reinvest all dividends in additional Shares, unless the Shareholder has requested otherwise, at net asset values on the payment date.
(j) Without any further action by the Board of Trustees or any officer of The China-U.S. Growth Fund or Castle Convertible Fund, Inc., issue replacement certificates for certificates for Shares of either such Fund alleged to have been lost, stolen or destroyed upon receipt by the Transfer Agent of properly executed affidavits and lost certificate bonds, satisfactory to the Transfer Agent, naming the Fund and the Transfer Agent as obligors under the bond.
(k) (i) In the event that any check or other order for the payment of money is returned unpaid for any reason or is rejected by the Transfer Agent, (i) give prompt notice of such return to the Fund and electronically send copies of all check writing drafts the Transfer Agent is rejecting for review by the Fund; (ii) cancel the purchase order against all Shares issued in exchange for such check or order, and (iii) take such other action as the Fund and Transfer Agent agree is appropriate.
(ii) Issue replacement checks and place stop orders on original checks based on the Shareholder's representation that a check was not received or was lost. Such stop orders and replacements will be deemed to have been made at the request of the Fund, and the Fund shall be responsible for all losses or claims resulting from such replacement in the absence of the Transfer Agent's negligence, bad faith or willful misconduct.
(1) Maintain records of account for and advise the Fund and its Shareholders as to the foregoing, which shall include, but not be limited to, the number of Shares held by each holder of record, the holder's name or names, address and taxpayer identification numbers and whether the Shares are held in certificated or uncertificated form; and
(m) Record the issuance of Shares of the Fund and maintain pursuant to Securities and Exchange Commission (the "SEC") Rule 17Ad-l0(e) of the Securities Exchange Act of 1934 a record of the total number of Shares of the Fund which are authorized, based upon data provided to it by the Fund, and issued and outstanding. The Transfer Agent shall also provide the Fund on a regular basis with the total number of Shares which are authorized and issued and outstanding and shall have no obligation, when recording the issuance of Shares, to monitor the issuance of such Shares or to take cognizance of any laws relating to the issue or sale of such Shares, which functions shall be the sole responsibility of the Fund.
(n) Within approximately 15 days of each calendar quarter-end, at the request of the Funds, the Transfer Agent shall certify in a form to be determined by the Funds and the Transfer Agent whether it has complied with the terms of the Agreement, including whether it has identified and disclosed to the Funds all significant deficiencies and material weaknesses in the design and operation of internal controls which are reasonably likely to adversely affect the Transfer Agent's ability to perform its obligations and responsibilities under the Agreement.
(O) (i) RETIREMENT ACCOUNTS. With respect to certain retirement plans or accounts (such as individual retirement accounts ("IRAS"), SIMPLE IRAs, SEP IRAs, Roth IRAs. Coverdell Education Savings Accounts and 403(b) Plans (such accounts, "Retirement Accounts")), for which one or more Funds are investment options, the Transfer Agent, at the request of the Funds, may provide or arrange for the provision of appropriate prototype plans AS well AS provide or arrange for the provision of various services to such plans and/or accounts which services may include account
set-up, maintenance, and disbursement as well as such other services AS the parties hereto shall mutually agree upon.
(ii) REVIEW AND MAINTENANCE OF FUND PROTOTYPE RETIREMENT PLANS OR ACCOUNT MATERIALS.
(1) If one or more Fund provides or arranges for the provision of retirement plan prototypes or account materials (the "Fund Prototype(s)") for use in connection with a Retirement Account or Accounts, such Funds will appoint an affiliate of Fred Alger Management, Inc. as custodian or trustee.
(2) Each such Fund agrees that its Fund Prototypes will comply with applicable sections of the Internal Revenue Code of 1986, AS amended (the "Code"), and regulations promulgated thereunder as in effect at the time. Each such Fund will be responsible for establishing, maintaining, and updating its Fund Prototypes in compliance with the Code and all other applicable federal or state law or regulations, when changes in the law require such updating, and may rely on the provider of the Fund Prototypes to maintain and update the Fund Prototypes.
(3) Each such Fund agrees that its Fund Prototypes are the responsibility of the Fund and further agrees that it will indemnify, defend, and hold harmless the Transfer Agent, its affiliates, successors, representatives, and assigns from and against any and all losses, damages, costs, charges, expenses, including reasonable fees for counsel, taxes, penalties and liabilities (collectively, "Losses") arising out of or attributable to the use of a Fund Prototype by the Funds, its agents, employees, representatives, or any other person acting on the Fund's behalf to the extent the provider of the Fund Prototype so indemnifies the Funds, except however to the extent that such Losses arise out of or are attributable to the negligence, bad faith, or willful misconduct of the Transfer Agent (or its agents, affiliates, successors, or assigns), unless such negligence is a result of complying with a Fund Prototype. This indemnification obligation will survive termination of this Agreement.
(4) Each such Fund agrees that any modifications made by the Funds to a Fund Prototype without the Transfer Agent's written consent shall not increase the liabilities or responsibilities of the Transfer Agent or that of such affiliate as custodian or limit the Transfer Agent's ability or that of such affiliate to resign as custodian as provider hereunder. The Fund will furnish the Transfer Agent with a copy of each Fund Prototype. The Transfer Agent or its affiliates shall not be required to review, comment, or advise on such Fund Prototypes.
(p) GERMAN REGISTERED FUNDS. The Transfer Agent agrees to provide certain services for Funds registered for sale in Germany, said Funds and services as set forth on Schedule 1.1(p) attached hereto.
(q) Cooperate with each Fund by providing systems access, reports and file transmissions that the Fund may use to monitor the sales practices of such Fund in accordance with (a) procedures described in the applicable Fund's prospectus and statement of additional information, and (b) applicable federal and state securities laws and the rules and regulations of applicable regulatory agencies and authorities, such as the Securities and Exchange Commission and the National Association of Securities Dealers, Inc. Such sales practices shall included, but not be limited to, provisions relating to frequent or short-term trading, and late trading.
(r) CLOSED-END FUND. The Transfer Agent agrees to provide the following additional services for Castle Convertible Fund, Inc., a closed-end fund:
(i) Act as agent for Shareholders pursuant to dividend reinvestment plans, and other investment programs as amended from time to time in accordance with the terms of the agreements relating thereto to which the Transfer Agent is or will be a party;
(ii) Receive all payments made to the Fund or the Transfer Agent under any dividend reinvestment plan, direct stock purchase plan, and other investment plans and make all payments required to be made under such plans, including all payments required to be made to the Fund.
1.2 ADDITIONAL SERVICES. In addition to, and neither in lieu nor in contravention of, the services set forth in the above paragraph, the Transfer Agent shall perform the following services:
(a) OTHER CUSTOMARY SERVICES. Perform the customary services of a transfer agent, dividend disbursing agent, recordkeeper of certain retirement plans and, as relevant, agent in connection with accumulation, open-account or similar plans (including without limitation any periodic investment plan or periodic withdrawal program), including but not limited to: maintaining all Shareholder accounts, including purging all closed accounts as the Fund directs, preparing Shareholder meeting lists, Shareholder reports and prospectuses to current Shareholders, withholding taxes on U.S. resident and non-resident alien accounts, preparing and filing U.S. Treasury Department Forms 1099 and other appropriate forms required with respect to dividends and distributions by federal authorities for all Shareholders, preparing and mailing activity statements for Shareholders, and providing Shareholder account information;
(b) CONTROL BOOK (ALSO KNOWN AS "SUPER SHEET"). Maintain a daily record and produce a daily report for each Fund of all transactions and receipts and disbursements of money and securities and to use its best efforts to deliver a copy of such report for the Fund for each business day to each Fund no later than 9:00 AM Eastern Time, or such earlier time as each Fund may reasonably require, on the next business day;
(c) "BLUE SKY" REPORTING. Each open-end Fund shall (i) identify to the Transfer Agent in writing those transactions and assets to be treated as exempt from blue sky reporting for each state and (ii) verify the establishment of transactions for each State on the system prior to activation and thereafter monitor the daily activity for each State. The responsibility of the Transfer Agent for the Fund's blue sky State registration status is solely limited to the initial establishment of transactions subject to blue sky compliance by the Fund and providing a system which will enable the Fund to monitor the total number of Shares sold in each State:
(d) NATIONAL SECURITIES CLEARING CORPORATION (THE "NSCC"). (i) accept and effectuate the registration and maintenance of accounts through Networking and the purchase, redemption, transfer and exchange of shares in such accounts through Fund/SERV (Networking and Fund/SERV being programs operated by the NSCC on behalf of NSCC's participants, including the Funds), in accordance with, instructions transmitted to and received by the Transfer Agent by transmission from NSCC on behalf of broker-dealers and banks which have been established by, or in accordance with the instructions of authorized persons, as hereinafter defined on the dealer file maintained by the Transfer Agent; (ii) issue instructions to Fund's banks for the settlement of transactions between the Fund and NSCC (acting on behalf of its broker-dealer and bank participants); (iii) provide account and transaction information from the affected Fund's records on DST Systems, Inc. computer system TA2000 ("TA2000 System") in accordance with NSCC's Networking and Fund/SERV rules for those broker-dealers; (iv) maintain Shareholder accounts on TA2000 System through Networking; and (v) maintain the current version of NSCC functionality and any other future mutual fund processing capabilities provided by NSCC;
(e) SHAREHOLDER/BROKER SERVICES. Respond as appropriate to all inquiries and communications from Shareholders/Brokers relating to Shareholder accounts with respect to its duties hereunder and as may be from time to time mutually agreed upon between the Transfer Agent and each Fund. The Transfer Agent shall provide each Fund with reports concerning shareholder inquiries and the responses thereto by the Transfer agent, in such form and at such times as are agreed to by the Fund and the Transfer Agent;
(f) NEW PROCEDURES. New procedures as to who shall provide certain of these services in SECTION 1 may be established in writing from time to time by agreement between each Fund and the Transfer Agent. The Transfer Agent may at times perform only a portion of these services and each Fund or its agent may perform these services on each Fund's behalf;
(g) TELEPHONE SUPPORT SERVICES. If the parties elect to have the Transfer Agent provide telephone suppon services under this Agreement, the parties will agree to such services, fees and sub-contracting as stated in Schedule 1.2(G) entitled "Telephone Support Services" attached hereto;
(h) ANTI-MONEY LAUNDERING ("AML") DELEGATION. If the Funds elect to delegate to the Transfer Agent certain AML duties under this Agreement, the parties will agree to such duties and terms as stated in the attached schedule ("Schedule 1.2(h) entitled "AML Delegation") which may be changed from time to time subject to mutual written agreement between the parties. In consideration of the performance of the duties by the Transfer Agent pursuant to this section 1.2(h), each Fund agrees to pay the Transfer Agent for the reasonable administrative expense that may be associated with such additional duties in the amount as the parties may from time to time agree in writing in accordance with SECTION 4 (Fees and Expenses) below;
(i) RECORD KEEPING AND OTHER INFORMATION. (i) The Transfer Agent shall create and maintain all necessary records in accordance with all applicable law, rules and regulations, including but not limited to, records of all issued and unpaid redemption checks, records required by Section 31(a) of the Investment Company Act of 1940, as amended (the "1940 Act"), and those records pertaining to the various functions performed by the Transfer Agent under this Agreement. All records shall be available for inspection and use by the Funds during regular business hours. Where applicable, the records shall be maintained by the Transfer Agent for the periods and in the places required by Rule 31a-2 under the 1940 Act. (ii) Upon reasonable notice by a Fund, the Transfer Agent shall make available during regular business hours such of its facilities and premises employed in connection with the performance of its duties under this Agreement for reasonable visitation by the Fund, or any other person retained by the Fund as may be necessary for the Fund to evaluate the quality of the services performed by the Transfer Agent pursuant hereto. The Transfer Agent will provide each Fund with remote access to its various systems, including but not limited to, TA2000, AWD, Power Select and DST vision. (iii) The Transfer Agent agrees that all such records prepared or maintained by the Transfer Agent hereunder are the property of the Fund and will be preserved, maintained and made available for inspection and use by the Fund in accordance with such Section and Rules, and will be surrendered promptly to the Fund on and in accordance with its request;
(j) CORPORATE ACTIONS. To the extent that a Fund elects to engage the Transfer Agent to provide the following services, the Fund shall engage the Transfer Agent to provide such services upon terms and fees to be agreed upon by the parties: corporate actions (including inter alia, odd lot buy backs, exchanges, mergers, redemptions, subscriptions, capital reorganization, coordination of post-merger services and special meetings); and
(k) In addition to the duties set forth herein, the Transfer Agent shall perform such other duties and functions, and shall be paid such amounts therefore, as may from time to time be agreed upon in writing between the Fund and the Transfer Agent.
2. THIRD PARTY ADMINISTRATORS FOR DEFINED CONTRIBUTION PLANS
2.1 One or more Funds may decide to make available to certain of their customers a qualified plan program (the "Program") pursuant to which the customers ("Employers") may adopt certain plans of deferred compensation ("Plan or Plans") for the benefit of the individual Plan participant (the "Plan Participant"), such Plan(s) being qualified under Section 401(a) of the Internal Revenue Code of 1986, as amended ("Code") and administered by third party administrators which may be plan administrators as defined in the Employee Retirement Income Security Act of 1974, as amended (the "TPA(s)").
2.2 In accordance with the procedures established in the initial Schedule 2.1 entitled "Third Party Administrator Procedures", as may be amended by the Transfer Agent and each Fund from time to time ("Schedule 2.1", the Transfer Agent shall:
(a) Treat Shareholder accounts established by the Plans in the name of the Trustees, Plans or TPA's as the case may be as omnibus accounts;
(b) Maintain omnibus accounts on its records in the name of the TPA or its designee as the Trustee for the benefit of the Plan; and
(c) Perform all services under Section 1 as Transfer Agent of the Funds and not as a record-keeper for the Plans.
2.3 Transactions identified under SECTION 2 of this Agreement shall be deemed exception services ("Exception Services") when such transactions:
(a) Require the Transfer Agent to use methods and procedures other than those usually employed by the Transfer Agent to perform services under Section 1 of this Agreement;
(b) Involve the provision of information to the Transfer Agent after the commencement of the nightly processing cycle of the TA2000 System; or
(c) Require more manual intervention by the Transfer Agent, either in the entry of data or in the modification or amendment of reports generated by the TA2000 System than is usually required by non-retirement plan and pre-nightly transactions.
3. SERVICE LEVELS
3.1 SERVICE LEVEL SCHEDULE. Schedule 3.1 to this Agreement specifies key performance indicators and delivery benchmarks in respect of the services to be provided by the Transfer Agent pursuant to this Agreement (the "Services"), and reflects the performance goals of the parties from time to time (the "Service Levels").
3.2 PERFORMANCE OF SERVICES; QUALITY LEVEL. The Transfer Agent shall provide the Services (a) in a professional and workmanlike manner, (b) with commercially reasonable care and
skill, (c) with customer and technical support in accordance with the standards set forth in Schedule 3.1 and (d) at a minimum, at the Service Levels set forth in Schedule 3.1. The Transfer Agent understands that timely performance by the Transfer Agent of all Services and timely delivery of all deliverables required hereunder is required by each Fund.
3.3 ADJUSTMENT OF SERVICE LEVELS. Each Fund and the Transfer Agent may, at any time upon notice to the other, initiate negotiations to review and, upon written agreement by both the Transfer Agent's account manager and each Fund's designated representative, amend Schedule 3.1 to alter any Service Level which either party, in good faith, believes is inappropriate at the time.
3.4 ROOT-CAUSE ANALYSIS. Without limiting each Fund's rights and remedies hereunder, at law or in equity, Transfer Agent will use its best efforts within three (3) business days of receipt of a notice from a Fund with respect to any material failure by the Transfer Agent to provide the Services at the appropriate Service Levels, the Transfer Agent shall, as part of the Services, (a) perform a root-cause analysis to identify the cause of such failure, (b) provide the Fund with a report detailing the cause of, and procedure for correcting, such failure and (c) to the extent possible correct such failure in accordance with the Service Levels.
3.5 MEASUREMENT AND MONITORING. As part of the Services, the Transfer Agent shall implement the necessary measurement and monitoring tools and procedures required to measure and report the Transfer Agent's performance of the Services against the applicable Service Levels. Such measurement and monitoring shall permit reporting at a level of detail sufficient to verify compliance with the Service Levels and shall be subject to audit by each Fund in accordance with this Agreement. The Transfer Agent shall provide each Fund with information and access to such tools and procedures upon request, for purposes of verification, and shall furnish each Fund with monthly reports setting forth the Transfer Agent's performance of the Services against the applicable Service Levels. Through the term of this Agreement, and as a part of the Services, the Transfer Agent shall maintain and provide to each Fund (a) all reports in content and format specified by each Fund and reasonably agreed to by the Transfer Agent in writing from time to time, in both a hardcopy and an electronic form and (b) such documentation and information as may be reasonably requested by each Fund from time to time in order to verify the accuracy of the reports. At each Fund's request, the Transfer Agent shall promptly correct any material errors or inaccuracies in the reports.
3.6 LIABILITY RELATING TO SERVICE LEVELS. Notwithstanding anything contained in Sections 4.6 and 12.4(e) herein, the fact that the Transfer Agent has met the Service Levels shall not relieve the Transfer Agent of any liability that it might otherwise have under this Agreement in the performance of its duties hereunder.
4. FEES AND EXPENSES
4.1 FEE SCHEDULE. For the performance by the Transfer Agent pursuant to this Agreement, each Fund agrees to pay the Transfer Agent an annual maintenance fee for each Shareholder account as set forth in the attached fee schedule ("Schedule 4.1"). Such fees and out-of-pocket expenses and advances identified under SECTION 4.2 below may be changed from time to time subject to mutual written agreement between each Fund and the Transfer Agent.
4.2 OUT-OF-POCKET EXPENSES. In addition to the fee paid under SECTION 4.1 above, each Fund agrees to reimburse the Transfer Agent for out-of-pocket expenses, including but not limited to: those arising in connection with the German registered funds, escheatment processing, Literature Orders and AWD licensing fees, confirmation statements, investor statements, postage, long distance telephone calls, records retention, AMUCIP, customized programming/enhancements requested in writing by the Fund, NSCC charges, fax in line, state tax reporting, Fan Web, Fan Mail, TA 2000, federal wire fees, transcripts. microfilm, microfiche, hardware at the Fund's facilities, telecommunications/network configuration, mailing and tabulating proxies, records storage, or advances incurred by the Transfer Agent for the items set out in Schedule 3.1 attached hereto. In addition, any other expenses incurred by the Transfer Agent at the request or with the consent of the Fund, will be reimbursed by the Fund.
4.3 POSTAGE. Postage for mailing of dividends, proxies, Fund reports and other mailings to all Shareholder accounts shall be advanced to the Transfer Agent by the Funds at least seven (7) days prior to the mailing date of such materials.
4.4 INVOICES. Each Fund agrees to pay all of its fees and reimbursable expenses within thirty (30) days following the receipt of the respective invoice, except for any fees or expenses that are subject to good faith dispute. In the event of such a dispute, the Fund may only withhold that portion of the fee or expense subject to the good faith dispute. The Fund shall notify the Transfer Agent in writing within twenty-one (21) calendar days, following the receipt of each invoice, if the Fund is disputing any amounts in good faith. If the Fund does not provide such notice of dispute within the required time, the invoice will be deemed accepted by the Fund. The Fund shall settle such disputed amounts within five (5) days of the day on which the parties agree on the amount to be paid by payment of the agreed amount. If no agreement is reached, then such disputed amounts shall be settled as may be required by law or legal process.
4.5 LATE PAYMENTS. If any undisputed amount in an invoice of the Transfer Agent (for fees or reimbursable expenses) is not paid when due, the Fund shall pay the Transfer Agent interest thereon (from the due date to the date of payment) at a per annum rate equal to one percent (1.0%) plus the Prime Rate (that is, the base rate on corporate loans posted by large domestic banks) published by The Wall Street Journal (or, in the event such rate is not so published, a reasonably equivalent published rate agreed to by the Fund and the Transfer Agent) on the first day of publication during the month when such amount was
due. Notwithstanding any other provision hereof, such interest rate shall be no greater than permitted under applicable provisions of Massachusetts law.
4.6 COST OF LIVING ADJUSTMENT. Following the Initial Term, unless the parties shall otherwise agree and provided that the service mix and volumes remain consistent as previously provided in the Initial Term, the total fee for all services shall equal the fee that would be charged for the same services based on a fee rate (as reflected in a fee rate schedule) increased by the percentage increase for the twelve-month period of such previous calendar year of the Consumer Price Index for Urban Wage Earners and Clerical Workers, for the Boston area, as published bimonthly by the United States Department of Labor, Bureau of Labor Statistics, or, in the event that publication of such Index is terminated, any successor or substitute index, appropriately adjusted, acceptable to both parties.
5. REPRESENTATIONS AND WARRANTIES OF THE TRANSFER AGENT.
The Transfer Agent represents and warrants to the Funds that:
5.1 It is a trust company duly organized and existing and in good standing under the laws of The Commonwealth of Massachusetts.
5.2 It is duly qualified to carry on its business in The Commonwealth of Massachusetts.
5.3 It is empowered under applicable laws and by its Charter and By-Laws to enter into and perform this Agreement.
5.4 All requisite corporate proceedings have been taken to authorize it to enter into and perform this Agreement.
5.5 It has and will continue to have access to the necessary facilities, equipment and personnel to perform its duties and obligations under this Agreement.
5.6 The various procedures and systems which it has implemented with regard to safeguarding from loss or damage attributable to fire, theft or any other cause, the Funds' records and other data and the Transfer Agent's records, data equipment facilities and other property used in the performance of its obligations hereunder are adequate and that it will make such changes therein from time to time as may be reasonably necessary for the secure performance of its obligations thereunder.
6. REPRESENTATIONS AND WARRANTIES OF THE FUNDS.
Each Fund represents and warrants to the Transfer Agent that:
6.1 It is a business trust duly organized and existing and in good standing under the laws of the Commonwealth of Massachusetts with the exception of Castle Convertible Fund, Inc.
which is a corporation duly organized and existing and in good standing under the laws of the State of Delaware.
6.2 It is empowered under applicable laws and by the applicable Articles of Incorporation or Declaration of Trust, as the case may be, and By-Laws to enter into and perform this Agreement.
6.3 All corporate proceedings required by said Articles of Incorporation or Declaration of Trust, as the case may be, and By-Laws have been taken to authorize it to enter into and perform this Agreement.
6.4 It is an open-end and diversified management investment company registered under the Investment Company Act of 1940, with the exception of Castle Convertible Fund, Inc., which is a closed-end management investment company registered under the Investment Company Act of 1940.
6.5 A registration statement under the Securities Act of 1933, as amended, is currently effective and will remain effective, and appropriate state securities law filings have been made and will continue to be made, with respect to all Shares of each of the Funds being offered for sale.
7. WIRE TRANSFER OPERATING GUIDELINES/ARTICLES 4A OF THE UNIFORM COMMERCIAL CODE
7.1 OBLIGATION OF SENDER. The Transfer Agent is authorized to promptly debit the appropriate Fund account(s) upon the receipt of a payment order in compliance with the selected security procedure (the "Security Procedure") chosen for funds transfer and in the amount of money that the Transfer Agent has been instructed by the Fund to transfer. The Transfer Agent shall execute payment orders in compliance with the Security Procedure and with the Fund instructions on the execution date provided that such payment order is received by the customary deadline for processing such a request, unless the payment order specifies a later time. All payment orders and communications received after the customary deadline will be deemed to have been received the next business day.
7.2 SECURITY PROCEDURE. Each Fund acknowledges that the Security Procedure it has designated on the Fund Selection Form was selected by the Fund from security procedures offered by the Transfer Agent. The Fund shall restrict access to confidential information relating to the Security Procedure to authorized persons as communicated to the Transfer Agent in writing. The Fund must notify the Transfer Agent immediately if it has reason to believe unauthorized persons may have obtained access to such information or of any change in the Fund's authorized personnel. The Transfer Agent shall verify the authenticity of all Fund instructions according to the Security Procedure.
7.3 ACCOUNT NUMBERS. The Transfer Agent shall process all payment orders on the basis of the account number contained in the payment order. In the event of a discrepancy between any name indicated on the payment order and the account number, the account number shall take precedence and govern.
7.4 REJECTION. The Transfer Agent reserves the right to decline to process or
delay the processing of a payment order which (a) is in excess of the
collected balance in the account to be charged at the time of the
Transfer Agent's receipt of such payment order; (b) if initiating such
payment order would cause the Transfer Agent, in the Transfer Agent's
sole judgment, to exceed any volume, aggregate dollar, network, time,
credit or similar limits which are applicable to the Transfer Agent; or
(c) if the Transfer Agent, in good faith, is unable to satisfy itself
that the transaction has been properly authorized.
7.5 CANCELLATION AMENDMENT. The Transfer Agent shall use reasonable efforts to act on all authorized requests to cancel or amend payment orders received in compliance with the Security Procedure provided that such requests are received in a timely manner affording the Transfer Agent reasonable opportunity to act. However, the Transfer Agent assumes no liability if the request for amendment or cancellation cannot be satisfied unless the Transfer Agent has acted in bad faith, with negligence or willful misconduct.
7.6 ERRORS. The Transfer Agent shall assume no responsibility for failure to detect any erroneous payment order provided that the Transfer Agent complies with the payment order instructions as received and the Transfer Agent complies with the Security Procedure unless the Transfer Agent has acted in bad faith, with negligence or willful misconduct. The Security Procedure is established for the purpose of authenticating payment orders only and not for the detection of errors in payment orders.
7.7 INTEREST. The Transfer Agent shall assume no responsibility for lost interest with respect to the refundable amount of any unauthorized payment order, unless the Transfer Agent is notified of the unauthorized payment order within thirty (30) days of notification by the Transfer Agent of the acceptance of such payment order.
7.8 ACH CREDIT ENTRIES/PROVISIONAL PAYMENTS. When a Fund initiates or receives Automated Clearing House credit and debit entries pursuant to these guidelines and the rules of the National Automated Clearing House Association and the New England Clearing House Association, the Transfer Agent will act as an Originating Depository Financial Institution and/or Receiving Depository Financial Institution, as the case may be, with respect to such entries. Credits given by the Transfer Agent with respect to an ACH credit entry are provisional until the Transfer Agent receives final settlement for such entry from the Federal Reserve Bank. If the Transfer Agent does not receive such final settlement, the Fund agrees that the Transfer Agent shall receive a refund of the amount credited to the Fund in connection with such entry provided that the Transfer Agent has acted in good faith and without negligence or willful misconduct, and the party making payment to the Fund via such entry shall not be deemed to have paid the amount of the entry.
7.9 CONFIRMATION. Confirmation of Transfer Agent's execution of payment orders shall ordinarily be provided within twenty four (24) hours notice of which may be delivered through the Transfer Agent's proprietary information systems, or by facsimile or call-
back. A Fund must report any objections to the execution of an order within thiny (30) days.
8. DATA ACCESS AND PROPRIETARY INFORMATION.
8.1 Each Fund and the Transfer Agent agree that the Proprietary Information (defined below) and the contents of this Agreement (collectively the "Confidential Information") are confidential information of the Funds and the Transfer Agent and their respective licensors. Each Fund and the Transfer Agent shall exercise at least the same degree of care, but not less than reasonable care, to safeguard the confidentiality of the Confidential Information of the other as it would exercise to protect its own confidential information of a similar nature. The Funds and the Transfer Agent shall not duplicate, sell or disclose to others the Confidential Information of the other, in whole or in part, without the prior written permission of the other party. The Funds and the Transfer Agent may, however, disclose Confidential Information to their respective parent corporation, their respective affiliates, their subsidiaries and affiliated companies and employees, provided that each shall use reasonable efforts to ensure that the Confidential Information is not duplicated or disclosed in breach of this Agreement. Proprietary Information means:
(a) any data or information that is competitively sensitive material, and not generally known to the public, including, but not limited to, information about product plans, marketing strategies, finance, operations, customer relationships, customer lists, customer profiles, sales estimates, business plans, and internal performance results relating to the past, present or future business activities of the Funds or the Transfer Agent, their respective subsidiaries and affiliated companies and the customers, clients and suppliers of any of them;
(b) any scientific or technical information, design, process, procedure, formula, or improvement that is commercially valuable and secret in the sense that its confidentiality affords the Funds or the Transfer Agent a competitive advantage over its competitors; and
(c) all confidential or proprietary concepts, documentation, reports, data, specifications, computer software, source code, object code, flow charts, databases, inventions, know-how, show-how and trade secrets, whether or not patentable or copyrightable.
8.2 Without limiting the foregoing, each Fund agrees for itself and its employees and agents to:
(a) Use such Proprietary Information (i) solely on the Fund's computers, or (ii) solely from equipment at the location agreed to between the Fund and the Transfer Agent and (iii) solely in accordance with the Transfer Agent's applicable user documentation;
(b) Refrain from copying or duplicating in any way (other than in the normal course of performing processing on the Fund's computer(s)), the Proprietary Information;
(c) Refrain from obtaining unauthorized access to any portion of the Proprietary Information, and if such access is inadvertently obtained, to inform in a timely manner of such fact and dispose of such information in accordance with the: Transfer Agent's instructions;
(d) Refrain from causing or allowing information transmitted from the Transfer Agent's computer to the Fund's terminal to be retransmitted to any other computer terminal or other device except as expressly permitted by the Transfer Agent (such permission not to be unreasonably withheld);
(e) Allow the Fund to have access only to those authorized transactions as agreed to between the Fund and the Transfer Agent; and
(f) Honor all reasonable written requests made by the Transfer Agent to protect at the Transfer Agent's expense the rights of the Transfer Agent in Proprietary Information at common law, under federal copyright law and under other federal or state law.
8.3 Proprietary Information shall not include all or any portion of any of the foregoing items that: (i) are or become publicly available without breach of this Agreement; (ii) are released for general disclosure by a written release by the Transfer Agent; or (iii) are already in the possession of the receiving party at the time of receipt without obligation of confidentiality or breach of this Agreement.
8.4 The Transfer Agent and each Fund agree that they will not, at any time during the term of this Agreement or after its termination, reveal, divulge, or make known to any person, firm, corporation or other business organization, any customers' lists, trade secrets, cost figures and projections, profit figures and projections, or any other secret or confidential information whatsoever, whether of the Transfer Agent or of the Fund, used or gained by the transfer agent or the Fund during performance under this Agreement. Each Fund and the Transfer Agent further covenant and agree to retain all such knowledge and information acquired during and after the term of this Agreement respecting such lists, trade secrets, or any secret or confidential information whatsoever in trust for the sole benefit of the Transfer Agent or the Fund and their successors and assigns. In the event of breach of the foregoing by either party, the remedies provided by Section 8.5 shall be available to the party whose confidential information is disclosed. The above prohibition of disclosure shall not apply to the extent that the Transfer Agent must disclose such data to its sub-contractor or a Fund's agent for purposes of providing services under this Agreement.
8.5 Each Fund and the Transfer Agent acknowledge that their obligation to protect each other's Proprietary Information is essential to their business interests and that the disclosure of such Proprietary Information in breach of this Agreement would cause the
non-breaching party immediate, substantial and irreparable harm, the value of which would be extremely difficult to determine. Accordingly, each Fund and the Transfer Agent agree that, in addition to any other remedies that may be available in law, equity, or otherwise for the disclosure or use of the Proprietary Information in breach of this Agreement, the non-breaching party shall be entitled to seek and obtain a temporary restraining order, injunctive relief, or other equitable relief against the continuance of such breach.
8.6 If any Fund or the Transfer Agent becomes legally compelled (including by deposition, interrogatory, request for documents, subpoena, civil investigative demand or similar process) to disclose any Confidential Information, the Fund will provide the Transfer Agent or vice versa, as the case may be, with prompt prior written notice of such requirements so that the Fund or the Transfer Agent may seek a protective order or other appropriate remedy. If such protective order or other remedy is not obtained, the Fund and the Transfer Agent agree to disclose only that portion of the Confidential Information which they are advised by opinion of counsel is legally required to be disclosed and to take all reasonable steps to preserve the confidentiality of the Confidential Information (including by obtaining an appropriate protective order or other reliable assurance that confidential treatment will be accorded the Confidential Information). In addition, each Fund and the Transfer Agent agree to not oppose any action (and will, if and to the extent requested by the Fund or the Transfer Agent, cooperate with, assist and join with the Fund or the Transfer Agent, as the case may be, at the other party's expense, in any reasonable action) by the other party to obtain an appropriate protective order or other reliable assurance that confidential treatment will be accorded the Confidential Information.
8.7 Notwithstanding anything herein to the contrary, the Transfer Agent shall not, with respect to any "non-public personal information" (as such term is defined in Regulation S-P) pertaining to the Funds' investors, disclose such information to any unaffiliated third party or use such information other than for the purpose of providing the services contemplated by this Agreement, or otherwise permitted under Regulation S-P,or under another agreement covering such information.
8.8 If a Fund notifies the Transfer Agent that any of the Data Access Services do not operate in material compliance with the most recently issued user documentation for such services, the Transfer Agent shall endeavor in a timely manner to correct such failure. Organizations from which the Transfer Agent may obtain certain data included in the Data Access Services are solely responsible for the contents of such data and the Fund agrees to make no claim against the Transfer Agent arising out of the contents of such third-party data, including, but not limited to, the accuracy thereof. DATA ACCESS SERVICES AND ALL COMPUTER PROGRAMS AND SOFTWARE SPECIFICATIONS USED IN CONNECTION THEREWITH ARE PROVIDED ON AN AS IS, AS AVAILABLE BASIS. THE TRANSFER AGENT EXPRESSLY DISCLAIMS ALL WARRANTIES EXCEPT THOSE EXPRESSLY STATED HEREIN INCLUDING,
BUT NOT LIMITED TO, THE IMPLIED WARRANTEES OF MERCHANTABILITY AND FITNESS
FOR A PARTICULAR PURPOSE.
8.9 If the transactions available to a Fund include the ability to originate electronic instructions to the Transfer Agent in order to (i) effect the transfer or movement of cash or Shares or (ii) transmit Shareholder information or other information, then in such event the Transfer Agent shall be entitled to rely on the validity and authenticity of such instruction without undertaking any further inquiry as long as such instruction is undertaken in conformity with Security Procedures.
8.10 Each of the Funds and the Transfer Agent shall take reasonable efforts to advise its employees of their obligations pursuant to this Section 8. The obligations of this Section shall survive any earlier termination of this Agreement.
9. INDEMNIFICATION
9.1 Each Fund shall indemnify the Transfer Agent and the Transfer Agent shall indemnify each Fund (the "Indemnified Party") from and against, any and all losses, damages, costs, charges, reasonable counsel fees and expenses, payments, expenses and liability arising out of or attributable to any claim, demand, action or suit or other proceeding (a "Claim") relating to this Agreement or such Indemnified Party's duties under this Agreement, including the breach of any representation, covenant, warranty or agreement set forth herein, unless such Claim has resulted from negligence or willful misconduct on the part of the Indemnified Party in the performance of its duties hereunder. In addition, the Transfer Agent shall not be responsible for, and the applicable Fund shall indemnify and hold the Transfer Agent harmless from and against, any Claim which may be asserted against the Transfer Agent or for which the Transfer Agent may be held to be liable arising out of or attributable to any of the following:
(a) All actions of the Transfer Agent or its agents or subcontractors required to be taken pursuant to this Agreement (including the defense of any law suit in which the Transfer Agent or affiliate is a named party), provided that such actions are taken in good faith and without negligence or willful misconduct;
(b) The Fund's lack of good faith, negligence or willful misconduct in performing its responsibilities under the terms of this Agreement;
(c) Provided that the Transfer Agent has acted in good faith and without negligence or willful misconduct, the reliance upon, and any subsequent use of or action taken or omitted, by the Transfer Agent, or its agents or subcontractors on: (i) any information, records, documents, data, stock certificates or services, which are received by the Transfer Agent or its agents or subcontractors by machine readable input, facsimile, CRT data entry, electronic instructions or other similar means authorized by the Fund, and which have been prepared, maintained or performed by the Fund or any other person or firm on behalf of the Fund including but not limited to any broker-dealer, TPA or previous transfer agent: (ii) any instructions or requests of the Fund or any of its officers;
(iii) any instructions or opinions of legal counsel with respect to any matter arising in connection with the services to be performed by the Transfer Agent under this Agreement which are provided to the Transfer Agent after consultation with such legal counsel; or (iv) any paper or document, reasonably believed to be genuine, authentic, or signed by the proper person or persons;
(d) The offer or sale of Shares in violation of federal or state securities laws or regulations requiring that such Shares be registered or in violation of any stop order or other determination or ruling by any federal or any state agency with respect to the offer or sale of such Shares;
(e) In the absence of negligence, bad faith or willful misconduct by the Transfer Agent, the negotiation and processing of any checks including without limitation for deposit into the Fund's demand deposit account maintained by the Transfer Agent;
(f) Upon a Fund's request entering into any agreements required by the NSCC for the transmission of Fund or Shareholder data through the NSCC clearing systems; or
(g) Upon a Fund's request, entering into any sub-servicing agreements to service certain German registered Funds, as set forth on Schedule 1.l(p).
9.2 In order that the indemnification provisions contained in this Section 9 shall apply, upon the assertion of a claim for which the Indemnifying Party may be required to indemnify the Indemnified Party, the Indemnified Party shall promptly notify the Indemnifying Party of such assertion, and shall keep the Indemnifying Party advised with respect to all developments concerning such claim. The Indemnifying Party shall have the option to participate with the Indemnified Party in the defense of such claim or to defend against said claim in its own name or in the name of the Indemnified Party. The Indemnified Party shall in no case confess any claim or make any compromise in any case in which the Indemnifying Party may be required to indemnify the Indemnified Party except with the Indemnifying Party's prior written consent.
10. STANDARD OF CARE
The Transfer Agent shall at all times act in good faith and agrees to use its best efforts within commercially reasonable limits to ensure the accuracy of all services performed under this Agreement, BUT assumes no responsibility and shall not be liable for loss or damage due to errors, including encoding and payment processing errors, unless said errors are caused by its negligence, bad faith, or willful misconduct or that of its employees or agents. The parties agree that any encoding or payment processing errors shall be governed by this standard of care and Section 4-209 of the Uniform Commercial Code is superseded by SECTION 10 of this Agreement. This standard of care also shall apply to Exception Services, as defined in Section 2.3 herein, but such application shall take into consideration the manual processing involved in, and time-sensitive nature of, Exception Services. Notwithstanding the foregoing, the Transfer Agent's aggregate liability during any term of this Agreement with respect to, arising from or arising in
connection with this Agreement, or from all services provided or omitted to be provided by the Transfer Agent under this Agreement, whether in contract, or in tort, or otherwise, is limited to, and shall not exceed, the aggregate of the amounts actually received hereunder by the Transfer Agent as fees and charges, but not including reimbursable expenses, with respect to the applicable Fund, during the six (6) calendar months immediately preceding the event for which recovery from the Transfer Agent is being sought.
11. COVENANTS OF THE FUNDS AND THE TRANSFER AGENT
11.1 Each Fund shall promptly furnish to the Transfer Agent the following:
(a) A certified copy of the resolution of the Board of Trustees or Directors of the Fund, as applicable, authorizing the appointment of the Transfer Agent and the execution and delivery of this Agreement.
(b) A copy of the Declaration of Trust or Articles of Incorporation, as applicable, and By-Laws of the Fund and all amendments thereto.
(c) A certificate as to the Shares authorized, issued and outstanding as well as any authorized but unissued shares reserved for specific purposes.
11.2 The Transfer Agent hereby agrees to establish and maintain facilities and procedures reasonably acceptable to each Fund for safekeeping of stock certificates, check forms and facsimile signature imprinting devices, if any, and for the preparation or use, and for keeping account of, such certificates, forms and devices.
11.3 In case of any requests or demands for the inspection of Shareholder records of a Fund, the Transfer Agent will notify the Fund of such request and secure written instructions as to the handling of such request, unless in its reasonable opinion the Transfer Agent believes it is legally required to allow the inspection of the records.
12. TERMINATION OF AGREEMENT.
12.1 TERM. The initial term of this Agreement (the "Initial Term") shall be five years from the date first stated above unless terminated pursuant to the provisions of this SECTION 12. Unless a party gives written notice to the other party one hundred and twenty (120) days before the expiration of the Initial Term or any Renewal Term, this Agreement will renew automatically from year to year each such year-to-year renewal term a "Renewal Term." One hundred and twenty (120) days before the expiration of the Initial Term or a Renewal Term the parties to this Agreement will agree upon a Fee Schedule for the upcoming Renewal Term. Otherwise, the fees shall be increased pursuant to SECTION 4.6 of this Agreement. Notwithstanding the termination or non-renewal of this Agreement, the terms and conditions of this Agreement shall continue to apply until the completion of Deconversion, defined below.
12.2 DECONVERSION. In the event that this Agreement is terminated or not renewed with respect to a Fund, the Transfer Agent agrees that, in order to provide for uninterrupted service to the Funds, the Transfer Agent, at the Fund's request, shall offer reasonable assistance in converting or transferring the Fund's records from the Transfer Agent's systems or facilities to whatever services, systems or facilities are designated by the Fund (the "Deconversion") (subject to the recompense of the Transfer Agent for such assistance at its standard rates and fees in effect at the time within a reasonable time frame agreed to by the parties). As used herein "reasonable assistance" and "transitional assistance" shall not include requiring the Transfer Agent (i) to assist any new service or system provider to modify, to alter, to enhance, or to improve such provider's system, or to provide any new functionality to such provider's system, (ii) to disclose any protected information of the Transfer Agent, or (iii) to develop Deconversion software, to modify any of the Transfer Agent's software, or to otherwise alter the format of the data as maintained on any provider's systems.
12.3 EARLY TERMINATION. Should services be converted to a successor service provider prior to the expiration of the Initial Term, then the remaining Funds that are parties to the Agreement will pay to the Transfer Agent an amount equal to the Transfer Agent's cost for the initial conversion and implementation of the remaining Funds, pro rated among the number of accounts remaining for the respective Fund, which will be subject to a pro rata reduction over the Initial Term, on the date notice of termination was given to the Transfer Agent, and the payment of all fees to the Transfer Agent as set forth herein shall be accelerated to the business day immediately prior to the Deconversion or termination of services.
12.4 TERMINATION BY EACH FUND. Each Fund may terminate this Agreement and the appointment of the Transfer Agent with immediate effect and without any penalty at any time if:
(a) The Transfer Agent shall generally not pay its debts as such debts become due, or shall admit in writing its inability to pay its debts generally, or shall make a general assignment for the benefit of creditors; or any proceeding shall be instituted by or against the Transfer Agent seeking to adjudicate it as bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, protection, relief, or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, or other similar official for it or for any substantial part of its property; or the Transfer Agent shall take any corporate action to authorize any of the preceding actions;
(b) With respect to any particular Fund, such Fund has substantially liquidated or distributed its assets to Shareholders or a successor following a vote of such Shareholders or other action to dissolve the Fund;
(c) The Transfer Agent shall breach in any material respect any representation, warranty or covenant set forth in this Agreement;
(d) A Change of Control shall occur with respect to the Transfer Agent
or Fred Alger Management Inc. "Change in Control" means (i) a
consolidation or merger of an entity, or its parent corporation,
into or with any other entity where the original entity, or its
parent corporation, is not the surviving entity (but excluding any
such merger or consolidation of any entity as to which at least
fifty percent (50%) of the outstanding voting securities of the
surviving entity are owned by the owners of the original entity.
or its parent corporation, immediately prior to the merger or
consolidation), (ii) a sale, transfer or other disposition of all,
or substantially all, of the assets of an entity, or its parent
corporation, in a single transaction or series of related
transactions, to any person, or group of related persons, not
controlled by the transferring entity or its parent corporation or
(iii) the acquisition by any person of beneficial ownership of
more than fifty percent (50%) of the outstanding shares of stock
of an entity or its parent corporation; or
(e) The Transfer Agent has consistently failed to meet the Service Levels;
12.5 EXPIRATION OF TERM. During the Initial Term or Renewal Term, whichever currently is in effect, should any Fund or the Transfer Agent exercise its right to terminate, all out-of-pocket expenses or costs associated with the movement of records and material will be borne by the party terminating this Agreement. Additionally, the Transfer Agent reserves the right to charge for any other reasonable expenses associated with such termination.
12.6 CONFIDENTIAL INFORMATION. Upon termination of this Agreement with respect to a Fund, the Funds and the Transfer Agent shall return to the other party all copies of confidential or proprietary materials or information received from such other party hereunder, other than materials or information required to be retained by such party under applicable laws or regulations.
12.7 UNPAID INVOICES. The Transfer Agent may terminate this Agreement with respect to a Fund immediately upon an unpaid invoice payable by the Fund to the Transfer Agent being outstanding for more than ninety (90) days, except with respect to any amount subject to a good faith dispute within the meaning of SECTION 4.4 of this Agreement.
12.8 BANKRUPTCY. Each Fund and the Transfer Agent party hereto may terminate this Agreement by notice to the other party, effective at any time specified therein, in the event that (a) the other party ceases to carry on its business or (b) an action is commenced by or against the other party under Title 11 of the United States Code or a receiver, conservator or similar officer is appointed for the other party and such suit, conservatorship or receivership is not discharged within thirty (30) days.
13. ASSIGNMENT AND THIRD PARTY BENEFICIARIES
13.1 Except as provided in SECTION 14.1 below, neither this Agreement nor any rights or obligations hereunder may be assigned by any party without the written consent of the counterparty. Any attempt to do so in violation of this Section shall be void. Unless specifically stated to the contrary in any written consent to an assignment, no assignment will release or discharge the assignor from any duty or responsibility under this Agreement.
13.2 Except as explicitly stated elsewhere in this Agreement, nothing under this Agreement shall be construed to give any rights or benefits in this Agreement to anyone other than the Transfer Agent and the Funds, and the duties and responsibilities undertaken pursuant to this Agreement shall be for the sole and exclusive benefit of the Transfer Agent and the Funds. This Agreement shall inure to the benefit of and be binding upon the parties and their respective permitted successors and assigns.
13.3 This Agreement does not constitute an agreement for a partnership or joint venture between the Transfer Agent and any Fund or Funds. Other than as provided in Section 14.1 and Schedule 1.2(f), neither the Funds nor the Transfer Agent shall make any commitments with third parties that are binding on the other party without the other party's prior written consent.
14. SUBCONTRACTORS
14.1 The Transfer Agent may, without further consent on the part of a Fund,
subcontract for the performance hereof, with respect to that Fund, with
(i) Boston Financial Data Services, Inc., a Massachusetts corporation
("Boston Financial") which is duly registered as a transfer agent
pursuant to Section 17A(c)(2) of the Securities Exchange Act of 1934, as
amended, (ii) a Boston Financial subsidiary duly registered as a transfer
agent, (iii) a Boston Financial affiliate duly registered as a transfer
agent, (iv) EquiServe Limited Partnership or its successor; provided,
however, that the Transfer Agent shall be fully responsible to each Fund
for the acts and omissions of Boston Financial or its subsidiary or
affiliate or of EquiServe Limited Partnership or its successor as it is
for its own acts and omissions and/or (v) Continental Funds Services, its
successors or affiliates pursuant to an sub-servicing agreement which the
Transfer Agent has agreed to entered into at the direction of the Funds.
The Transfer Agent may not, without the prior written consent of each
Fund, subcontract for the performance of services hereunder to any party
other than those listed in this paragraph.
14.2 Nothing herein shall impose any duty upon the Transfer Agent in connection with or make the Transfer Agent liable for the actions or omissions to act of unaffiliated third parties such as by way of example and not limitation, Airborne Services, Federal Express, United Parcel Service, the U.S. Mails, the NSCC and telecommunication companies, provided, if the Transfer Agent selected such company, the Transfer Agent shall have exercised due care in selecting the same.
15. MISCELLANEOUS
15.1 AMENDMENT. This Agreement may be amended or modified, with respect to a Fund, by a written agreement executed by the parties and authorized or approved by a resolution of the Board of Trustees or Directors, as applicable, of the Fund.
15.2 MASSACHUSETTS LAW TO APPLY. This Agreement shall be construed and the provisions thereof interpreted under and in accordance with the laws of The Commonwealth of Massachusetts.
15.3 FORCE MAJEURE. In the event that a Fund or the Transfer Agent is unable to perform its obligations under the terms of this Agreement because of acts of God, strikes, equipment or transmission failure or damage reasonably beyond its control, or other causes reasonably beyond its control, such party shall not be liable for damages to the other for any damages resulting from such failure to perform or otherwise from such causes.
15.4 CONSEQUENTIAL DAMAGES. Neither any Fund nor the Transfer Agent shall be liable to each other for special, indirect or consequential damages under any provision of this Agreement or for any special, indirect or consequential damages arising out of any act or failure to act hereunder.
15.5 SURVIVAL. All provisions regarding indemnification, warranty, liability, and limits thereon, and confidentiality and/or protections of proprietary rights and trade secrets shall survive the termination of this Agreement.
15.6 SEVERABILITY. If any provision or provisions of this Agreement shall be held invalid, unlawful, or unenforceable, the validity, legality, and enforceability of the remaining provisions shall not in any way be affected or impaired.
15.7 PRIORITIES CLAUSE. In the event of any conflict, discrepancy or ambiguity between the terms and conditions contained in this Agreement and any Schedules or attachments hereto, the terms and conditions contained in this Agreement shall take precedence.
15.8 WAIVER. No waiver by any party of any breach or default of any of the covenants or conditions herein contained and performed by the other party shall be construed as a waiver of any succeeding breach of the same or of any other covenant or condition.
15.9 MERGER OF AGREEMENT. This Agreement constitutes the entire agreement between the parties hereto and supersedes any prior agreement with respect to the subject matter hereof whether oral or written.
15.10 COUNTERPARTS. This Agreement may be executed by the parties hereto on any number of counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument.
15.11 REPRODUCTION OF DOCUMENTS. This Agreement and all schedules, exhibits, attachments and amendments hereto may be reproduced by any photographic, photostatic, microfilm, micro-card, miniature photographic or other similar process. The Funds and the Transfer Agent each agree that any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding, whether or not the original is in existence and whether or not such reproduction was made by a party in the regular course of business, and that any enlargement, facsimile or further reproduction shall likewise be admissible in evidence.
15.12 NOTICES. All notices and other communications as required or permitted hereunder shall be in writing and sent by first class mail, postage prepaid, addressed as follows or to such other address or addresses of which the respective party shall have notified the other.
(a) If to State Street Bank and Trust Company, to:
Boston Financial Data Services, Inc.
2 Heritage Drive, 4th Floor
North Quincy, MA 02171
Attention: Legal Department
Facsimile: 617-483-2490
(b) If to a Fund, to:
(Name of Fund)
30 Montgomery Street
Jersey City, NJ 07302
Attention: Legal Department Facsimile: 201-547-8219
15.13 DISCLAIMER OF TRUSTEE OR SHOREHOLDER LIABILITY. The Transfer Agent understands and agrees that the obligations of each Fund under this Agreement that is organized as a Massachusetts business trust are not binding upon any Trustee or shareholder of that Fund personally, hut bind only the Fund and the Fund's property; the Transfer Agent represents that it has notice of the provisions of the Declaration of Trust of each such Fund disclaiming Trustee or shareholder liability for acts or obligations of the Fund.
16. ADDITIONAL FUNDS.
In the event that a Fund establishes one or more series of Shares, in addition to those listed on the attached Schedule A, with respect to which it desires to have the Transfer Agent render services as transfer agent under the terms hereof, it shall so notify the Transfer Agent in writing to the effect that the Fund appoints the Transfer Agent as transfer agent for the new series. The notice must be received by the Transfer Agent within a reasonable period of time prior to the commencement of operations of the new series in order to allow the Transfer Agent in the ordinary course of its business to
prepare to perform its duties for the new series. Such series of Shares shall become a Portfolio hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in their names and on their behalf by and through their duly authorized officers, as of the day and year first above written.
STATE STREET BANK AND TRUST THE ALGER AMERICAN FUND
COMPANY
By: /s/ Joseph L. Hooley By:
--------------------------
Name: Joseph L. Hoooley Name: Frederick A. Blum
Title: Executive Vice President Title: Treasurer
Attest: /s/ Sharon Frever Attest:
Name: Sharon Frever Name: Katherine P. Feld
THE ALGER INSTITUTIONAL FUNDS
By:
Name: Frederick A. Blum
Title: Treasurer
Attest:
Name: Katherine P. Feld
SPECTRA FUND
By:
Name: Frederick A. Blum
Title: Treasurer
Attest:
Name: Katherine P. Feld
|
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in their names and on their behalf by and through their duly authorized officers, as of the day and year first above written.
STATE STREET BANK AND TRUST THE ALGER AMERICAN FUND
COMPANY
By: By: /s/ Frederick A. Blum
Name: Name: Frederick A. Blum
Title: Title: Treasurer
Attest: Attest: /s/ Katherine P. Feld
Name: Name: Katherine P. Feld
THE ALGER INSTITUTIONAL FUNDS
By: /s/ Frederick A. Blum
Name: Frederick A. Blum
Title: Treasurer
Attest: /s/ Katherine P. Feld
Name: Katherine P. Feld
SPECTRA FUND
By: /s/ Frederick A. Blum
Name: Frederick A. Blum
Title: Treasurer
Attest: /s/ Katherine P. Feld
Name: Katherine P. Feld
|
THE CHINA-U.S. GROWTH FUND
By: /s/ Frederick A. Blum Name: Frederick A. Blum Title: Treasurer Attest: /s/ Katherine P. Feld Name: Katherine P. Feld |
CASTLE CONVERTIBLE FUND, INC.
By: /s/ Frederick A. Blum Name: Frederick A. Blum Title: Treasurer Attest: /s/ Katherine P. Feld Name: Katherine P. Feld |
THE ALGER FUNDS
By: /s/ Frederick A. Blum Name: Frederick A. Blum Title: Treasurer Attest: /s/ Katherine P. Feld Name: Katherine P. Feld |
SCHEDULE A
The Alger Funds
Alger Balanced Fund
Alger Capital Appreciation Fund
Alger Health Sciences Fund
Alger Large Cap Growth Fund
Alger MidCap Growth Fund
Alger SmallCap & MidCap Growth Fund
Alger SmallCap Growth Fund
Alger Money Market Fund
The Alger American Fund
Alger American Balanced Portfolio
Alger American Growth Portfolio
Alger American Income & Growth Portfolio
Alger American Leveraged All-Cap Portfolio
Alger American MidCap Growth Portfolio
Alger American Small Capitalization Portfolio
The Alger Institutional Funds
Alger Balanced Institutional Fund
Alger Capital Appreciation Institutional Fund
Alger LargeCap Growth Institutional Fund
Alger MidCap Growth Institutional Fund
Alger SmallCap Growth Institutional Fund
Alger Socially Responsible Growth lnstitutional Fund
Spectra Fund
The China-U.S. Growth Fund
Castle Convertible Fund, Inc.
SCHEDULE 1.2(g)
TELEPHONE SUPPORT FEES AND SERVICES
Dated_____________________
a. SERVICES
i. Telephone Support Functions
1. Answer telephone inquiries from 8:30 a.m. to 7 p.m. Boston time Monday through Friday, except New York Stock Exchange holidays, from existing customers and prospective customers of the Fund for sales literature.
2. Answer questions to the extent that such questions are answerable based upon the information supplied to the Transfer Agent by the Fund.
3. The Transfer Agent will receive calls and take oral requests
from shareholders and brokers of record of the Fund. Calls and
oral requests to be answered by the Transfer Agent include:
telephone redemptions, telephone purchases, account maintenance,
telephone exchanges, confirmed transactions, account balances and
general inquiries. Some inquiries may result in research which
will be done by the Transfer Agent. Calls relating to matters not
described in the previous sentence, or to the extent questions
cannot be answered based upon information supplied to the Transfer
Agent by the Funds, may be referred directly to the Fund.
ii. Maintain prospect detail information for six (6) months thereafter, and provide such information to the Funds in the form that the Funds may reasonably request;
iii. Send any and all orders for literature from the Transfer Agent to the Fund's fulfillment vendor a minimum of one transmission per day at a mutually agreed upon time;
iv. Provide the Fund with monthly telephone reports detailing the calls received, abandon rate, calls to the VRU and Service Factor during the monthly period;
v. Provide the Fund with monthly conversion reports as selected by the Funds from DST's standard report package.
b. SUBCONTRACTORS
i. The Transfer Agent may, with consent on the part of the Fund, subcontract ministerial telephone support services for the performance hereof.
c. FEES
See Schedule 4.1
SCHEDULE 1.2(h)
AML DELEGATION
1. Delegation. In connection with the enactment of the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 and the regulations promulgated thereunder (collectively, the "USA PATRIOT Act"), the Funds have developed and implemented a written anti-money laundering program (the "AML Program"), which is designed to satisfy the requirements of the USA PATRIOT Act. Under the USA PATRIOT Act, a mutual fund can elect to delegate certain duties with respect to the implementation and operation of its AML Program to a service provider, including its transfer agent. Each Fund is desirous of having the Transfer Agent perform certain delegated duties pursuant to the AML Program and the Transfer Agent desires to accept such delegation.
2. Limitation on Delegation. Each Fund acknowledges and agrees that in accepting the delegation hereunder, the Transfer Agent is agreeing to perform only those duties that have been expressly delegated on this Schedule 1.2(h) (the "Delegated Duties"), as may be amended from time to time, and is not undertaking and shall not be responsible for any other aspect of the AML Program or for the overall compliance by the Fund with the USA PATRIOT Act or for any other matters that have not been delegated hereunder. Additionally, the parties acknowledge and agree that the Transfer Agent shall only be responsible for performing the Delegated Duties with respect to the ownership of, and transactions in, shares in the Funds for which the Transfer Agent maintains the applicable shareholder information. Nevertheless, the Transfer Agent represents that, in its opinion, its performance of the Delegated Duties constitutes a comprehensive AML program in compliance with the USA PATRIOT Act, as applicable to mutual funds.
3. Consent to Examination. In connection with the performance by the Transfer Agent of the Delegated Duties, the Transfer Agent understands and acknowledges that each Fund remains responsible for assuring compliance with the USA PATRIOT Act and that the records the Transfer Agent maintains for the Funds relating to the AML Program may be subject, from time to time, to examination and/or inspection by federal regulators in order that the regulators may evaluate such compliance. The Transfer Agent hereby consents to such examination and/or inspection and agrees to cooperate with such federal examiners in connection with their review. For purposes of such examination and/or inspection, the Transfer Agent will use its best efforts to make available, during normal business hours and on reasonable notice all required records and information for review by such examiners.
4. Delegated Duties
4.1 Consistent with the services provided by the Transfer Agent and with respect to the ownership of shares in the Funds for which the Transfer Agent maintains the applicable Shareholder information, the Transfer Agent shall:
SCHEDULE 1.2(h)
AML DELEGATION
(CONTINUED)
(a) Submit all financial and non-financial transactions through the Office of Foreign Assets Control ("OFAC") database and such other lists or databases as may be required from time to time by applicable regulatory authorities;
(b) Review special payee checks through OFAC database;
(c) Review redemption transactions that occur within thirty (30) days of account establishment or maintenance;
(d) Review wires, including the identity of the transmitter and recipient of wires, that are sent pursuant to banking instructions; and verify the identity of transmitters and recipients that are not on file with the Transfer Agent;
(e) Review accounts with small balances followed by large purchases;
(f) Review accounts with frequent activity within a specified date range followed by a large redemption;
(g) On a daily basis, review purchase and redemption activity per tax identification number ("TIN") within the Funds to determine if activity for that TIN exceeded the $100,000 threshold on any given day;
(h) Monitor and track cash equivalents under $10,000 for a rolling twelve-month period and file IRS Form 8300 and issue the Shareholder notices required by the IRS;
(i) Determine when a suspicious activity report ("SAR") should be filed as required by regulations applicable to mutual funds; prepare and file the SAR. Provide the Fund with a copy of the SAR within a reasonable time after filing; notify the fund if any further communication is received from U.S. Department of the Treasury or other law enforcement agencies regarding the SAR;
(j) Compare account information to any FinCEN request received by a Fund and provided to the Transfer Agent pursuant to USA PATRIOT Act SEC. 314(a). Provide the Fund with documents/information necessary to respond to requests under USA PATRIOT Act SEC. 314(a) within required time frames;
(k) In accordance with procedures agreed upon by the parties (which may be amended from time to time by mutual agreement of the parties) (i) verify the identity of any person seeking to open an account with a Fund, (ii) maintain records of the information used to verify the person's identity and (iii) determine whether the person appears on any lists of known or suspected terrorists or terrorists organizations provided to the Funds by any government agency;
SCHEDULE 1.2(h)
AML DELEGATION
(CONTINUED)
(l) Establish policies, procedures and internal controls to achieve compliance with the Bank Secrecy Act and implementing regulations;
(m) Establish policies, procedures and internal controls to detect the opening of correspondent accounts for foreign banks, the opening of private banking accounts, and the necessary filing of reports of foreign bank and financial accounts; and
(n) Determine when transactions require the filing of Currency Transaction Reports ("CTRs") and/or the filing of International Transportation of Currency or Monetary Instruments Reports ("CIMRs"); prepare and file such reports.
4.2 In the event that the Transfer Agent detects activity as a result of the foregoing procedures, which necessitates the filing by the Transfer Agent of a SAR, a Form 8300 or other similar report or notice to OFAC, then the Transfer Agent shall also immediately notify the Funds, unless prohibited by applicable law.
SCHEDULE 2.1
THIRD PARTY ADMINISTRATOR(S) PROCEDURES
Dated_____________
1. On each day on which both the New York Stock Exchange and the applicable Fund are open for business (a "Business Day"), the TPA(s) shall receive, on behalf of and as agent of the Fund, Instructions (as hereinafter defined) from the Plan. Instructions shall mean as to each Fund (i) orders by the Plan for the purchases of Shares, and (ii) requests by the Plan for the redemption of Shares; in each case based on the Plan's receipt of purchase orders and redemption requests by Participants in proper form by the time required by the terms of the Plan, but not later than the time of day as of which the net asset value of the Fund is calculated, as described from time to time in that Fund's prospectus. Each Business Day on which the TPA receives Instructions shall be a "Trade Date".
2. The TPA(s) shall communicate the TPA(s)'s acceptance of such Instructions, to the applicable Plan.
3. On the next succeeding Business Day following the Trade Date on which it accepted Instructions for the purchase and redemption of Shares, (TD+1), the TPA(s) shall notify the Transfer Agent of the net amount of such purchases or redemptions, as the case may be, for each of the Plans. In the case of net purchases by any Plan, the TPA(s) shall instruct the Trustees of such Plan to transmit the aggregate purchase price for Shares by wire transfer to the Transfer Agent on (TD+1). In the case of net redemptions by any Plan, the TPA(s) shall instruct the Fund's custodian to transmit the aggregate redemption proceeds for Shares by wire transfer to the Trustees of such Plan on (TD+1). The times at which such notification and transmission shall occur on (TD+1) shall be as mutually agreed upon by each Fund, the TPA(s), and the Transfer Agent.
4. The TPA(s) shall maintain separate records for each Plan, which record shall reflect Shares purchased and redeemed, including the date and price for all transactions, and Share balances. The TPA(s) shall maintain on behalf of each of the Plans a single master account with the Transfer Agent and such account shall be in the name of that Plan, the TPA(s), or the nominee of either thereof as the record owner of Shares owned by such Plan.
5. The TPA(s) shall maintain records of all proceeds of redemptions of Shares and all other distributions not reinvested in Shares.
6. The TPA(s) shall prepare, and transmit to each of the Plans, periodic account statements showing the total number of Shares owned by that Plan as of the statement closing date, purchases and redemptions of Shares by the Plan during the period covered by the statement, and the dividends and other distributions paid to the Plan on Shares during the statement period (whether paid in cash or reinvested in Shares).
SCHEDULE 2.1
THIRD PARTY ADMINISTRATOR(S) PROCEDURES
(continued)
7. The TPA(s) shall, at the request and expense of each participating Fund, transmit to the Plans prospectuses, proxy materials, reports, and other information provided by each Fund for delivery to its shareholders.
8. The TPA(s) shall, at the request of a Fund, prepare and transmit to the Fund or any agent designated by it such periodic reports covering Shares of the Fund as the Fund shall reasonably conclude are necessary to enable the Fund to comply with state Blue Sky requirements.
9. The TPA(s) shall transmit to the Plans confirmation of purchase orders and redemption requests placed by the Plans; and
10. The TPA(s) shall, with respect to Shares, maintain account balance information for the Plan(s) and daily and monthly purchase summaries expressed in Shares and dollar amounts.
11. Plan sponsors may request, or the law may require, that prospectuses, proxy materials, periodic reports and other materials relating to each Fund be furnished to Participants in which event the Transfer Agent or each Fund shall mail or cause to be mailed such materials to Participants. With respect to any such mailing, the TPA(s) shall, at the request of the Transfer Agent or each Fund, provide at the TPA(s)'s expense a complete and accurate set of mailing labels with the name and address of each Participant having an interest through the Plans in Shares.
SCHEDULE 3.1
SERVICE LEVELS
The availability, service and performance levels and standards represent the levels and standards which the Transfer Agent is, and has for some time been, generally achieving in its day-to-day operations and which each Fund may reasonably expect the Transfer Agent to generally achieve. Notwithstanding anything in the Agreement or any supplement to the contrary, this does not mean, and, the Transfer Agent neither represents, warrants, or covenants that, nor does the Fund expect, that the Transfer Agent shall always meet, fulfill or comply with the following levels and standards at all times. Rather, it is the expectation of the Parties that, in the event of failure to meet, fulfill or comply with the foregoing levels and standards, the Fund shall promptly notify the Transfer Agent thereof and the Transfer Agent and the Fund shall coordinate and cooperate to correct the inadequacies. In such event, the Transfer Agent shall provide the resources reasonably necessary to restore its compliance with the foregoing levels and standards as quickly as reasonably practical under the circumstances.
CUSTOMER SERVICE -------------------------------------------------------------------------------- ACTIVITIES TRANSFER AGENT TIMELINESS STANDARD -------------------------------------------------------------------------------- TELEPHONE SERVICING -------------------------------------------------------------------------------- Speed of Answer 15 seconds -------------------------------------------------------------------------------- Abandonment Rate 2% or less -------------------------------------------------------------------------------- Service Level 85% -------------------------------------------------------------------------------- ACCOUNT RESEARCH -------------------------------------------------------------------------------- Financial 2 days -------------------------------------------------------------------------------- Non-Financial 3 days -------------------------------------------------------------------------------- Transcripts 5 days -------------------------------------------------------------------------------- CORRESPONDENCE -------------------------------------------------------------------------------- Financial 3 days -------------------------------------------------------------------------------- Non-Financial 7 days -------------------------------------------------------------------------------- IRA/Account Transfer Request -------------------------------------------------------------------------------- Notices (LOA) 3 days -------------------------------------------------------------------------------- |
TRANSACTION PROCESSING -------------------------------------------------------------------------------- ACTIVITIES TRANSFER AGENT TIMELINESS STANDARD -------------------------------------------------------------------------------- Transactions/Types -------------------------------------------------------------------------------- New Accounts Same day -------------------------------------------------------------------------------- Purchases Same day -------------------------------------------------------------------------------- Redemptions Same day -------------------------------------------------------------------------------- Exchanges Same day -------------------------------------------------------------------------------- Transfers Next day -------------------------------------------------------------------------------- Adjustments 3 days -------------------------------------------------------------------------------- Maintenance - Financial 3 days -------------------------------------------------------------------------------- Maintenance - Non-Financial 6 days -------------------------------------------------------------------------------- |
SCHEDULE 3.1
SERVICE LEVELS
(CONTINUED)
COMMISSIONS
--------------------------------------------------------------------------------
ACTIVITIES TRANSFER AGENT TIMELINESS STANDARD
--------------------------------------------------------------------------------
12b-1 STANDARDS
Funding Letter to Alger Funds 3 days after Cycle end date
Mailing and delivery of payment via
Commserve 3 days after funding is received from
Alger Funds
REGULAR COMMISSION
Funding Letter to Alger Funds 3 days after Cycle end date
Mailing and delivery of payment via
Commserve 3 days after funding is received from
Alger Funds
PROCESSING ACCURACY
Overall Transaction Quality 96%
|
Measured and reported by Boston Financial
QAT Process (Based on NQR "best-in-class"
standards by NQR for BFDS clients -
updated at least annually)
SHAREHOLDER AND DEALER STATEMENTS
The Transfer Agent shall send an accurate monthly and quarterly statement file to the print/mail vendor by the first business day after each month end.
DAILY CONFIRMATION FILE
The Transfer Agent shall send an accurate daily confirmation file to the print/mail vendor each business day for the trades processed the previous business day. The Transfer Agent shall use its best efforts to deliver this file no later than 8:00 a.m. each business day for the trades processed the previous business day.
SCHEDULE 4.1
FEES
EFFECTIVE: NOVEMBER 22, 2004 TO NOVEMBER 22, 2009
GENERAL:
Fees are based on an annual per Shareholder account charge for account maintenance plus transaction and out-of-pocket expenses. Fees are billable on a monthly basis at the rate of 1/12 of the annual fee. A charge is made for an account in the month that an account opens or closes.
ACCOUNT SERVICE FEES:
Open Account Fee
Direct Accounts $10.75/account
NSCC - Level III $8.50/account
Closed Accounts $2.50/account
ACTIVITY FEES:
Telephone calls $3.00/call
IRAs $2.00/plan
|
IMPLEMENTATION CONVERSION FEES:
Data mapping, conversion programming, data Fee waived conversion, two mock conversions, and a dress rehearsal. One-man month of "Train the Trainer" for each Fee waived Fund's associates at its facility. Programming hours for systems modifications Fee waived (capped at 2,000 hours) Image conversion required prior to implementation Capped at $200,000 Out of Pocket expenses for implementation, Capped at $75,000 including travel expenses for all associates of the Transfer Agent and affiliates. OUT-OF POCKET EXPENSES: |
To be paid by the Funds - See Section 4 (Page 10)
GERMAN SHAREHOLDER PROCESSING
For so long as the Sub-servicing Agreement dated November 10, 2004 between State Street Bank and Trust Company and Continental Fund Services, S.A. shall remain in effect, Alger Smallcap Growth Fund, Alger MidCap Growth Fund and Alger LargeCap Growth Fund shall individually pay the following account service fees to State Street Bank and Trust Company:
USD $4 per account per year
USD $5 per transaction per year
These fees are subject to change upon mutual agreement of Alger SmallCap Growth Fund, Alger MidCap Growth Fund and Alger LargeCap Growth Fund, respectively, and the Transfer Agent relative to any changes in fees that are agreed upon between State Street Bank and Trust Company and Continental Fund Services, S.A. under the Sub-Servicing Agreement dated November 10, 2004 as it may be amended from time to time.
SCHEDULE 1.1(p)
GERMAN REGISTERED FUNDS
SERVICES AS SET OUT ON THIS SCHEDULE 5 WILL BE PROVIDED FOR:
Alger SmallCap Growth Fund
Alger MidCap Growth Fund
Alger LargeCap Growth Fund
COMMUNICATIONS:
State Street to provide VPN access to Sub T/A for TA2000 to support data entry.
State Street will process data in the event of communication failure to Sub T/A provided that data is received by market close, in U.S. dollars ("USD") and in English language.
GERMAN SAVINGS PLAN PROCESS:
State Street will generate a file to the Funds' German Paying Agent, Merck Finck, on the first business day of the month and will process their return file upon receipt of a wire in USD. The return file is expected to be received on the second business day.
SYSTEMATIC WITHDRAWAL PLANS (SWIPS):
State Street will process German SWIPS as indicated by prospectus. Payments for shareholders may be in the form of a bulk wire to the Funds' German Paying Agent.
DAILY AND QUARTERLY STATEMENTS:
State Street will create a print-ready, multi-lingual statement file extract for daily and quarterly statements for the Funds' designated print vendor.
NORAMCO INFORMATION PROCESSING SYSTEM (NIPS):
State Street will send the NIPS extract files on a daily basis using standard TA2000 TIP files to provide data to the Funds' German Distributor.
COMMISSIONS:
State Street will process a bi-monthly Dealer concession commission and a quarterly 12b-1 trail commission file. Payments will be made to Dealers accordingly.
FONDSPOLICE:
State Street will support the monthly purchases into the Fondspolice accounts for the Funds. These purchases settle T+4; all other transactions settle T+2.
Ex-99J
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the reference to our firm under the captions "Financial Highlights" in the Prospectus and "Independent Registered Public Accounting Firm" in the Statement of Additional Information and to the incorporation by reference of our report dated January 28, 2005 in this Registration Statement (Form N-1A No. 33-21722 and 811-5550) of The Alger American Fund.
/s/ Ernst & Young LLP
---------------------
ERNST & YOUNG LLP
New York, New York
April 6, 2005
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EXHIBIT P-1
[Graphic Appears Here]
ALGER
ALGER CODE OF ETHICS
AMENDED AND RESTATED MAY 11, 2004
ALGER CODE OF ETHICS
I. PURPOSE AND CONSTRUCTION
This Code of Ethics (the "Code") is adopted by Fred Alger Management, Inc. ("Alger Management"), Fred Alger & Company, Incorporated ("Alger & Company"), Alger Shareholder Services, Inc. ("Shareholder Services") and each investment company for which Alger Management serves as investment adviser (individually referred to as a "Fund" and collectively referred to as the "Alger Funds") in compliance with Rule 17j-1 under the Investment Company Act of 1940 to establish standards and procedures for the detection and prevention of activities by which persons having knowledge of recommended investments and investment restrictions of the Alger Funds, other investment companies and other clients for which Alger Management or its subsidiaries or affiliates act as adviser or sub-adviser (collectively, "Advisory Clients") may abuse their fiduciary duties and otherwise to address the conflict of interest situations contemplated by Rule 17j-1.
In general, the fiduciary principals that govern personal investment activities reflect, at the minimum, the following: (i) the duty at all times to place the interests of Advisory Clients first; (ii) the requirement that all personal securities transactions be conducted consistent with the Code of Ethics and in such a manner as to avoid any actual or potential conflict of interest or any abuse of an Access Person's position of trust and responsibility; and (iii) the fundamental standard that Access Persons should not take advantage of their positions.
This Code establishes procedures designed:
(1) to prevent and detect violations of certain provisions of the Investment Company Act of 1940, as amended (the "1940 Act"), the Investment Advisers Act of 1940, as amended (the "Advisers Act"), and the rules and regulations thereunder;
(2) to ensure that Access Persons comply with their fiduciary obligations to Advisory Clients; and
(3) to prevent Access Persons with access to certain information from engaging in investment activities that might be harmful to the interests of Advisory Clients or that might enable Access Persons to profit illicitly from their relationship with Alger Management and Advisory Clients.
II. DEFINITIONS
A. "ACCESS PERSON" means:
(1) any director, trustee or officer of the Funds, Alger Management, Alger & Company or Shareholder Services; and
(2) all other employees of Alger Management, Alger & Company, and Shareholder Services.
B. "ADVISORY PERSON" means:
(1) any Alger Management, Alger & Company, Shareholder Services or Fund employee (or any employee of a company in a control relationship with these entities) who, in connection with his or her regular functions or duties, makes, participates in or obtains information regarding the purchase or sale of Securities by an Advisory Client; and
(2) any natural person in a control relationship with Alger Management, Alger & Company or an Advisory Client who obtains information concerning recommendations made to an Advisory Client with regard to the purchase or sale of Securities by the Advisory Client.
C. "AFFILIATED PERSON" of another person means:
(1) any person directly or indirectly owning, controlling or holding with power to vote five percent (5%) or more of the outstanding voting securities of such other person;
(2) any person five percent (5%) or more of whose outstanding voting securities are directly or indirectly owned, controlled or held with power to vote by such other person;
(3) any person directly or indirectly controlling, controlled by or under common control with such other person;
(4) any officer, director, partner, co-partner or employee of such other person;
(5) should such other person be an investment company, any investment adviser thereof or any member of an advisory board thereof; or
(6) should such other person be an unincorporated investment company not having a board of directors, the depositor thereof.
D. "BENEFICIAL OWNERSHIP" shall be determined in accordance with the definition of "beneficial owner" set forth in Rule 16a-l(a)(2) of the 1934
Act, i.e., a person must have a "direct or indirect pecuniary interest" to have "Beneficial Ownership." Although the following list is not exhaustive, under the Rule and this Code a person generally would be regarded to be the beneficial owner of the following securities:
(1) securities held in the person's own name;
(2) securities held with another in joint tenancy, community property or other joint ownership;
(3) securities held by a bank or broker as nominee or custodian on such person's behalf or pledged as collateral for a loan;
(4) securities held by members of the person's immediate family sharing the same household ("immediate family" means any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law or sister-in-law, including adoptive relationships);
(5) securities held by a relative not residing in the person's home if the person is a custodian, guardian or otherwise has controlling influence over the purchase, sale or voting of such securities;
(6) securities held by a trust in which the person is a beneficiary and has or shares the power to make purchase or sale decisions;
(7) securities held by a trust for which the person serves as a trustee and in which the person has a pecuniary interest (including pecuniary interests by virtue of performance fees and by virtue of holdings by the person's immediate family);
(8) securities held by a general partnership or limited partnership in which the person is a general partner;
(9) securities owned by a corporation in which the person has a control position or in which the person has or shares investment control over the portfolio securities (other than a registered investment company);
(10) securities in a portfolio giving the person certain performance-related related fees; or
(11) securities held by another person or entity pursuant to any agreement, understanding, relationship or other arrangement giving the person any direct or indirect pecuniary interest.
E. "CONTROL" means the power to exercise a controlling influence over the management or policies of a company, unless such power is solely the result of an official position with such company. Any person who owns
beneficially, either directly or through one or more controlled companies, more than twenty-five percent (25%) of the voting securities of a company shall be presumed to control such company. Any person who does not so own more than twenty-five (25%) of the voting securities of any company shall be presumed not to control such company. A natural person shall be presumed unable to be subject to control, as defined herein.
F. "DISINTERESTED FUND DIRECTOR" means a Fund director/trustee who is not an officer, director, trustee or employee of Alger Management or who is not otherwise an "interested person" of such Fund as defined in the 1940 Act, Section 2(a)(19).
G. "INVESTMENT ANALYST" means a person employed by Alger Management as a securities analyst, research analyst or in a comparable position who whose functions relate to providing information, advice or recommendations to one or more Portfolio Managers.
H. "PERSONAL SECURITIES TRANSACTION" means a transaction in a Security in which an individual has or thereby acquires Beneficial Ownership. A person shall be considered to be "engaging in" or "effecting" a Personal Securities Transaction if such a Security is involved, regardless of whether the transaction is effected by that person or by some other person (such as an immediate family member). However, a person shall not be considered to be "engaging in" or "effecting" a Personal Securities Transaction if such transaction is executed through a pre-established automatic investment plan or dividend reinvestment plan.
I. "PORTFOLIO MANAGER" means an Alger Management employee entrusted with the direct responsibility and authority to make investment decisions with respect to an Advisory Client.
J. "PURCHASE OR SALE OF A SECURITY" includes any contract to purchase or sell a Security, such as, for example, the writing of an option to purchase or sell a Security.
K. "SECURITY" has the meaning set forth in the 1940 Act, Section
2(a)(36) (i.e., "any note, stock, treasury stock, bond, debenture,
evidence of indebtedness, certificate of interest or participation
in any profit-sharing agreement, collateral-trust certificate,
pre-organization certificate or subscription, transferable share,
investment contract, voting-trust certificate, certificate of
deposit for a security, fractional undivided interest in oil, gas,
or other mineral rights, any put, call, straddle, option, or
privilege on any security (including a certificate of deposit) or
on any group or index of securities (including any interest
therein or based on the value thereof), or any put, call,
straddle, option, or privilege entered into on a national
securities exchange relating to foreign currency, or, in general,
any interest or instrument commonly known as a "security", or any
certificate of interest or participation in, temporary or interim
certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase, any of the foregoing"), except that it shall not include:
(1) direct obligations of the U.S. government;
(2) bankers' acceptances, bank certificates of deposit, commercial paper and high quality short-term debt instruments, including repurchase agreements; or
(3) shares issued by open-end investment companies other than those advised or sub-advised by Alger Management, its subsidiaries or affiliates.
"SECURITY HELD OR TO BE ACQUIRED" means (a) any Security which,
within the most recent fifteen (15) days (i) is or has been held
by the Advisory Client or (ii) is being considered by the Advisory
Client or Alger Management for purchase by the Advisory Client; or
(b) any option to purchase or sell, and any security convertible
into or exchangeable for, any Security that is held or to be
acquired by the Advisory Client. A Security is "being considered
for purchase or sale" from the time an order is either entered by
or on behalf of the Portfolio Manager into the trading system or
given by or on behalf of the Portfolio Manager to the trading desk
(in either case, known as an "open order"), until all orders with
respect to that Security are completed or withdrawn.
III. RESTRICTIONS
A. NON-DISCLOSURE OF INFORMATION. An Access Person shall not divulge to any person contemplated or completed securities transactions of any Advisory Client, except in the performance of his or her duties, unless such information previously has become a matter of public knowledge.
B. PROSCRIBED ACTIVITIES. No Access Person shall engage in any activity prohibited by the 1940 Act, Rule 17j-1(a). As a general matter, this provision prohibits Access Persons, in connection with the purchase or sale, directly or indirectly, by the Access Person of a Security Held or to be Acquired by an Advisory Client, from:
(1) using any device, scheme or artifice to defraud any Advisory Client;
(2) making to any Advisory Client an untrue statement of a material fact or omitting to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading;
(3) engaging in any act, practice or course of business which operates or would operate as a fraud or deceit upon any Advisory Client; or
(4) engaging in any manipulative practice with respect to any Advisory Client.
The foregoing conduct also may violate other antifraud provisions of the federal securities laws.
C. PROHIBITION ON TRADING WHILE IN POSSESSION OF MATERIAL NON-PUBLIC INFORMATION. No Access Person may seek any benefit for himself or herself, a Fund, or anyone else from material, non-public information about issuers, whether or not the securities of such issuers are held in Fund portfolios or suitable for inclusion in their portfolios. Any Access Person who believes he or she is in possession of such information should contact the Chief Compliance Officer IMMEDIATELY; not trade the securities on behalf of himself or others, including Advisory Clients; not communicate the information further inside or outside the Alger organization; and await instructions from the Chief Compliance Officer whether to continue the prohibitions against trading and communication or to permit trading and communication. Refer to the Alger Inc. Policies and Procedures Designed to Detect and Prevent Insider Trading for more detail. This prohibition does not preclude an Access Person from contacting officers and employees of issuers or other investment professionals in seeking information about issuers that is publicly available.
D. OBLIGATION TO EXERCISE BEST JUDGMENT. An Advisory Person shall act in his or her best judgment in effecting or recommending, or deciding not to effect or recommend any transaction on behalf of an Advisory Client. An Advisory Person shall not take into consideration his or her personal financial situation in connection with decisions regarding portfolio transactions by or on behalf of an Advisory Client.
E. GENERAL PRINCIPLES OF PERSONAL INVESTING. No Access Person shall engage in any Personal Securities Transaction that he or she has reason to believe will be detrimental to the best interests of any Advisory Client. When engaging in Personal Securities Transactions, an Access Person shall:
(1) place the interests of the Advisory Clients first;
(2) conduct such transactions in a manner consistent with the Code and in such a manner as to avoid any actual or potential conflict of interest or abuse of any such person's position of trust and responsibility as an Access Person; and
(3) not take inappropriate advantage of such person's position in relationship to the Advisory Clients.
The types of securities to which this Code applies are set forth in the definition of Security in Section II(J) hereof. Personal Securities Transactions involving the types of instruments excluded from that definition are not subject to the provisions of this Code.
F. LIMITATIONS ON PERSONAL SECURITIES TRANSACTIONS.
(1) LIMITATIONS RELATED TO TIMING OF TRANSACTIONS. The timing of Personal Securities Transactions shall be limited as follows:
(a) PRE-CLEARANCE REQUIRED: An Access Person may not execute a Personal Securities Transaction with actual knowledge that, at the same time: (i) a Portfolio Manager or Investment Analyst has issued a recommendation within Alger Management that the Security be traded which has not yet been acted upon, (ii) a Portfolio Manager intends to purchase or sell the Security for an Advisory Client for which he is responsible, or (iii) the Security is being "considered for purchase or sale" by an Advisory Client.
(b) An Access Person may not recommend any Securities transaction by an Advisory Client without having disclosed his or her interest in such Securities or the issuer thereof, including without limitation:
(i) direct or indirect beneficial ownership of any Securities of the issuer;
(ii) any position with the issuer or its affiliates; or
(iii) any present or proposed business relationship between the issuer or its affiliates and such person or any party in which such person has a significant interest.
(c) A Portfolio Manager shall not engage in a Personal Securities Transaction to buy or sell a Security within a period of seven (7) calendar days before or after an Advisory Client that he or she manages trades in the same Security.
(d) An Advisory Person may not purchase and sell or sell and purchase a Security in a Personal Securities Transaction within any sixty (60) day period at a gain.
(e) Any profits realized on trades within the proscribed periods shall be disgorged to the appropriate Advisory Client, or, for violations of the 60-day hold requirement under Section III.F.(l)(d) immediately above, to a charity selected by Alger Management.
(2) INITIAL PUBLIC OFFERINGS. An Advisory Person may not acquire any Securities in an initial public offering.
(3) PRIVATE PLACEMENT LIMITATIONS. An Advisory Person shall not
engage in any Personal Securities Transaction that involves
an offering of Securities that is exempt from registration
under the Securities Act of 1933 pursuant to section 4(2)
or section 4(6) or pursuant to rule 504, rule 505 or rule
506 (a "private placement"), without the express prior
written approval of the Chief Compliance Officer.
An Advisory Person who has a Beneficial Ownership interest in any Securities obtained through a private placement must disclose this interest to the Chief Compliance Officer if and when he or she becomes involved in any subsequent consideration of an investment in the securities of the same issuer for any Advisory Client. In such case, the decision to invest in the Securities of such an issuer on behalf of the Advisory Client shall be subject to the review and approval of an Advisory Person appointed by the Chief Compliance Officer who has no personal interest in the issuer.
(4) NO SHORT SALES. No Access Person may sell any Security that he or she does not own or otherwise engage in "short-selling" activities.
(5) PROHIBITION ON FUTURES AND OPTIONS. No Access Person may purchase or sell options or futures in a Personal Securities Transaction.
(6) APPLICATION TO DISINTERESTED FUND DIRECTORS. The restrictions on Personal Securities Transactions set forth in this Section III(F) shall not apply to Disinterested Fund Directors.
G. PRE-CLEARANCE OF PERSONAL SECURITIES TRANSACTIONS. All Access Persons must pre-clear their Personal Securities Transactions with the trading desk and with the Chief Compliance Officer or his/her designee as he/she may instruct.
ANY APPROVAL WILL BE VALID ONLY FOR THE DAY ON WHICH IT IS
GRANTED.
PRE-CLEARANCE IS NOT REQUIRED FOR THE FOLLOWING TRANSACTIONS, ALTHOUGH ALL SUCH TRANSACTIONS ARE SUBJECT TO THE REPORTING REQUIREMENTS OF THE CODE, INCLUDING SECTION III.H. AND ARTICLE IV:
(1) transactions effected for any account for which an Access Person has provided a written statement to the Chief Compliance Officer representing and explaining why he/she does not have any direct or indirect influence or control over the account, and the Chief Compliance Officer has provided written approval to the Access Person that the account is not subject to pre-clearance;
(2) purchases that are part of an automatic dividend reinvestment plan;
(3) purchases resulting from the exercise of rights acquired from an issuer as part of a pro rata distribution to all holders of a class of securities of such issuer and the sale of such rights;
(4) sales pursuant to tender offers;
(5) gifts or bequests (either receiving or giving) of Securities, although sales of Securities received as a gift or bequest must be pre-cleared;
(6) transactions in municipal securities that pay interest exempt from federal individual income tax; and
(7) transactions in shares of investment companies advised or sub-advised by Alger Management, Inc. its subsidiaries or its affiliates.
The pre-clearance requirements set forth in this Section III(G) shall not apply to Disinterested Fund Directors.
H. COPIES OF BROKERAGE REPORTS. An Access Person is responsible for directing the Chief Compliance to instruct his/her broker to supply duplicate copies of all comfirmations and periodic account statements to the attention of the Chief Compliance Officer PRIOR TO TRADING in any brokerage account in which any securities are held for his or her direct or indirect benefit.
IV. REPORTING REOUIREMENTS
A. INITIAL HOLDING REPORT. No later than ten (10) days after a person becomes an Access Person, he or she shall submit a report to the Chief Compliance Officer containing the following information:
(1) the title, number of shares and principal amount of each Security in which the Access Person had any direct or indirect Beneficial Ownership when he or she became an Access Person;
(2) the name of any broker, dealer or bank with whom the Access Person maintained an account in which any securities were held for his or her direct or indirect benefit as of the date he or she became an Access Person; and
(3) the date on which the report is submitted.
B. QUARTERLY REPORT. No later than ten (10) days after the end of each calendar quarter, each Access Person shall submit a report to the Chief Compliance Officer containing the following information:
(1) with respect to transactions during the quarter in any Security in which he or she had any direct or indirect Beneficial Ownership:
(a) the date of the transaction, the title, the interest rate and maturity date (if applicable), the number of shares, and the principal amount of each Security involved;
(b) the nature of the transaction (i.e., purchase, sale or any other type of acquisition or disposition);
(c) the price at which the transaction was effected;
(d) the name of the broker-dealer or bank with or through whom the transaction was effected; and
(e) the date on which the report is submitted.
(2) with respect to any account established by the Access Person in which any securities were held during the quarter for his or her direct or indirect benefit:
(a) the name of the broker-dealer or bank with whom the account was established;
(b) the date the account was established; and
(c) the date on which the report is submitted.
C. ANNUAL HOLDING REPORTS. Each Access Person shall submit an annual
report to the Chief Compliance Officer containing the following
information, which must be current as of date no more than thirty
(30) days before the report is submitted:
(1) the title, number of shares and principal amount of each Security in which the Access Person had any direct or indirect Beneficial Ownership;
(2) the name of any broker-dealer or bank with whom the Access Person maintains an account in which any securities are held for his or her direct or indirect benefit; and
(3) the date on which the report is submitted.
D. LIMITATIONS ON REPORTING REQUIREMENTS. No one shall be required to make a report under this Article IV:
(1) if such a person is a Disinterested Fund Director, EXCEPT that such Disinterested Fund Director shall file a quarterly report pursuant to
Section IV (B) hereof in an instance where such director knew or, in the ordinary course of fulfilling his or her official duties as a director of a Fund, should have known that during the fifteen (15) day period immediately before or after the date of the transaction in a Security by the director, a Fund purchased or sold the Security or such purchase or sale by a Fund was considered by the Fund or Alger Management; or
(2) with respect to quarterly transaction reports only, a report would duplicate information contained in broker trade confirmations or account statements received by the Chief Compliance Officer, provided that all of the information required to be included in the quarterly report must be contained in broker trade confirmations or account statements, or in the records of the Funds, Alger Management, Alger & Company, or Shareholder Services. Regardless, a quarterly report must be filed with respect to any account established or closed during the quarter by the Access Person that is subject to reporting under the Code of Ethics.
E. FILING OF REPORTS. All reports prepared pursuant to this Article IV shall be filed with the Chief Compliance Officer, except that reports relating to the Chief Compliance Officer, or to any individual designated by the Chief Compliance Officer to review reports prepared pursuant to this Article IV, shall be filed with the President of Alger Management.
F. ANNUAL REPORT TO BOARD OF DIRECTORS. The Funds, Alger Management, Alger & Company and Shareholder Services must furnish to the Funds' Board of Directors/Trustees an annual report that:
(1) describes any issues arising under the Code of Ethics and procedures since the last report to the Board of Directors/Trustees, including, but not limited to, information about material violations of the Code or procedures and sanctions imposed in response to the material violations; and
(2) certifies that the Funds, Alger Management, Alger & Company and Shareholder Services have adopted procedures reasonably necessary to prevent Access Persons from violating the Code.
V. SANCTIONS
Upon discovering that an Access Person has not complied with the requirements of this Code, the Board of Directors/Trustees of Alger Management, Alger & Company, Shareholder Services or of any Fund may impose on that person whatever sanctions the Board deems appropriate, including, among other things, censure, suspension or termination of employment.
VI. GIFTS AND DIRECTORSHIPS
A. GIFTS. No Access Person may accept any gift or other thing more than DE MINIMIS value from any person or entity that does business with Alger Management, Alger & Company, or Shareholder Services with respect to any Fund.
B. SERVICE AS DIRECTOR. Access Persons must obtain prior authorization of the Chief Compliance Officer to serve on the board of directors of a publicly traded company. Such authorization will be based on determination that the board service would be consistent with the interests of the Funds and their shareholders. Should any Access Person receive such authorization, any transaction by any Fund involving the securities of any such publicly traded company while such Access Person is serving as a director will be required to be approved in advance, in writing, by a Compliance Officer.
C. APPLICATION TO DISINTERESTED FUND DIRECTORS. The restrictions set forth in Sections VI(A) and (B) above shall not apply to Disinterested Fund Directors.
VII. MISCELLANEOUS PROVISIONS
A. IDENTIFICATION OF CODE OF ETHICS CLASSIFICATIONS. Alger Management shall identify all Access Persons, Advisory Persons, Portfolio Managers and Investment Analysts and inform them of such classification under the Code.
B. ADMINISTRATION OF THE CODE OF ETHICS. The Chief Compliance Officer is responsible for the administration of the Code of Ethics. The Chief Compliance Officer will designate an appropriate person as the "Administrator of the Code of Ethics" to perform various monitoring, review and recordkeeping functions under the Code of Ethics.
The duties of the Administrator of the Code of Ethics designated by the Chief Compliance Officer include:
(1) Trade pre-clearance as designated by the Chief Compliance Officer under Section III.G. hereof;
(2) Continuous maintenance of a current list of the names of all Access Persons with an appropriate description of their title or employment;
(3) Furnishing all Access Persons a copy of this Code of Ethics and initially and periodically informing them of their duties and obligations hereunder;
(4) Designating, as desired, appropriate personnel to review transaction and holdings reports submitted by Access Persons;
(5) Maintaining or supervising the maintenance of all records required by the Code of Ethics;
(6) Preparing listings of all transactions effected by any Access Persons within fifteen (15) days of the trade date on which the same security was held, purchased or sold by an Advisory Client;
(7) Issuing either personally or with the assistance of counsel as may be appropriate, any interpretation of this Code of Ethics which may appear consistent with the objectives of Rule 17j-1 and this Code of Ethics;
(8) Conducting such inspections or investigations, including
scrutiny of the listings referred to in the subparagraph
(6) above, as shall reasonably be required to detect and
report, with his/her recommendations, any apparent
violations of this Code of Ethics to Alger Management,
Alger Inc. and to the directors of the affected Alger funds
or any committee appointed by them to deal with such
information;
(9) Submitting a quarterly report to the Board of Directors of each Alger fund potentially affected, containing a description of any violation and the sanction imposed; transactions which suggest the possibility of a violation; interpretations issued by and any exemptions or waivers found appropriate by the Administrator of the Code of Ethics; and any other significant information concerning the appropriateness of this Code of Ethics.
(10) Submitting a written report at least annually to the Board of Directors or Trustees of each Alger fund which:
a) summarizes existing procedures concerning personal investing and any changes in the procedures made during the past year;
b) identifies any violations requiring significant remedial action during the past year and describes the remedial action taken;
c) identifies any recommended changes in existing restrictions or procedures based upon experience under the Code of Ethics, evolving industry practices or developments in applicable laws or regulations;
d) reports with respect to the implementation of this Code of Ethics through orientation and training programs and on-going reminders; and
e) certifies that the procedures set forth in this Code of Ethics were as reasonably necessary to prevent Covered Persons from violating the Code of Ethics.
(11) Maintaining periodic educational conferences to explain and reinforce the terms of this Code of Ethics.
C. MAINTENANCE OF RECORDS. Alger Management shall, on its own behalf and on the behalf of the Funds and Alger & Company, maintain and make available records with respect to the implementation of the Code in the manner and for the time required by the federal securities laws, including without limitation, Rule 17j-1(d) under the 1940 Act.
The Administrator shall maintain the following records for six years, the first two or five years, as specified, in an easily accessible place:
(1) A copy of any Code of Ethics that has been in effect during the past six years (the first five years in an easily accessible place);
(2) A record of any violation of any such Code of Ethics, and of any action taken as a result of such violation (the first five years in an easily accessible place);
(3) A copy of each report made by an Access Person, as well as trade confirmations and account statements that contain information not duplicated in such reports (the first two years in an easily accessible place);
(4) A copy of each report made by the Administrator of the Code of Ethics (the first two years in an easily accessible place);
(5) A list of all persons required to make reports pursuant to Rule 17j-1 and this Code of Ethics and a list of those persons responsible for reviewing these reports (the first five years in an easily accessible place); and
(6) A record of any decision, and the reasons supporting the decision, to permit an Advisory Person to invest in a private placement (the first two years in an easily accessible place).
D. ANNUAL CERTIFICATION OF COMPLIANCE. All Access Persons shall annually sign a certificate to be presented to the Adviser for that calendar year certifying that:
o they have read and understood the Code;
o they understand and acknowledge they are subject to the Code;
o they have complied with the requirements of the Code; and
o they have disclosed all Personal Securities Transactions required to be disclosed under the Code.
E. CONFIDENTIALITY. All information obtained from any Access Person hereunder shall be kept in strict confidence, except that reports of securities transactions hereunder will be made available to the Securities and Exchange Commission or any other regulatory or self-regulatory organization to the extent required by law or regulation.
F. OTHER LAWS, RULES AND STATEMENTS OF POLICY. Nothing contained in this Code shall be interpreted as relieving any Access Person from acting in accordance with the provisions of any applicable law, rule or regulation or any other statement of policy or procedure adopted by Alger Management, Alger & Company, Shareholder Services or an Advisory Client governing the conduct of such person.
EFFECTIVE DATE: The effective date of this Amended and Restated Code of Ethics shall be May 11, 2004.