================================================================================
THE |
ALGER | MEETING THE CHALLENGE
AMERICAN | OF INVESTING
FUND |
ALGER AMERICAN
GROWTH PORTFOLIO
ALGER AMERICAN
SMALL CAPITALIZATION PORTFOLIO
ALGER AMERICAN
INCOME AND GROWTH PORTFOLIO
ALGER AMERICAN
BALANCED PORTFOLIO
ALGER AMERICAN
MIDCAP GROWTH PORTFOLIO
ALGER AMERICAN
LEVERAGED ALLCAP PORTFOLIO
ANNUAL | DECEMBER 31, 1996
REPORT |
|
|
|
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<PAGE>
FELLOW SHAREHOLDERS: January 22, 1997
1996 IN REVIEW
Obviously, 1996 was a very difficult year for us. Upon analysis, I think that
our difficulty was primarily stylistic. The Alger American Fund, while having
portfolios which concentrate in different market cap sizes, uses the same
research product and style for all of its equity portfolios. We invest primarily
in rapidly growing companies, some of which have very high multiples. This is a
strategy which, over our thirty-two year history of managing money, has proven
to deliver years which are often euphorically good (1995) or occasionally bad
(1996). We have maintained this strategy because, over time, it has tended to
produce superior results. Even after considering 1996, our Growth Portfolio and
our MidCap Portfolio have average annual returns in excess of 15% over three
years. Additionally, our Growth, Small Capitalization, MidCap Growth and
Leveraged AllCap Portfolios have outperformed their respective benchmark returns
by considerable margins on a since-inception basis.
While we were by no means pleased with the performance of our funds through
midyear, most of our relative performance problems came in the second half of
the year, after the market's major correction in July. Last year, the market,
especially after the mini crash of July, took on a very conservative cast and
there was a sharp reduction in P/E multiple premiums paid for growth stocks. Our
analysis shows that based on 1997 earnings, we begin this year with virtually no
premium for growth stocks over the market itself. There are obviously some
exceptions to this rule. The four largest companies in the NASDAQ (Intel,
Microsoft, Cisco and Oracle) all did very well last year. However, small cap and
mid cap growth stocks generally fared very poorly during the second half of the
year.
This style "problem" contributed considerably to our relative underperformance.
It was not, however, the full story. Last year, our analysts made a few bad
analytical calls. We failed to foresee the earnings collapse of the HMO's, for
example, and we lost a fair amount in other medical technology companies, many
of which did very poorly after the first quarter. We also became excessively
concerned about earnings of some of our electronic technology companies and sold
them prior to the crash of July, buying them back higher later in the year.
While buying the stocks back proved to be the correct decision, some performance
points were lost.
One of the great advantages to our way of managing money is that we usually can
make up for bad years in a hurry. As growth stock multiples have contracted
about as far as they usually do, it is our sense that we will be able to reverse
the problem in 1997 and have an exceptional year relative to the market. We have
also enhanced our research staff and created a separate team to bolster analysis
on small cap growth companies. While our target for the Dow in 1997 is in the
7200 to 7300 range, we believe that our funds could do considerably better if
everything works right.
PORTFOLIO MATTERS
ALGER AMERICAN GROWTH PORTFOLIO
For the year ended December 31, 1996, the Alger American Growth Portfolio's
total return was 13.35% compared to 22.96% for the S&P 500. Since March 1996,
the worries concerning both the bond and stock markets have been that the
economy was growing too quickly, unemployment levels were too low, and inflation
was just around the corner. It was presumed that these concerns would lead to an
increase in Federal Reserve driven rates, most likely the Fed Funds rate, but
also possibly the discount rate. We maintained that the marketplace was
exaggerating the extent of the strength in the economy and, as a result, the Fed
would not raise rates in 1996. This proved correct. However, the economic
uncertainty which prevailed throughout most of the year resulted in defensive
positioning of investors. As a result, there was a flight to very large,
predictable, blue chip-type stocks. Stocks of companies which are expected to
grow their earnings at a faster rate (25%+), which are the types of stocks in
which this Portfolio typically invests, did not fare as well and there was a
sharp reduction in their P/E multiple premiums. We expect that investor
confidence will rebuild in 1997 and premiums for growth stocks will expand. This
should translate into strong performance for the Portfolio.
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
The Portfolio's total return for the year was 4.18% versus a return of 11.26%
for the Russell 2000 Growth Index. In contrast, when we began 1996, the
Portfolio had just produced a one year return of 44.31% versus 31.04% for the
Russell 2000 Growth Index. These tremendous gains were realized in large part by
a substantial commitment to the technology sector throughout most of 1995. As
you may recall, technology stocks weakened considerably in the fourth quarter of
that year. We attempted to reduce our position in this sector and were partially
successful, cutting it from approximately 50% to 25% by the beginning of 1996.
This effort was "too little too late" because technology stocks continued to
perform erratically during the first quarter of 1996 and this contributed to the
lackluster performance.
Also noteworthy is that during the June-July correction, small cap growth stocks
seemed to catch the brunt of the negativity in the marketplace. Additionally,
the Russell 2000 Growth Index had a substantial exposure to the financial and
energy sectors, both of which performed well during the 12 month period. These
were areas in which the Portfolio had minimal weighting, which accounts in part
for the Portfolio's relative underperformance. Currently, the Portfolio is well
diversified.
1
<PAGE>
ALGER AMERICAN INCOME & GROWTH PORTFOLIO
The Alger American Income & Growth Portfolio had a total return for 1996 of
19.68% compared to 22.96% for the S&P 500. The Portfolio's strategy is to invest
in growth stocks of different market capitalization sizes that provide current
income through dividends, a more conservative strategy than which is generally
found in our other Portfolios. Therefore, given the conservative cast of the
market and the defensive positioning of investors, this Portfolio was able to
generate strong relative returns.
ALGER AMERICAN BALANCED PORTFOLIO
The Alger American Balanced Portfolio's total return for the twelve-month period
ended December 31, 1996 was 10.17%, while maintaining a ratio of approximately
55-65% common stocks and 35-45% debt securities. The Portfolio did not
outperform the S&P 500, which returned 22.96% over the same time period; however
the performance relative to the Lehman Brothers Gov't/Corp. Bond Index return of
2.90% and a blended index (60% S&P 500, 40% Lehman Brothers Gov't/Corp. Bond
Index) return of 14.94% was more favorable.
The Portfolio's total performance suffered as a result of the lackluster
performance in the more aggressive equity portion of the Portfolio which
averaged roughly 60% of the Portfolio. Here, as in some of the other Portfolios,
an overcommitment to technology coupled with relatively slack earnings for many
of the owned companies hurt the Portfolio. The Portfolio was impacted further by
its midyear exposure to health care related stocks, specifically HMO's. During
the June-July correction, these stocks were especially hard-hit as increasing
medical expenses hurt second quarter earnings. Presently the equity portion of
the Portfolio is well positioned with diversified holdings in, among the top
industries, financial services, semiconductors and pharmaceuticals.
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
For the year ended December 31, 1996, the Alger American MidCap Growth
Portfolio's total return was 11.90% as compared to 19.20% for the S&P MidCap 400
Index. In the exceedingly volatile environment that prevailed over the last 12
months, it proved very difficult to find the right group of stocks. Although
activity in the bond market made the economy look, at times, overheated,
corporate profits in the first half of the year were not that strong. As a
result, earnings for many of the stocks held in the Portfolio grew at rates
which were below expectations. Like the Alger American Small Capitalization
Portfolio, this Portfolio was also negatively impacted by its large technology
exposure in the early part of the year. Currently, the three largest industries
represented in the Portfolio are retailing, semiconductors and financial
services. As of year-end, the Portfolio has a 5 year estimated EPS of 24.2% and,
with a P/E multiple (based on 1997 earnings estimates) of only 19.4x,
demonstrates very attractive valuations relative to the market.
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
For the year ended December 31, 1996, the Alger American Leveraged AllCap
Portfolio's total return was 12.04%, compared to 22.96% for the S&P 500. As
discussed previously, the economic uncertainty which existed throughout most of
the year resulted in defensive positioning of investors. As a result, there was
a flight to larger, more predictable, blue chip-type stocks. Therefore, the S&P
500 enjoyed a very strong year, driven by the larger, more stable companies in
the index. This Portfolio employs an "allcap" (i.e. small, medium and large
capitalizations) portfolio management strategy, and thus was relatively
underweighted in these strong performing stocks. Additionally, as smaller and
mid cap stocks significantly lagged the larger averages, the Portfolio's
exposure to these types of stocks through its allcap strategy caused it to
underperform the S&P 500, which has relatively little exposure in these areas.
LOOKING AHEAD
Despite the substantial gains in the averages last year, we believe that the
market is far from being fully valued. We expect that corporate profits will
climb approximately 7% in 1997, slower than recent gains but in line with the
long-term trend. The outlook for inflation and interest rates remains favorable.
In mid-January, the earnings yield for the S&P Industrials on projected 1997
earnings was 5.2%, while long-term Treasury bonds with a maturity of 10 years or
more yielded 6.78%. The ratio of earnings yield to long-term interest rates,
which expresses the relationship between stocks and bonds, was 0.77. It is well
above the recent average and indicates that the stock market is undervalued with
long-term interest rates at current levels.
Additionally, investors are now paying virtually no premium for quality growth
stocks. Currently, high quality growth stocks, which typically trade in a range
of 1.5 to 2.5 times the market multiple, are trading at around 1.1 times based
on our 1997 estimated earnings per share: below the low-end of the historical
range. In other words, investors are paying only a very small premium for
quality growth stocks. We believe that investors' unwillingness to pay a normal
premium for growth stocks reflects their concern about the market's volatility.
As it becomes clearer in the months ahead that the economy is expanding at a
noninflationary, steady pace, we expect that investor confidence will rebuild
and premiums for quality growth stocks will expand. This should translate into
strong performance for the Portfolios.
The longer term also looks very bright. Recently I have found myself being asked
the same question, "How long can this bull market go on?" I never hesitate to
tell people that I expect the market, as measured by the Dow Jones Industrial
Average, to hit 10,000 by the end of the decade. I think this answer seems to
many to be either a bit far fetched or a number that I picked because it sounds
good for the media--a nice big, round number. This is how the 10,000 was
derived: I believe that the earnings per share of the Dow will ultimately be
approximately $365 for 1996. If the economy is able to grow at a
2
<PAGE>
3% rate in GDP (which it should, on average), I believe the Dow can grow its
earnings at a 10% rate. This should bring earnings in the year 2000 to about
$535 per share. The median relationship between the earnings yield on the
averages and the long-bond has been 75% over fifteen years. Based on this
number, given a 7% long-bond (which would presume a 3% inflation rate and a 4%
real rate of return), the market should have a multiple of 19x. This, multiplied
by its earnings, gives the Dow a value of 10190: QED!
On balance, we are extremely optimistic about the next few years.
Respectfully submitted,
/s/ David D. Alger
------------------------
David D. Alger
President
3
<PAGE>
TABLE OF CONTENTS
Alger American Growth Portfolio:
Portfolio Highlights............................................. 5
Schedule of Investments.......................................... 6-7
Financial Highlights............................................. 8
Alger American Small Capitalization Portfolio:
Portfolio Highlights............................................. 9
Schedule of Investments.......................................... 10-12
Financial Highlights............................................. 13
Alger American Income and Growth Portfolio:
Portfolio Highlights............................................. 14
Schedule of Investments.......................................... 15-16
Financial Highlights............................................. 17
Alger American Balanced Portfolio:
Portfolio Highlights............................................. 18
Schedule of Investments.......................................... 19-21
Financial Highlights............................................. 22
Alger American MidCap Growth Portfolio:
Portfolio Highlights............................................. 23
Schedule of Investments.......................................... 24-26
Financial Highlights............................................. 27
Alger American Leveraged AllCap Portfolio:
Portfolio Highlights............................................. 28
Schedule of Investments.......................................... 29-30
Financial Highlights............................................. 31
Statements of Assets and Liabilities.................................. 32
Statements of Operations.............................................. 33
Statement of Cash Flows (Alger American Leveraged AllCap Portfolio)... 34
Statements of Changes in Net Assets................................... 35-36
Notes to Financial Statements......................................... 37-39
4
<PAGE>
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ALGER AMERICAN GROWTH PORTFOLIO
PORTFOLIO HIGHLIGHTS THROUGH DECEMBER 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
The Alger American Growth Portfolio invests in companies which generally have
broader product lines, markets, financial resources and depth of management than
smaller, newer companies.
- --------------------------------------------------------------------------------
$10,000 HYPOTHETICAL INVESTMENT SINCE INCEPTION January 9, 1989
- --------------------------------------------------------------------------------
[THE TABLE BELOW IS REPRESENTATIVE OF A GRAPHIC PLOT POINT CHART]
ALGER AMERICAN GROWTH S&P 500 INDEX
--------------------- -------------
01/09/89 10,000 10,000
12/31/89 12,410 13,012
12/31/90 12,924 12,598
12/31/91 18,144 16,437
12/31/92 20,390 17,684
12/31/93 24,971 19,460
12/31/94 25,330 19,717
12/31/95 34,542 27,127
12/31/96 39,153 33,213
The chart above illustrates the growth in value of a hypothetical $10,000
investment made in the Alger American Growth Portfolio and the S&P 500 Index on
January 9, 1989, the inception date of the Alger American Growth Portfolio. The
figures for both the Alger American Growth Portfolio and the S&P 500 Index, an
unmanaged index of common stocks, include reinvestment of dividends.
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON THROUGH DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
1 YEAR 5 YEARS SINCE INCEPTION
-----------------------------------------------
<S> <C> <C> <C>
ALGER AMERICAN GROWTH PORTFOLIO 13.35% 16.63% 18.65%
S&P 500 INDEX 22.96% 15.22% 16.24%
-----------------------------------------------
</TABLE>
PERFORMANCE FIGURES DO NOT REFLECT DEDUCTION OF INSURANCE CHARGES AGAINST ASSETS
OR ANNUITIES. IF THESE CHARGES WERE DEDUCTED, THE TOTAL RETURN FIGURES WOULD BE
LOWER. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.
5
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1996
- --------------------------------------------------------------------------------
SHARES COMMON STOCKS--92.2% VALUE
- ------ AEROSPACE--4.9% -------
234,500 Boeing Company (The) .................... $24,944,937
263,500 Gulfstream Aerospace Corp.* ............. 6,389,875
291,100 Sundstrand Corp. ........................ 12,371,750
75,500 United Technologies Corp. ............... 4,983,000
------------
48,689,562
------------
APPAREL--.6%
129,400 Tommy Hilfiger Corporation* ............. 6,211,200
------------
BIO-TECHNOLOGY-- .8%
103,400 Amgen Inc.* ............................. 5,622,375
46,900 BioChem Pharma Inc.*+ ................... 2,356,725
------------
7,979,100
------------
BUSINESS SERVICES--.6%
110,000 Cintas Corp. ............................ 6,462,500
------------
CHEMICALS--2.5%
52,400 Avery Dennison Corp. .................... 1,853,650
578,000 Monsanto Co. ............................ 22,469,750
------------
24,323,400
------------
COMMUNICATIONS--3.9%
50,000 LCI International Inc.* ................. 1,075,000
74,100 Lucent Technologies Inc. ................ 3,427,125
196,600 PictureTel Corp.* ....................... 5,111,600
241,500 Qualcomm Inc.* .......................... 9,629,812
117,200 Telecomunicacoes Brasileiras S.A. ADR+ .. 8,965,800
401,900 WorldCom Inc.* .......................... 10,474,720
------------
38,684,057
------------
COMMUNICATIONS EQUIPMENT--6.4%
153,900 Ascend Communications, lnc.*+ ........... 9,561,037
168,700 Cascade Communications Corp.* ........... 9,299,587
453,200 Cisco Systems, Inc.* .................... 28,834,850
187,500 Glenayre Technologies Inc.* ............. 4,043,063
39,600 Pairgain Technologies Inc.* ............. 1,205,345
277,900 Tellabs, Inc.* .......................... 10,455,988
------------
63,399,870
------------
COMPUTER RELATED &
BUSINESS EQUIPMENT--4.7%
268,900 Hewlett-Packard Company ................. 13,512,225
128,700 Ingram Micro Inc. Cl. A*+ ............... 2,960,100
452,200 Sun Microsystems Inc.* .................. 11,616,113
256,600 3 Com Corp.* ............................ 18,828,025
------------
46,916,463
------------
COMPUTER SERVICES--.3%
14,400 Diebold Inc. ............................ 905,400
78,400 Sabre Group Holdings Inc.* .............. 2,185,400
------------
3,090,800
------------
COMPUTER SOFTWARE--4.5%
80,600 Computer Associates International Inc.* . 4,009,850
167,000 Compuware Corp.* ........................ 8,370,875
400,300 Informix Corporation* ................... 8,156,112
236,400 Microsoft Corporation* .................. 19,532,550
87,500 Parametric Technology Corporation* ...... 4,495,313
------------
44,564,700
------------
CONGLOMERATE--.4%
66,700 Tyco International Ltd. ................. 3,526,763
CONSUMER PRODUCTS--6.2%
445,200 CUC International Inc.* ................. 10,573,500
90,000 Colgate Palmolive Co. ................... 8,302,500
223,000 General Electric Co. .................... 22,049,125
326,900 Nike, Inc. Cl. B ........................ 19,532,275
------------
60,457,400
------------
DEFENSE--.6%
69,120 Lockheed Martin Corp. ................... 6,324,480
------------
ENERGY & ENERGY SERVICES--1.6%
163,000 Schlumberger Ltd. ....................... 16,279,625
------------
FINANCIAL SERVICES--11.6%
271,400 Chase Manhattan Corp. ................... 24,222,450
294,900 Citicorp ................................ 30,374,700
727,326 First Data Corporation+ ................. 26,547,399
265,000 Green Tree Financial Corp. .............. 10,235,625
112,000 MBNA Corp. .............................. 4,648,000
340,300 Money Store Inc. (The)+ ................. 9,400,787
299,400 Schwab (Charles) Corporation (The)+ ..... 9,580,800
------------
115,009,761
------------
FOOD CHAINS--.7%
155,600 Safeway Inc.*+ .......................... 6,651,900
------------
HEALTH CARE--1.5%
364,900 Columbia/HCA Healthcare Corporation ..... 14,869,675
------------
INSURANCE--3.4%
251,300 American International Group Inc. ....... 27,203,225
23,700 MGIC Investment Corp.+ .................. 1,801,200
125,900 Travelers/Aetna Property Casualty Corp. Cl.A 4,453,712
------------
33,458,137
------------
LEISURE & ENTERTAINMENT--1.2%
531,700 International Game Technology ........... 9,703,525
119,300 Mirage Resorts, Incorporated* ........... 2,579,863
------------
12,283,388
------------
MACHINERY--.7%
121,300 Case Corp. .............................. 6,610,850
------------
MEDICAL DEVICES--2.3%
103,100 Boston Scientific Corp.* ................ 6,186,000
245,400 Medtronic, Inc. ......................... 16,687,200
------------
22,873,200
------------
6
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1996 (CONT'D)
- --------------------------------------------------------------------------------
SHARES COMMON STOCKS (CONTINUED) VALUE
- ------ -----
OIL & GAS--2.7%
76,300 B.J. Services Corp.*+ ................... $ 3,891,300
275,300 Global Marine Inc.* ..................... 5,678,063
181,500 Halliburton Co. ......................... 10,935,375
140,200 Tidewater Inc. .......................... 6,344,050
-----------
26,848,788
-----------
PHARMACEUTICALS--8.6%
80,800 Bristol Myers Squibb Co. ................ 8,787,000
289,700 Eli Lilly & Company ..................... 21,148,100
353,000 Merck & Co., Inc. ....................... 27,975,250
124,600 Pfizer Inc. ............................. 10,326,225
230,500 Warner-Lambert Co. ...................... 17,287,500
-----------
85,524,075
-----------
POLLUTION CONTROL--1.3%
415,300 USA Waste Services, Inc.*+ .............. 13,237,687
-----------
RESTAURANTS & LODGING--2.6%
318,700 Boston Chicken Inc.*+ ................... 11,433,363
478,600 Lone Star Steakhouse & Saloon, lnc.* .... 12,802,550
54,800 Outback Steakhouse, Inc.*+ .............. 1,465,900
-----------
25,701,813
-----------
RETAILING--5.4%
42,000 Dollar General Corp. .................... 1,344,000
186,800 Gucci Group N.V ......................... 11,931,850
459,100 Home Depot, lnc.+ ....................... 23,012,388
53,100 Nine West Group Inc.* ................... 2,462,512
1,003,500 OfficeMax Inc.* ......................... 10,662,187
57,000 Rite Aid Corp. .......................... 2,265,750
32,000 TJX Companies, Inc. ..................... 1,516,000
----------
53,194,687
-----------
SEMICONDUCTORS--9.1%
579,600 Adaptec Inc.* ........................... 23,184,000
265,200 Altera Corporation* ..................... 19,276,858
248,900 Intel Corp. ............................. 32,590,468
74,500 Linear Technology Corporation ........... 3,268,688
68,300 Maxim Integrated Products, lnc.* ........ 2,953,975
244,000 Xilinx, Inc.* ........................... 8,982,371
-----------
90,256,360
-----------
MISCELLANEOUS--3.1%
273,000 Loewen Group Inc. ....................... 10,681,125
708,200 Service Corp International .............. 19,829,600
-----------
30,510,725
-----------
TOTAL COMMON STOCKS
(COST $786,520,689) .................... 913,940,966
-----------
WARRANTS
MANFACTURING
Windmere Corp.*
1 expire 1/19/98 (COST $1) .............. 5
-----------
PREFERRED STOCK--1.1%
COMMUNICATIONS
182,500 Nokia Corporation, ADR
(COST $8,980,484) ..................... 10,516,563
-----------
PRINCIPAL
AMOUNT
--------
SHORT-TERM INVESTMENTS--10.1%
SHORT-TERM CORPORATE NOTES--5.8%
$ 8,383,000 CSC Enterprises.,
5.67%, 1/03/97 ........................ 8,380,359
21,617,000 Dynamic Funding Corp. Series A.,
6.08%, 1/03/97 ........................ 21,609,698
17,500,000 Ford Motor Credit Corp.,
5.88%, 1/02/97 ........................ 17,497,142
10,000,000 Merrill Lynch & Co., Inc.,
5.55%, 1/02/97 ........................ 9,998,459
-----------
TOTAL SHORT-TERM CORPORATE NOTES
(COST $57,485,658) .................... 57,485,658
-----------
SECURITIES HELD UNDER
REPURCHASE
AGREEMENTS--4.3%
Securities Held Under Repurchase
Agreements, 6.50%-6.625%, 1/2/97, with
Bear, Stearns & Co. Inc., dtd 12/31/96,
repurchase price $42,917,421; collateralized
by U.S. Treasury Strips (par value
$209,350,000 due 8/15/06-11/15/22) .... 42,901,709
-----------
TOTAL SHORT-TERM INVESTMENTS
(COST $100,387,367) ................... 100,387,367
-----------
TOTAL INVESTMENTS
(COST $895,888,541)(A) 103.4% 1,024,844,901
Liabilities in Excess Of Other Assets (3.4) (33,816,533)
----- ------------
NET ASSETS 100.0% $ 991,028,368
===== =============
- --------------------------------------------------------------------------------
* Non-income producing security.
+ Securities partially or fully on loan.
(a) At December 31, 1996, the net unrealized appreciation on investments, based
on cost for federal income tax purposes of $895,888,541 amounted to
$128,956,360 which consisted of aggregate gross unrealized appreciation of
$154,599,898 and aggregate gross unrealized depreciation of $25,643,538.
See Notes to Financial Statements.
7
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------
1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 31.16 $ 23.13 $ 24.67 $ 20.17 $ 18.00
- ------------------------------------------------------------------------------------------------------------------------
Net investment income 0.12 0.02 0.07 0.03 0.03
Net realized and unrealized gain on investments 4.00 8.33 0.15 4.50 2.19
- ------------------------------------------------------------------------------------------------------------------------
Total from investment operations 4.12 8.35 0.22 4.53 2.22
- ------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (0.02) (0.07) (0.03) (0.03) (0.03)
Distributions from net realized gains (0.93) (0.25) (1.73) -- (0.02)
- ------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.95) (0.32) (1.76) (0.03) (0.05)
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $ 34.33 $ 31.16 $ 23.13 $ 24.67 $ 20.17
========================================================================================================================
Total Return 13.35% 36.37% 1.45% 22.47% 12.38%
========================================================================================================================
Ratios and Supplemental Data:
Net assets, end of year (000's omitted) $991,028 $502,974 $150,390 $74,878 $30,316
========================================================================================================================
Ratio of expenses to average net assets 0.79% 0.85% 0.86% 0.97% 0.99%
========================================================================================================================
Ratio of net investment income to average
net assets 0.50% 0.18% 0.48% 0.25% 0.33%
========================================================================================================================
Portfolio Turnover Rate 82.86% 118.33% 111.76% 112.64% 63.91%
========================================================================================================================
Average Commission Rate Paid $ .0683
======================================================================
</TABLE>
See Notes to Financial Statements.
8
<PAGE>
- --------------------------------------------------------------------------------
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
PORTFOLIO HIGHLIGHTS THROUGH DECEMBER 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
The Alger American Small Capitalization Portfolio invests in small,
fast-growing companies that offer innovative products, services, or
technologies to a rapidly expanding marketplace.
- --------------------------------------------------------------------------------
$10,000 HYPOTHETICAL INVESTMENT SINCE INCEPTION September 21, 1988
- --------------------------------------------------------------------------------
[THE TABLE BELOW IS REPRESENTATIVE OF A GRAPHIC PLOT POINT CHART]
ALGER AMERICAN SMALL RUSSELL 2000
CAPITALIZATION GROWTH INDEX
--------------- ------------
09/21/88 10,000 10,000.00
12/31/88 9,665 10,006.11
12/31/89 15,897 12,024.08
12/31/90 17,282 9,930.66
12/31/91 27,225 15,013.84
12/31/92 28,192 16,180.43
12/31/93 31,936 18,342.12
12/31/94 30,541 17,896.06
12/31/95 44,073 23,446.96
12/31/96 45,916 26,087.00
The chart above illustrates the growth in value of a hypothetical $10,000
investment made in the Alger American Small Capitalization Portfolio and the
Russell 2000 Growth Index on September 21, 1988, the inception date of the
Alger American Small Capitalization Portfolio. The figures for both the Alger
American Small Capitalization Portfolio and the Russell 2000 Growth Index, an
unmanaged index of common stocks, include reinvestment of dividends.
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON THROUGH December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
1 YEAR 5 YEARS SINCE INCEPTION
-----------------------------------------------
<S> <C> <C> <C>
ALGER AMERICAN SMALL
CAPITALIZATION PORTFOLIO 4.18% 11.02% 20.21%
RUSSELL 2000 GROWTH INDEX 11.26% 11.69% 12.28%
-----------------------------------------------
</TABLE>
PERFORMANCE FIGURES DO NOT REFLECT DEDUCTION OF INSURANCE CHARGES AGAINST
ASSETS OR ANNUITIES. IF THESE CHARGES WERE DEDUCTED, THE TOTAL RETURN FIGURES
WOULD BE LOWER. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.
9
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1996
- --------------------------------------------------------------------------------
SHARES COMMON STOCKS--94.3% VALUE
- ------ -----
AEROSPACE--2.1%
224,300 Atlas Air, lnc.*+ ....................... $ 10,710,325
200,000 BE Aerospace Inc.* ...................... 5,425,000
190,300 Greenwich Air Services Inc Cl. B.* ...... 4,234,175
468,700 Wyman Gordon Co.*+ ...................... 10,428,575
-------------
30,798,075
-------------
AGRICULTURE--.4%
174,800 Delta and Pine Land Co. ................. 5,593,600
-------------
ALUMINUM--.2%
290,600 Kaiser Aluminum Corp.*+ ................. 3,378,225
-------------
APPAREL--4.3%
242,800 Designer Holdings Ltd.*+ ................ 3,915,150
150,000 Gymboree Corp.*+ ........................ 3,431,250
424,000 Jones Apparel Group Inc.* ............... 15,847,000
176,500 Liz Claiborne Inc. ...................... 6,817,312
308,500 Mens Wearhouse Inc. ..................... 7,558,250
246,600 Nautica Enterprises Inc.* ............... 6,226,650
218,000 ST. John Knits Inc. ..................... 9,483,000
215,100 Tommy Hilfiger Corporation* ............. 10,324,800
-------------
63,603,412
-------------
AUTOMOTIVE EQUIPMENT & SERVICES--.4%
198,400 Cross-Continent Auto Retailers, Inc.* ... 4,141,600
201,100 Navistar International Corp.*+ .......... 1,835,037
-------------
5,976,637
-------------
BIO-TECHNOLOGY--2.5%
247,400 BioChem Pharma Inc.*+ ................... 12,431,850
290,000 CellPro Incorporated* ................... 3,625,000
152,300 DEKALB Genetics Corp. Cl. B+ ............ 7,767,300
100,000 Ergo Science Corp.* ..................... 1,312,500
193,000 INCYTE Pharmaceuticals, lnc.*+ .......... 9,939,500
63,000 Serologicals Inc.* ...................... 2,228,625
-------------
37,304,775
-------------
BUILDING & CONSTRUCTION--.3%
416,500 Morrison Knudsen Corp.* ................. 3,748,500
65,000 Toll Brothers Inc.*+ .................... 1,267,500
-------------
5,016,000
-------------
BUSINESS SERVICES--1.0%
108,000 G & K Services Inc. Cl. A ............... 4,077,000
247,100 Saville Systems PLC ADR* ................ 10,038,438
-------------
14,115,438
-------------
COMMUNICATIONS--1.3%
321,000 LCI International Inc.* ................. 6,901,500
340,000 Pegasus Communications Corp. CI A.* ..... 4,675,000
255,000 Teleport Communications Group Inc. CI A.* 7,777,500
20,000 Tollgrade Communications Inc. ........... 620,000
-------------
19,974,000
-------------
COMMUNICATIONS EQUIPMENT--8.6%
463,100 Ascend Communications, lnc.*+ ........... 28,770,088
179,900 Cascade Communications Corp.* ........... 9,916,988
612,100 DSP Communications, Inc.* ............... 11,859,437
84,500 Davox Corp.*+ ........................... 3,485,625
468,925 Glenayre Technologies Inc.* ............. 10,111,430
100,000 InterVoice Inc.*+ ....................... 1,225,000
741,700 PictureTel Corp.* ....................... 19,284,200
125,500 Powerwave Technologies, lnc.+ ........... 1,835,438
690,000 Tellabs, Inc.* .......................... 25,961,250
335,000 Videoserver Inc.* ....................... 14,237,500
-------------
126,686,956
-------------
COMPUTER RELATED &
BUSINESS EQUIPMENT--1.2%
513,100 Auspex Systems Inc.* .................... 5,964,788
51,300 Cymer, Inc. ............................. 2,468,813
163,200 Network Appliance Inc.*+ ................ 8,302,800
50,000 Xircom Inc.*+ ........................... 1,087,500
-------------
17,823,901
-------------
COMPUTER SERVICES--5.0%
246,000 Acxiom Corp.* ........................... 5,904,000
72,500 CKS Group Inc.*+ ........................ 2,020,938
250,000 Cambridge Technology Partners Inc.* ..... 8,390,750
461,200 Employee Solutions Inc.*+ ............... 9,454,600
269,800 FactSet Research Systems Inc.*+ ......... 5,665,800
200,000 First USA Paymentech Inc.*+ ............. 6,775,000
40,000 Information Management Resources, lnc ... 845,000
15,000 International Network Services*+ ........ 452,820
171,400 Keane Inc.* ............................. 5,441,950
118,300 Logicon Inc.+ ........................... 4,317,950
92,800 National Data Corp.+ .................... 4,036,800
37,800 Paychex, Inc. ........................... 1,944,356
221,000 Quick Response Service Inc.* ............ 6,298,500
182,200 Sungard Data Systems* ................... 7,196,900
17,000 TeleFax Inc.+ ........................... 886,125
68,600 Whittman-Hart, Inc.* .................... 1,757,875
90,000 XLConnect Solutions, Inc.*+ ............. 2,587,500
-------------
73,976,864
-------------
COMPUTER SOFTWARE--9.9%
206,000 CBT Group PLC ADS* ...................... 11,175,500
319,400 Compuware Corp.* ........................ 16,009,925
340,000 Electronics For Imaging Inc.* ........... 27,965,000
182,600 HBO & Company ........................... 10,841,875
655,900 Informix Corporation* ................... 13,363,963
50,000 Infinity Financial Technology Inc.*+ .... 862,500
164,400 INSO Corp.*+ ............................ 6,534,900
216,000 Integrated Systems Inc.* ................ 5,616,000
440,800 Learning Company Inc. (The)*+ ........... 6,336,500
311,100 Macromedia Inc.*+ ....................... 5,599,800
395,900 Medic Computer Systems, lnc.*+ .......... 15,959,917
50,000 Parametric Technology Corporation* ...... 2,568,750
60,000 Premis Corp. ............................ 337,500
779,300 Structural Dynamics Research Corp.*+ .... 15,586,000
322,600 Systemsoft Corp.*+ ...................... 4,798,675
43,000 Wandel Goltermann Technologies Inc.* .... 1,257,750
-------------
144,814,555
-------------
COMPUTER TECHNOLOGY--2.3%
220,000 Checkpoint Systems Inc.*+ ............... 5,445,000
260,800 Citrix Systems, Inc.* ................... 10,187,630
228,200 CompuCom Systems Inc.* .................. 2,453,150
228,000 Digital Microwave Corp.* ................ 6,355,500
20,000 Jabil Circuit Inc.*+ .................... 800,000
248,900 Sterling Commerce, lnc.*+ ............... 8,773,725
-------------
34,015,005
-------------
CONSUMER PRODUCTS--1.3%
122,900 Blyth Industries Inc.*+ ................. 5,607,313
168,000 Fred Meyer, Inc.* ....................... 5,964,000
130,000 Herman Miller Inc. ...................... 7,361,250
-------------
18,932,563
-------------
10
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1996 (CONT'D)
- --------------------------------------------------------------------------------
SHARES COMMON STOCKS (CONTINUED) VALUE
- ------ -----
DEFENSE--.6%
194,100 Rohr Inc.*+ ............................. $ 4,391,513
175,000 Tracor, Inc.* ........................... 3,718,750
-------------
8,110,263
-------------
ENERGY & ENERGY SERVICES--.3%
81,500 United Meridian Corp. Series A* ......... 4,217,625
-------------
FINANCIAL SERVICES--5.7%
28,500 Associated Banc-Corp .................... 1,211,250
42,700 CCB Financial Corp.+ .................... 2,914,275
9,000 Centura Banks Inc. ...................... 401,625
37,100 Colonial BancGroup Inc.+ ................ 1,484,000
84,900 Commerce Bancshares Inc. ................ 3,926,625
105,000 Compass Bancshares Inc. ................. 4,173,750
405,000 Concord EFS Inc.*+ ...................... 11,441,250
332,100 Green Tree Financial Corp. .............. 12,827,363
175,000 Leasing Solutions Inc.*+ ................ 4,506,250
38,100 Mercantile Bankshares Corp. ............. 1,219,200
805,700 Money Store Inc. (The)+ ................. 22,257,462
75,000 National Commerce Bancorp ............... 2,868,750
388,000 PMT Services, Inc.*+ .................... 6,790,000
95,700 Provident Bankshares Corp.+ ............. 3,732,300
90,000 Wilmington Trust Corp. .................. 3,555,000
-------------
83,309,100
-------------
FOODS & BEVERAGES--.8%
113,900 Interstate Bakeries Corp. ............... 5,595,338
130,600 JP Foodservice Inc.*+ ................... 3,640,475
164,100 United Natural Foods, lnc ............... 2,789,700
-------------
12,025,513
-------------
FREIGHT
15,000 Landstar Systems Inc.*+ ................. 348,750
-------------
HEALTH CARE--2.2%
272,000 Access Health, Inc.* .................... 12,172,000
140,250 Clintrials Research Inc.*+ .............. 3,190,688
107,500 Omnicare, Inc. .......................... 3,453,438
166,700 Orthodontic Centers of America Inc.*+ ... 2,667,200
560,600 Physicians Sales & Service, Inc.+ . ..... 8,058,625
100,000 United Dental Care, Inc.* ............... 3,037,500
-------------
32,579,451
-------------
HEALTH MAINTENANCE ORGANIZATION--.1%
73,300 AMISYS Managed Care Systems Inc.*+ ...... 1,246,100
-------------
INDUSTRIAL EQUIPMENT--1.2%
215,000 DT Industries Inc.* ..................... 7,525,000
314,100 Waters Corporation* ..................... 9,540,787
-------------
17,065,787
-------------
INSURANCE--1.2%
82,500 Equitable of lowa Companies ............. 3,784,688
85,000 Executive Risk Inc. ..................... 3,145,000
156,900 HCC Insurance Holdings Inc. ............. 3,765,600
90,500 Protective Life Corp. ................... 3,608,688
95,000 Vesta Insurance Group Inc.+ ............. 2,980,625
-------------
17,284,601
-------------
LEISURE ENTERTAINMENT--1.5%
161,300 Anchor Gaming*+ ......................... 6,492,325
40,000 Cinar Films, lnc. Cl. B.* ............... 1,040,000
801,800 International Game Technology ........... 14,632,850
-------------
22,165,175
-------------
MACHINERY--.2%
200,000 JLG Industries Inc. ..................... 3,200,000
-------------
MANUFACTURING--1.1%
402,500 American Power Conversion Corp.* ........ 10,968,125
116,200 Cincinnati Milacron Inc. ................ 2,541,875
78,000 Palm Harbor Homes Inc.* ................. 2,184,000
-------------
15,694,000
-------------
MEDICAL DEVICES--5.9%
111,300 Biopsys Medical Inc.* ................... 2,420,775
91,200 Conceptus, Inc.*+ ....................... 934,800
402,500 CONMED Corporation* ..................... 8,251,250
446,600 ESC Medical Systems Ltd. ................ 11,388,300
63,500 Fisher Scientific Inc. .................. 2,992,438
187,900 Heartport Inc.*+ ........................ 4,298,213
500,200 Hologic, Inc.* .......................... 12,379,950
64,000 IDEXX Laboratories Inc.*+ ............... 2,304,000
140,500 Intercardia, Inc.* ...................... 3,020,750
302,500 Mentor Corp.+ ........................... 8,923,750
296,500 Neuromedical Systems Inc.*+ ............. 3,928,625
200,000 Physio-Control Corp.*+ .................. 4,500,000
218,200 STERIS Corp.* ........................... 9,491,700
286,600 Target Therapeutics, Inc.* .............. 12,037,200
-------------
86,871,751
-------------
MEDICAL SERVICES--4.2%
222,000 CompDent Corp.* ......................... 7,825,500
161,500 Health Management Associates, lnc. Cl. A 3,633,750
528,000 Lincare Holdings Inc.* .................. 21,648,000
70,000 National Surgery Centers, Inc.* ......... 2,660,000
541,550 PhyCor, Inc.*+ .......................... 15,366,480
166,300 Quintiles Transnational Corp.* .......... 11,017,375
-------------
62,151,105
-------------
MEDICAL TECHNOLOGY--.1%
50,000 Curative Health Services Inc. ........... 1,384,400
-------------
METALS--.6%
247,000 Titanium Metals Corporation*+ ........... 8,120,125
-------------
OIL & GAS--1.3%
70,000 B.J. Services Corp.*+ ................... 3,570,000
212,500 Benton Oil & Gas Co.* ................... 4,807,812
76,000 Energy Ventures Inc.* ................... 3,866,500
270,000 Varco International Inc.+ ............... 6,243,750
-------------
18,488,062
-------------
PAPER PACKAGING & FOREST PRODUCTS--.7%
245,100 Sealed Air Corp.*+ ...................... 10,202,287
-------------
PHARMACEUTICALS--.4%
115,000 Dura Pharmaceuticals, Inc.*+ ............ 5,491,250
-------------
11
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1996 (CONT'D)
- --------------------------------------------------------------------------------
SHARES COMMON STOCKS (CONTINUED) VALUE
- ----- -----
POLLUTION CONTROL--4.0%
142,000 Culligan Water Technologies Inc.+ ....... $ 5,751,000
187,700 Tetra Tech Inc.* ........................ 3,707,075
525,800 USA Waste Services, Inc.* ............... 16,759,875
250,000 U.S. Filter Corp.*+ ..................... 7,937,500
701,800 United Waste Systems, Inc.*+ ............ 24,124,375
-------------
58,279,825
-------------
REAL ESTATE--.3%
100,000 Security Capital Atlantic Incorporated* . 2,450,000
31,500 Vornado Realty Trust .................... 1,653,750
-------------
4,103,750
-------------
RESTAURANTS & LODGING--3.4%
123,000 Apple South, lnc.+ ...................... 1,660,500
188,100 Boston Chicken Inc.*+ ................... 6,748,088
297,800 Landry's Seafood Restaurants, Inc.*+ .... 6,365,475
771,800 Lone Star Steakhouse & Saloon, lnc.* .... 20,645,650
211,600 Outback Steakhouse, Inc.*+ .............. 5,660,300
355,000 Prime Hospitality Corp.*+ ............... 5,724,375
50,500 Starwood Lodging Trust+ ................. 2,783,812
-------------
49,588,200
-------------
RETAILING--8.1%
115,200 Abercrombie & Fitch Co., Cl. A* ......... 1,900,800
15,000 Borders Group Inc.* ..................... 538,125
100,000 CML Group Inc. .......................... 337,500
38,500 Dominick's Supermarkets, lnc ............ 837,375
72,500 Footstar Inc.*+ ......................... 1,803,437
312,700 Gucci Group N.V ......................... 19,973,712
90,000 Loehmann's, Inc.* ....................... 2,070,000
169,400 Mail Boxes Etc.*+ ....................... 3,811,500
335,000 Marks Brothers Jewelers Inc.* ........... 3,894,375
226,200 Neiman Marcus Group, Inc. (The)* ........ 5,768,100
95,000 Nine West Group Inc.*+ .................. 4,405,625
506,475 OfficeMax, Inc.* ........................ 5,381,296
268,000 PetsMart Inc.*+ ......................... 5,862,500
192,200 Quiksilver Inc.* ........................ 4,108,275
50,600 Saks Holdings, Inc.*+ ................... 1,366,200
200,000 Sothebys Holdings Inc., Cl.A ............ 3,725,000
736,400 Sports Authority Inc. (The)*+ ........... 16,016,700
368,400 Stage Stores, Inc.* ..................... 6,723,300
260,000 TJX Companies, Inc.+ .................... 12,317,500
378,200 Tiffany & Co. ........................... 13,851,575
146,300 West Marine Inc.*+ ...................... 4,132,975
-------------
118,825,870
-------------
SEMICONDUCTORS--5.2%
544,400 Adaptec Inc.* ........................... 21,776,000
272,000 Altera Corporation* ..................... 19,771,135
264,000 Cirrus Logic, Inc.* ..................... 4,092,000
175,600 Maxim Integrated Products, lnc.* ........ 7,594,700
82,300 Microchip Technology Incorporated* ...... 4,187,012
671,100 S3 Incorporated*+ ....................... 10,905,375
231,400 Xilinx, Inc.* ........................... 8,518,528
-------------
76,844,750
-------------
TRANSPORTATION--1.1%
472,900 Coach USA Inc.* ......................... 13,714,100
237,400 Fritz Companies Inc.* ................... 3,026,850
-------------
16,740,950
-------------
MISCELLANEOUS--3.3%
41,200 Central Parking Corp.* .................. 1,380,200
471,600 Loewen Group Inc. ....................... 18,451,350
158,500 Metromail Corporation* .................. 2,892,625
149,300 Ogden Corp.+ ............................ 2,799,375
109,500 Outdoor Systems, Inc.* .................. 3,079,687
78,000 Rural/Metro Corporation * ............... 2,808,000
174,000 Sturm Ruger & Co. Inc.+ ................. 3,371,250
183,200 Uniphase Corp.*+ ........................ 9,618,000
187,000 Universal Outdoor Holdings Inc.* ........ 4,394,500
-------------
48,794,987
-------------
TOTAL COMMON STOCKS
(COST $1,184,107,094) ................. 1,385,143,683
-------------
PRINCIPAL SHORT-TERM INVESTMENTS--5.6%
AMOUNT SHORT-TERM CORPORATE NOTES--4.5%
--------
$17,000,000 Countrywide Funding Corp.,
5.95%, 1/14/97 .......................... 16,963,474
30,000,000 Ford Motor Credit Corp.,
5.88%, 1/02/97 .......................... 29,995,100
20,000,000 Merrill Lynch & Co., Inc.,
5.55%, 1/02/97 .......................... 19,996,916
--------------
TOTAL SHORT-TERM CORPORATE NOTES
(COST $66,955,490) ...................... 66,955,490
--------------
SECURITIES HELD UNDER
REPURCHASE AGREEMENTS--1.1%
Securities Held Under Repurchase
Agreements, 6.50%, 1/2/97, with
Bear, Stearns & Co. Inc., dtd 12/31/96,
repurchase price $16,689,921; collateralized
by U.S. Treasury Bonds and U.S. Treasury
Strips (par value $57,115,000
due 11/15/13-2/15/22) ................... 16,683,896
--------------
TOTAL SHORT-TERM INVESTMENTS
(COST $83,639,386) ...................... 83,639,386
--------------
TOTAL INVESTMENTS
(COST $1,267,746,480)(A) ............ 99.9% 1,468,783,069
Other Assets in Excess of Liabilities . .1 735,400
----- --------------
NET ASSETS 100.0% $1,469,518,469
===== ==============
- --------------------------------------------------------------------------------
* Non-income producing security.
+ Securities partially or fully on loan.
(a) At December 31, 1996, the net unrealized appreciation on investments, based
on cost for federal income tax purposes of $1,276,746,480 amounted to
$201,036,589 which consisted of aggregate gross unrealized appreciation of
$262,104,139 and aggregate gross unrealized depreciation of $61,067,550.
See Notes to Financial Statements.
12
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------
1996 1995 1994 1993 1992
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 39.41 $ 27.31 $ 30.88 $ 27.26 $ 26.79
- --------------------------------------------------------------------------------------------------------------------
Net investment income (loss) (0.04)(i) (0.09) (0.03)(i) (0.05) (0.06)
Net realized and unrealized gain
(loss) on investments 1.70 12.19 (1.45) 3.67 0.91
- --------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.66 12.10 (1.48) 3.62 0.85
Distributions from net realized gains (0.16) -- (2.09) -- (0.38)
- --------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $ 40.91 $ 39.41 $ 27.31 $ 30.88 $ 27.26
====================================================================================================================
Total Return 4.18% 44.31% (4.38%) 13.28% 3.55%
====================================================================================================================
Ratios and Supplemental Data:
Net assets, end of year (000's omitted) $1,469,518 $984,212 $397,037 $238,850 $135,718
====================================================================================================================
Ratio of expenses to average net assets 0.88% 0.92% 0.96% 1.03% 0.98%
====================================================================================================================
Ratio of net investment income (loss) to
average net assets (0.09%) (0.48%) (0.10%) (0.35%) (0.37%)
====================================================================================================================
Portfolio Turnover Rate 110.04% 80.66% 117.61% 148.07% 108.06%
====================================================================================================================
Average Commission Rate Paid $ .0591
===================================================================
</TABLE>
(i) Amount was computed based on average shares outstanding during the year.
See Notes to Financial Statements.
13
<PAGE>
- --------------------------------------------------------------------------------
ALGER AMERICAN INCOME AND GROWTH PORTFOLIO
PORTFOLIO HIGHLIGHTS THROUGH DECEMBER 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
The Alger American Income and Growth Portfolio seeks a high level of dividend
income consistent with prudent investment mangement by investing in dividend
paying equity securities. Capital appreciation is a secondary objective of
the Portfolio.
- --------------------------------------------------------------------------------
$10,000 HYPOTHETICAL INVESTMENT SINCE INCEPTION November 15, 1988
- --------------------------------------------------------------------------------
[THE TABLE BELOW IS REPRESENTATIVE OF A GRAPHIC PLOT POINT CHART]
ALGER AMERICAN INCOME
AND GROWTH S&P 500 INDEX
--------------------- -------------
11/15/88 10,000 10,000
12/31/88 10,095 10,422
12/31/89 10,842 13,715
12/31/90 10,872 13,279
12/31/91 13,428 17,325
12/31/92 14,589 18,640
12/31/93 16,097 20,512
12/31/94 14,765 20,783
12/31/95 19,952 28,593
12/31/96 23,878 34,139
The chart above illustrates the growth in value of a hypothetical $10,000
investment made in the Alger American Income and Growth Portfolio and the S&P
500 Index on November 15, 1988, the inception date of the Alger American
Income and Growth Portfolio. Figures for the Alger American Income and Growth
Portfolio and the S&P 500 Index, an unmanaged index of common stocks, include
reinvestment of dividends.
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON THROUGH December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
1 YEAR 5 YEARS SINCE INCEPTION
-----------------------------------------------
<S> <C> <C> <C>
ALGER AMERICAN INCOME
AND GROWTH PORTFOLIO 19.68% 12.20% 11.30%
S&P 500 INDEX 22.96% 15.22% 16.31%
-----------------------------------------------
</TABLE>
PERFORMANCE FIGURES DO NOT REFLECT DEDUCTION OF INSURANCE CHARGES AGAINST
ASSETS OR ANNUITIES. IF THESE CHARGES WERE DEDUCTED, THE TOTAL RETURN FIGURES
WOULD BE LOWER. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.
14
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN INCOME AND GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1996
- --------------------------------------------------------------------------------
SHARES COMMON STOCKS--95.8% VALUE
- ------ -----
AEROSPACE--7.7%
7,000 Boeing Company (The) .................... $ 744,625
18,000 Sundstrand Corp. ........................ 765,000
1,500 United Technologies Corp. ............... 99,000
----------------
1,608,625
----------------
BIO-TECHNOLOGY--2.2%
9,000 DEKALB Genetics Corp. Cl. B+ ............ 459,000
----------------
CHEMICALS--2.8%
15,000 Monsanto Co. ............................ 583,125
----------------
COMMUNICATIONS--.5%
1,500 Lucent Technologies Inc. ................ 69,375
1,700 WorldCom Inc.* .......................... 44,307
----------------
113,682
----------------
COMMUNICATIONS EQUIPMENT--1.8%
10,000 Tellabs, Inc.* .......................... 376,250
----------------
COMPUTER RELATED &
BUSINESS EQUIPMENT--2.2%
4,000 Hewlett-Packard Company ................. 201,000
2,000 3 Com Corp.* ............................ 146,750
2,000 Xerox Corp. ............................. 105,250
----------------
453,000
----------------
COMPUTER SERVICES--2.0%
8,000 Paychex, Inc. ........................... 411,503
----------------
COMPUTER SOFTWARE--.3%
1,500 Computer Associates International Inc.* . 74,625
----------------
CONGLOMERATE--1.0%
4,000 Tyco International Ltd. ................. 211,500
----------------
CONSUMER PRODUCTS--3.2%
2,000 Colgate Palmolive Co. ................... 184,500
5,000 General Electric Co. .................... 494,375
----------------
678,875
----------------
DEFENSE--.9%
2,050 Lockheed Martin Corp. ................... 187,575
----------------
ENERGY & ENERGY SERVICES--2.1%
4,400 Schlumberger Ltd. ....................... 439,450
----------------
FINANCIAL SERVICES--21.0%
3,800 American Express Co. .................... 214,700
12,000 Bank Of New York Co. Inc. ............... 405,000
6,000 BankAmerica Corp. ....................... 598,500
7,500 Chase Manhattan Corp. ................... 669,375
5,600 Citicorp ................................ 576,800
6,000 Equifax Inc. ............................ 183,750
11,674 First Data Corporation+ ................. 426,101
6,000 Mellon Bank Corp. ....................... 426,000
5,000 Money Store Inc. (The)+ ................. 138,125
10,000 Schwab (Charles) Corporation (The)+ ..... 320,000
10,000 SunAmerica Inc. ......................... 443,750
----------------
4,402,101
----------------
HEALTH CARE--1.8%
9,500 Columbia/HCA Healthcare Corporation ..... 387,125
----------------
HEALTH MAINTENANCE ORGANIZATIONS--2.5%
11,500 United Healthcare Corporation ........... 517,500
----------------
INSURANCE--2.2%
4,300 American International Group Inc. ....... 465,475
----------------
LEISURE & ENTERTAINMENT--1.3%
14,500 International Game Technology ........... 264,625
----------------
MACHINERY--1.1%
4,200 Case Corp. .............................. 228,900
----------------
MANUFACTURING--3.7%
8,850 Precision Castparts Corp. ............... 439,181
8,000 Thermo Electron Corp. ................... 330,000
----------------
769,181
----------------
MEDICAL DEVICES--2.2%
6,700 Medtronic, Inc. ......................... 455,600
----------------
OIL & GAS--5.3%
2,000 Chevron Corp. ........................... 130,000
3,000 Exxon Corp. ............................. 294,000
5,300 Halliburton Co. ......................... 319,325
8,000 Tidewater Inc. .......................... 362,000
----------------
1,105,325
----------------
PHARMACEUTICALS--12.3%
3,000 Bristol Myers Squibb Co. ................ 326,250
7,400 Eli Lilly & Company ..................... 540,200
6,600 Merck & Co., lnc ........................ 523,050
5,000 Pfizer Inc. ............................. 414,375
3,500 SmithKline Beecham PLC ADS .............. 238,000
7,000 Warner-Lambert Co. ...................... 525,000
----------------
2,566,875
----------------
RETAILING--7.9%
17,800 Dollar General Corp. .................... 569,600
2,300 Gucci Group N.V ......................... 146,913
8,000 Home Depot, Inc.+ ....................... 401,000
8,000 Rite Aid Corp. .......................... 318,000
4,500 TJX Companies, Inc. ..................... 213,188
----------------
1,648,701
----------------
SEMICONDUCTORS--4.9%
2,000 Altera Corporation* ..................... 145,376
5,100 Intel Corp. ............................. 667,784
4,900 Linear Technology Corporation ........... 214,987
----------------
1,028,147
----------------
15
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN INCOME AND GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1996 (CONT'D)
- --------------------------------------------------------------------------------
SHARES COMMON STOCKS (CONTINUED) VALUE
- ------ -----
MISCELLANEOUS--2.9%
4,500 Loewen Group Inc. ....................... $ 176,063
15,000 Service Corp. International ............. 420,000
--------------
596,063
--------------
TOTAL COMMON STOCKS
(COST $17,051,950) ..................... 20,032,828
--------------
PREFERRED STOCK--.6%
COMMUNICATIONS
2,100 Nokia Corporation, ADR
(COST $99,063) .......................... 121,013
--------------
SHORT-TERM INVESTMENTS--6.3%
SECURITIES HELD
UNDER REPURCHASE
AGREEMENTS
Securities Held Under Repurchase
Agreements, 6.50%-6.625%, 1/2/97, with
Bear, Stearns & Co. Inc., dtd 12/31/96,
repurchase price $1,312,758; collateralized
by U.S. Treasury Strips (par value
$4,190,000 due 11/15/13)
(COST $1,312,280). ...................... 1,312,280
--------------
TOTAL INVESTMENTS
(COST $18,463,293)(A) ............... 102.7% 21,466,121
Liabilities In Excess of Other Assets . (2.7) (555,881)
----- --------------
NET ASSETS ............................ 100.0% $ 20,910,240
===== ==============
- --------------------------------------------------------------------------------
* Non-income producing security.
+ Securities partially or fully on loan.
(a) At December 31, 1996, the net unrealized appreciation on investments, based
on cost for federal income tax purposes of $18,463,293, amounted to
$3,002,828 which consisted of aggregate gross unrealized appreciation of
$3,089,806 and aggregate gross unrealized depreciation of $86,978.
See Notes to Financial Statements.
16
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN INCOME AND GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
1996 1995 1994 1993 1992
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 17.79 $ 13.30 $ 15.31 $ 13.93 $ 13.08
- ---------------------------------------------------------------------------------------------------------------------
Net investment income 0.09(i) 0.11(i) 0.17 0.07 0.08
Net realized and unrealized gain
(loss) on investments 1.87 4.54 (1.47) 1.37 1.02
- ---------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.96 4.65 (1.30) 1.44 1.10
- ---------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (0.33) (0.16) (0.15) (0.06) (0.12)
Distributions from net realized gains (11.00) -- (0.56) -- (0.13)
- ---------------------------------------------------------------------------------------------------------------------
Total Distributions (11.33) (0.16) (0.71) (0.06) (0.25)
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $ 8.42 $ 17.79 $ 13.30 $ 15.31 $ 13.93
=====================================================================================================================
Total Return 19.68% 35.13% (8.28%) 10.34% 8.64%
=====================================================================================================================
Ratios and Supplemental Data:
Net assets, end of year (000's omitted) $ 20,910 $ 8,639 $ 29,135 $31,895 $ 8,671
=====================================================================================================================
Ratio of expenses to average net assets 0.81% 0.75% 0.75% 0.97% 1.25%
=====================================================================================================================
Decrease reflected in above expense ratios
due to expense reimbursements -- -- -- -- 0.01%
=====================================================================================================================
Ratio of net investment income to average
net assets 0.94% 0.61% 1.22% 1.51% 1.62%
=====================================================================================================================
Portfolio Turnover Rate 121.60% 164.05% 177.97% 105.80% 100.62%
=====================================================================================================================
Average Commission Rate Paid $ .0728
===================================================================
</TABLE>
(i) Amount was computed based on average shares outstanding during the year.
See Notes to Financial Statements.
17
<PAGE>
- --------------------------------------------------------------------------------
ALGER AMERICAN BALANCED PORTFOLIO
PORTFOLIO HIGHLIGHTS THROUGH DECEMBER 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
The Alger American Balanced Portfolio invests in stocks of companies with
growth potential and fixed-income securities with emphasis on
income-producing securities which appear to have some potential for capital
appreciation.
- --------------------------------------------------------------------------------
$10,000 HYPOTHETICAL INVESTMENT SINCE INCEPTION September 5, 1989
- --------------------------------------------------------------------------------
[THE FOLLOWING TABLE REPRESENTS A GRAPH CONTAINING PLOT POINTS]
LEHMAN BROTHERS
ALGER AMERICAN BALANCED S&P 500 INDEX GOVT/CORP BOND INDEX
----------------------- -------------- --------------------
09/05/89 10,000 10,000 10,000
12/31/89 10,265 10,170 10,399
12/31/90 10,933 9,847 11,261
12/31/91 11,447 12,847 13,077
12/31/92 12,535 13,822 14,067
12/31/93 13,511 15,210 15,623
12/31/94 12,935 15,410 15,075
12/31/95 16,638 21,201 17,975
12/31/96 18,329 26,113 18,501
The chart above illustrates the growth in value of a hypothetical $10,000
investment made in the Alger American Balanced Portfolio, the S&P 500 Index,
and the Lehman Brothers Government/Corporate Bond Index on September 5, 1989,
the inception date of the Alger American Balanced Portfolio. Figures for the
Alger American Balanced Portfolio, the S&P 500 Index, an unmanaged index of
common stocks, and the Lehman Brothers Government/Corporate Bond Index, an
unmanaged index of government and corporate bonds, include reinvestment of
dividends and/or interest.
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON THROUGH December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
1 YEAR 5 YEARS SINCE INCEPTION
-----------------------------------------------
<S> <C> <C> <C>
ALGER AMERICAN BALANCED PORTFOLIO 10.17% 9.87% 8.63%
S&P 500 INDEX 22.96% 15.22% 14.01%
LEHMAN BROTHERS GOV'T/CORP BOND INDEX 2.90% 7.18% 8.77%
-----------------------------------------------
</TABLE>
PERFORMANCE FIGURES DO NOT REFLECT DEDUCTION OF INSURANCE CHARGES AGAINST
ASSETS OR ANNUITIES. IF THESE CHARGES WERE DEDUCTED, THE TOTAL RETURN FIGURES
WOULD BE LOWER. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.
18
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1996
- --------------------------------------------------------------------------------
SHARES COMMON STOCKS--56.9% VALUE
------ -----
AEROSPACE--3.1%
1,200 Boeing Company (The) ................. $ 127,650
2,200 Gulfstream Aerospace Corp.* .......... 53,350
2,500 Sundstrand Corp. ..................... 106,250
500 United Technologies Corp. ............ 33,000
---------
320,250
---------
APPAREL--.5%
1,000 Tommy Hilfiger Corporation* .......... 48,000
---------
BIO-TECHNOLOGY--.3%
600 Amgen Inc.* .......................... 32,625
---------
BUSINESS SERVICES--.3%
500 Cintas Corp. ......................... 29,375
---------
CHEMICALS--1.5%
3,925 Monsanto Co. ......................... 152,584
---------
COMMUNICATIONS--1.5%
800 LCI International, Inc.* ............. 17,200
500 Lucent Technologies Inc. ............. 23,125
600 Telecomunicacoes Brasileiras S.A. ADR. 45,900
2,600 WorldCom Inc.* ....................... 67,763
---------
153,988
---------
COMMUNICATIONS EQUIPMENT--3.9%
1,000 Ascend Communications, lnc.* ......... 62,125
500 Cascade Communications Corp.* ........ 27,563
3,100 Cisco Systems, Inc.* ................. 197,237
1,000 Glenayre Technologies Inc.* .......... 21,562
900 PictureTel Corp.* .................... 23,400
2,000 Tellabs, Inc.* ....................... 75,250
---------
407,137
---------
COMPUTER RELATED &
BUSINESS EQUIPMENT--2.6%
1,600 Hewlett-Packard Company .............. 80,400
2,800 Sun Microsystems Inc.* ............... 71,926
1,700 3 Com Corp.* ......................... 124,738
---------
277,064
---------
COMPUTER SERVICES--.4%
700 Diebold Inc. ......................... 44,013
---------
COMPUTER SOFTWARE--3.2%
600 Computer Associates International Inc.* 29,850
1,500 Compuware Corp.* ..................... 75,188
4,200 Informix Corporation* ................ 85,575
1,500 Microsoft Corporation* ............... 123,938
500 Parametric Technology Corporation* ... 25,688
---------
340,239
---------
CONGLOMERATE--.4%
700 Tyco International Ltd. .............. 37,013
---------
CONSUMER PRODUCTS--3.8%
2,850 CUC International Inc.* .............. 67,688
600 Colgate Palmolive Co. ................ 55,350
1,500 General Electric Co. ................. 148,313
2,100 Nike, Inc. Cl. B ..................... 125,475
---------
396,826
---------
DEFENSE--.6%
741 Lockheed Martin Corp. ................ 67,802
---------
ENERGY & ENERGY SERVICES--1.0%
1,100 Schlumberger Ltd. .................... 109,862
---------
FINANCIAL SERVICES--7.5%
1,600 Chase Manhattan Corp. ................. 142,800
1,800 Citicorp .............................. 185,400
4,926 First Data Corporation+ ............... 179,799
2,560 GreenTree Financial Corp. ............. 98,880
800 MBNA Corp. ............................ 33,200
3,000 Money Store Inc. (The) ................ 82,875
2,000 Schwab (Charles) Corporation (The)+ ... 64,000
---------
786,954
---------
FOOD CHAINS--.3%
700 Safeway Inc.*+ ........................ 29,925
---------
HEALTH CARE--.9%
2,500 Columbia/HCA Healthcare Corporation ... 101,875
---------
INSURANCE--2.4%
1,700 American International Group, Inc. .... 184,025
800 MGIC Investment Corp.+ ................ 60,800
---------
244,825
---------
LEISURE & ENTERTAINMENT--.7%
3,700 International Game Technology ......... 67,525
---------
MACHINERY--.5%
1,000 Case Corp. ............................ 54,500
---------
MEDICAL DEVICES--1.3%
500 Boston Scientific Corp.* .............. 30,000
1,500 Medtronic, Inc. ....................... 102,000
---------
132,000
---------
OIL & GAS--1.0%
900 Halliburton Co. ....................... 54,225
1,100 Tidewater Inc. ........................ 49,775
---------
104,000
---------
19
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1996 (CONT'D)
- --------------------------------------------------------------------------------
SHARES COMMON STOCKS (CONTINUED) VALUE
------ -----
PHARMACEUTICALS--6.0%
600 Bristol Myers Squibb Co. .............. $ 65,250
2,200 Eli Lilly & Company ................... 160,600
2,500 Merck & Co., Inc. ..................... 198,125
800 Pfizer Inc. ........................... 66,300
1,900 Warner-Lambert Co. .................... 142,500
---------
632,775
---------
POLLUTION CONTROL--.9%
3,000 USA Waste Services, Inc.* ............. 95,625
---------
RESTAURANTS & LODGING--1.5%
1,700 Boston Chicken Inc.*+ ................. 60,987
3,000 Lone Star Steakhouse & Saloon, lnc.* .. 80,250
700 Outback Steakhouse, Inc.* ............. 18,725
---------
159,962
---------
RETAILING--3.3%
900 Borders Group Inc.* ................... 32,288
1,000 Dollar General Corp. .................. 32,000
500 Gucci Group N.V. ...................... 31,938
2,500 Home Depot, lnc.+ ..................... 125,312
1,000 Nine West Group Inc.* ................. 46,375
7,500 OfficeMax, Inc.* ...................... 79,687
---------
347,600
---------
SEMICONDUCTORS--5.5%
4,000 Adaptec, Inc.* ........................ 160,000
1,800 Altera Corporation* ................... 130,838
1,600 Intel Corp. ........................... 209,501
2,100 Xilinx, Inc.* ......................... 77,306
---------
577,645
---------
MISCELLANEOUS--2.0%
1,900 Loewen Group Inc. ..................... 74,338
5,000 Service Corp. International ........... 140,000
---------
214,338
---------
TOTAL COMMON STOCKS
(COST $5,148,472) ................... 5,966,327
---------
PREFERRED STOCK--.4%
COMMUNICATIONS
700 Nokia Corporation, ADR
(COST $33,021) ...................... 40,338
---------
AUTOMOTIVE--4.2%
$ 200,000 Ford Motor Credit Corp.,
9.50%, 6/1/10 ....................... 237,531
200,000 General Motors Acceptance Corp.,
7.125%, 6/1/99 ...................... 203,236
---------
440,767
---------
CHEMICALS & PHARMACEUTICALS--2.0%
200,000 WMX Technologies Corp.,
8.25%, 11/15/99 ..................... 209,274
---------
ELECTRIC UTILITIES--.9%
100,000 Cincinnati Gas & Electric Co.,
7.20%, 10/01/23 ..................... 95,500
---------
FINANCIAL SERVICES--.9%
100,000 Bank America Corp.,
7.125%, 05/12/05 .................... 100,754
---------
INSURANCE--1.0%
100,000 Travelers Inc.,
7.75%, 06/15/99 ..................... 102,602
---------
TOTAL CORPORATE BONDS
(COST $984,355) ..................... 948,897
---------
U.S. GOVERNMENT AND AGENCY
OBLIGATIONS--13.7%
200,000 U.S. Treasury Notes,
5.625%, 11/30/98 .................... 199,094
200,000 U.S. Treasury Notes,
7.50%, 10/31/99 ..................... 207,438
200,000 U.S. Treasury Notes,
5.875%,11/30/01 ..................... 197,094
200,000 U.S. Treasury Bonds,
7.625%, 11/15/22 .................... 220,782
200,000 Federal Home Loan Mortgage Corp.,
8.20%, 1/16/98 ...................... 200,698
200,000 Federal National Mortgage Association,
7.60%, 4/14/04 ...................... 199,468
200,000 Federal National Mortgage Association,
8.50%, 2/01/05 ...................... 210,434
---------
TOTAL U.S. GOVERNMENT &
AGENCY OBLIGATIONS
(COST $1,389,688) ................... 1,435,008
---------
20
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1996 (CONT'D)
- --------------------------------------------------------------------------------
PRINCIPAL VALUE
AMOUNT ------
- --------
SHORT-TERM INVESTMENTS--20.4%
SHORT-TERM CORPORATE NOTES--12.4%
$500,000 Countrywide Funding Corp.,
5.95%, 1/14/97 .................... $ 498,926
300,000 Dynamic Funding Corp., Series A,
6.08%, 1/03/97 .................... 299,899
500,000 Ford Motor Credit Corp.,
5.88%, 1/02/97 .................... 499,917
-----------
TOTAL SHORT-TERM CORPORATE NOTES
(COST $1,298,742) ................. 1,298,742
-----------
SHORT-TERM U.S. GOVERNMENT
OBLIGATIONS--4.7%
250,000 U.S. Treasury Bills, 4.86%, 3/20/97 . 247,862
250,000 U.S. Treasury Bills, 5.04%, 6/19/97 . 244,528
-----------
TOTAL SHORT-TERM U.S. GOVERNMENT
OBLIGATIONS (COST $491,452) ....... 492,390
-----------
SECURITIES HELD UNDER
REPURCHASE AGREEMENTS--3.3%
Securities Held Under Repurchase
Agreements, 6.50%-6.625%, 1/2/97,
with Bear, Stearns & Co. Inc., dtd
12/31/96, repurchase price $342,157;
collateralized by U.S. Treasury
Strips (par value $1,290,000
due 2/15/16) ...................... 342,033
-----------
TOTAL SHORT-TERM INVESTMENTS
(COST $2,132,227) ................. 2,133,165
-----------
TOTAL INVESTMENTS
(COST $9,687,763)(A) ................ 100.4% 10,523,735
Liabilities in Excess of Other Assets . (.4) (38,051)
----- -----------
NET ASSETS ............................ 100.0% $10,485,684
===== ===========
* Non-income producing security.
+ Securities partially or fully on loan.
(a) At December 31, 1996, the net unrealized appreciation on investments, based
on cost for federal income tax purposes of $9,687,763 amounted to $835,972
which consisted of aggregate gross unrealized appreciation of $1,036,598 and
aggregate gross unrealized depreciation of $200,626.
See Notes to Financial Statements.
21
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN BALANCED PORTFOLIO (i)
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 13.64 $ 10.80 $ 11.58 $ 10.77 $ 10.02
- ------------------------------------------------------------------------------------------------------------------------
Net investment income 0.21(ii) 0.33(ii) 0.20 0.15 0.22
Net realized and unrealized gain
(loss) on investments 1.01 2.73 (0.70) 0.69 0.72
- ------------------------------------------------------------------------------------------------------------------------
Total from investment operations 1.22 3.06 (0.50) 0.84 0.94
- ------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (0.73) (0.22) (0.13) (0.03) (0.19)
Distributions from net realized gains (4.89) -- (0.15) -- --
- ------------------------------------------------------------------------------------------------------------------------
Total Distributions (5.62) (0.22) (0.28) (0.03) (0.19)
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $ 9.24 $ 13.64 $ 10.80 $ 11.58 $ 10.77
========================================================================================================================
Total Return 10.17% 28.62% (4.27%) 7.79% 9.48%
========================================================================================================================
Ratios and Supplemental Data:
Net assets, end of year (000's omitted) $10,486 $ 3,671 $ 10,394 $ 7,848 $ 4,009
========================================================================================================================
Ratio of expenses to average net
assets 1.14% 1.00% 1.08% 1.25% 1.25%
========================================================================================================================
Decrease reflected in above expense
ratios due to expense
reimbursements -- -- -- 0.19% 0.42%
========================================================================================================================
Ratio of net investment income to
average net assets 2.06% 2.49% 2.30% 2.05% 1.99%
========================================================================================================================
Portfolio Turnover Rate 68.66% 113.02% 78.80% 85.46% 15.27%
========================================================================================================================
Average Commission Rate Paid $ .0712
=====================================================================
</TABLE>
(i) Prior to October 1, 1992, the American Balanced Portfolio was the American
Fixed Income Portfolio.
(ii) Amount was computed based on average shares outstanding during the year.
See Notes to Financial Statements.
22
<PAGE>
- --------------------------------------------------------------------------------
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
PORTFOLIO HIGHLIGHTS THROUGH DECEMBER 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
The Alger American MidCap Growth Portfolio invests in mid-sized companies.
- --------------------------------------------------------------------------------
$10,000 HYPOTHETICAL INVESTMENT SINCE INCEPTION May 3, 1993
- --------------------------------------------------------------------------------
[THE FOLLOWING TABLE REPRESENTS A GRAPH CONTAINING PLOT POINTS]
Alger American S&P Midcap
Midcap Growth 400 Index
------------- ---------
5/23/93 ............ $ 10,000 $ 10,000
12/31/93 ........... 13,867 11,297
12/31/94 ........... 13,653 10,893
12/31/95 ........... 19,722 14,624
12/31/96 ........... 22,068 17,001
The chart above illustrates the growth in value of a hypothetical $10,000
investment made in the Alger American MidCap Growth Portfolio and the S&P
MidCap 400 Index on May 3, 1993, the inception date of the Alger American
MidCap Growth Portfolio. Figures for the Alger American MidCap Growth
Portfolio and the S&P MidCap 400 Index, an unmanaged index of common stocks,
include reinvestment of dividends.
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON THROUGH December 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
1 YEAR SINCE INCEPTION
-------------------------------------------
<S> <C> <C>
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO 11.90% 24.08%
S&P MIDCAP 400 INDEX 19.20% 15.56%
-------------------------------------------
</TABLE>
PERFORMANCE FIGURES DO NOT REFLECT DEDUCTION OF INSURANCE CHARGES AGAINST
ASSETS OR ANNUITIES. IF THESE CHARGES WERE DEDUCTED, THE TOTAL RETURN FIGURES
WOULD BE LOWER. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.
23
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1996
- --------------------------------------------------------------------------------
SHARES COMMON STOCKS--93.7% VALUE
------ -----
AEROSPACE--3.3%
50,000 Greenwich Air Services Inc. CI. A .. $ 1,125,000
179,000 Gulfstream Aerospace Corp.* ........ 4,340,750
182,000 Sundstrand Corp. ................... 7,735,000
------------
13,200,750
------------
APPAREL--1.6%
48,500 Liz Claiborne Inc. ................. 1,873,312
24,900 Nautica Enterprises Inc.* .......... 628,725
83,100 Tommy Hilfiger Corporation* ........ 3,988,800
------------
6,490,837
------------
BIO-TECHNOLOGY--1.0%
78,400 BioChem Pharma Inc.*+ .............. 3,939,600
------------
BROADCASTING--.6%
65,000 Univision Communications Inc. CI. A. 2,405,000
------------
BUSINESS SERVICES--1.6%
84,500 Cintas Corp. ....................... 4,964,375
31,000 G & K Services Inc. Cl. A. ......... 1,170,250
------------
6,134,625
------------
COMMUNICATIONS--3.7%
103,100 LCI International Inc.* ............ 2,216,650
210,800 Qualcomm Inc.* ..................... 8,405,650
156,100 WorldCom Inc.* ..................... 4,068,434
------------
14,690,734
------------
COMMUNICATIONS EQUIPMENT--5.8%
66,600 Ascend Communications, lnc.* ....... 4,137,525
60,000 Cascade Communications Corp.* ...... 3,307,500
56,100 Cisco Systems, Inc.* ............... 3,569,363
111,075 Glenayre Technologies Inc.* ........ 2,395,110
43,200 Pairgain Technologies Inc.* ........ 1,314,922
149,000 PictureTel Corp.* .................. 3,874,000
109,000 Tellabs, Inc.* ..................... 4,101,125
------------
22,699,545
------------
COMPUTER RELATED &
BUSINESS EQUIPMENT--3.0%
66,000 Cable Design Technologies Corp.* ... 2,054,250
110,000 Ingram Micro Inc. Cl. A* ........... 2,530,000
101,000 3 Com Corp.* ....................... 7,410,875
------------
11,995,125
------------
COMPUTER SERVICES--.5%
54,600 Cambridge Technology Partners Inc.* 1,832,540
------------
COMPUTER SOFTWARE--7.7%
99,900 Compuware Corp.* ................... 5,007,488
46,500 Electronics For lmaging Inc.* ...... 3,824,625
28,900 HBO & Company ...................... 1,715,938
269,200 Informix Corporation* .............. 5,484,950
96,400 Learning Company Inc. (The)*+ ...... 1,385,750
87,500 Medic Computer Systems, lnc.* ...... 3,527,388
103,000 Parametric Technology Corporation* . 5,291,625
203,000 Structural Dynamics Research Corp.* 4,060,000
------------
30,297,764
------------
COMPUTER TECHNOLOGY--1.3%
67,000 Citrix Systems, Inc.* .............. 2,617,221
72,500 Sterling Commerce, lnc.* ........... 2,555,625
------------
5,172,846
------------
CONGLOMERATE--.5%
40,500 Tyco International Ltd. ............ 2,141,438
------------
CONSUMER PRODUCTS--1.7%
218,250 CUC International Inc.* ............ 5,183,437
29,000 Herman Miller Inc. ................. 1,642,125
------------
6,825,562
------------
ENERGY SERVICES--.7%
59,000 Smith International Inc. ........... 2,647,625
------------
FINANCIAL SERVICES--8.5%
125,300 Equifax Inc. ....................... 3,837,313
111,012 First Data Corporation+ ............ 4,051,938
126,400 Green Tree Financial Corp. ......... 4,882,200
84,800 Leasing Solutions Inc.* ............ 2,183,600
45,500 MBNA Corp. ......................... 1,888,250
303,500 Money Store Inc. (The)+ ............ 8,384,188
137,700 Schwab (Charles) Corporation (The)+ 4,406,400
91,400 SunAmerica Inc. .................... 4,055,875
------------
33,689,764
------------
FOOD CHAINS--1.1%
103,000 Safeway Inc.*+ ..................... 4,403,250
------------
HEALTH CARE--.5%
41,500 Access Health, Inc.* ............... 1,857,125
------------
INSURANCE--1.5%
54,000 MGIC Investment Corp.+ ............. 4,104,000
43,000 Travelers/Aetna Property Casualty Corp.
Cl. A ............................ 1,521,125
-----------
5,625,125
------------
24
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1996 (CONT'D)
- --------------------------------------------------------------------------------
SHARES COMMON STOCKS (C0NTINUED) VALUE
------ -----
LEISURE & ENTERTAINMENT--3.2%
457,300 International Game Technology ..... $ 8,345,725
203,000 Mirage Resorts, Incorporated* ..... 4,389,875
-------------
12,735,600
-------------
MACHINERY--.6%
43,000 Case Corp. ........................ 2,343,500
-------------
MANUFACTURING--1.0%
142,500 American Power Conversion Corp.* .. 3,883,125
-------------
MEDICAL DEVICES--3.2%
64,000 Boston Scientific Corp.* .......... 3,840,000
25,000 Hologic, Inc.* .................... 618,750
45,000 IDEXX Laboratories Inc.* .......... 1,620,000
31,800 Mentor Corp. ...................... 938,100
54,000 STERIS Corp.* ..................... 2,349,000
80,600 Target Therapeutics, Inc.* ........ 3,385,200
-------------
12,751,050
-------------
MEDICAL SERVICES--1.1%
155,000 PhyCor, Inc.* ..................... 4,398,125
-------------
METALS--1.0%
120,000 Titanium Metals Corporation*+ ..... 3,945,000
-------------
OIL & GAS--3.9%
79,000 B.J. Services Corp.*+ ............. 4,029,000
145,100 Global Marine Inc.* ............... 2,992,687
90,900 Halliburton Co. ................... 5,476,725
65,100 Tidewater Inc. .................... 2,945,775
-------------
15,444,187
-------------
PAPER & PACKAGING
& FOREST PRODUCTS--1.3%
120,000 Sealed Air Corp.*+ ................ 4,995,000
-------------
POLLUTION CONTROL--4.7%
274,600 USA Waste Services, Inc.*+ ........ 8,752,875
116,000 U.S. Filter Corp.*+ ............... 3,683,000
182,600 United Waste Systems, Inc.* ....... 6,276,875
-------------
18,712,750
-------------
RESTAURANTS &
LODGING--4.6%
189,400 Boston Chicken Inc.*+ .............. 6,794,725
95,300 Landry's Seafood Restaurants, lnc.*. 2,037,037
243,300 Lone Star Steakhouse & Saloon, lnc.*+ 6,508,275
110,800 Outback Steakhouse, Inc.* .......... 2,963,900
-------------
18,303,937
-------------
RETAILING--10.5%
218,700 Dollar General Corp. .............. 6,998,400
113,900 Gucci Group N.V. .................. 7,275,362
17,000 Neiman Marcus Group, Inc. (The)* .. 433,500
116,100 Nine West Group Inc.* ............. 5,384,137
495,300 OfficeMax, Inc.* .................. 5,262,563
119,800 PetsMart Inc.*+ ................... 2,620,625
76,600 Rite Aid Corp. .................... 3,044,850
212,200 Sports Authority Inc. (The)*+ ..... 4,615,350
84,800 TJX Companies, Inc. ............... 4,017,400
47,000 Tiffany & Co. ..................... 1,721,375
-------------
41,373,562
-------------
SEMICONDUCTORS--9.1%
268,700 Adaptec, Inc.* .................... 10,748,000
147,400 Altera Corporation* ............... 10,714,210
47,800 Linear Technology Corporation ..... 2,097,225
43,600 Maxim Integrated Products, lnc.* .. 1,885,700
39,400 Microchip Technology Incorporated* 2,004,475
150,000 S3 Incorporated* .................. 2,437,500
159,200 Xilinx, Inc.* ..................... 5,860,630
-------------
35,747,740
-------------
TRANSPORTATION--.6%
76,000 Coach USA Inc.* ................... 2,204,000
-------------
MISCELLANEOUS--4.3%
220,800 Loewen Group Inc. ................. 8,638,800
298,000 Service Corp International ........ 8,344,000
-------------
16,982,800
-------------
TOTAL COMMON STOCKS
(COST $322,117,641) ............. 369,869,631
-------------
25
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1996 (CONT'D)
- --------------------------------------------------------------------------------
SHARES PREFERRED STOCK--1.5% VALUE
- ------ -----
COMMUNICATIONS
105,800 Nokia Corporation, ADR
(COST $5,108,232) ............... $ 6,096,725
------------
PRINCIPAL
AMOUNT SHORT-TERM INVESTMENTS--4.6%
--------
SHORT-TERM CORPORATE NOTES--3.3%
$5,000,000 Countrywide Funding Corp.,
5.95%, 1/14/ 97 ................. 4,989,257
8,000,000 Dynamic Funding Corp., Series A,
6.08%, 1/03/ 97 ................. 7,997,298
------------
TOTAL SHORT-TERM CORPORATE NOTES
(COST $12,986,555) .............. 12,986,555
------------
SECURITIES HELD UNDER
REPURCHASE AGREEMENTS--1.3%
Securities Held Under Repurchase
Agreements, 6.50%,
1/2/97, with Bear, Stearns & Co. Inc.,
dtd 12/31/96, repurchase price
$5,302,050; collateralized by
U.S. Treasury Strips (par value
$19,865,000 due 2/15/16) ........ 5,300,136
------------
Total Short-Term Investments
(COST $18,286,691) .............. 18,286,691
------------
TOTAL INVESTMENTS
(COST $345,512,564)(a) .............. 99.8% 394,253,047
Other Assets in Excess of Liabilities . .2 593,687
----- -----------
NET ASSETS ............................ 100.0% $394,846,734
===== ===========
- --------------------------------------------------------------------------------
* Non-income producing security.
+ Securities partially or fully on loan.
(a) At December 31, 1996, the net unrealized appreciation on investments, based
on cost for federal income tax purposes of $345,512,564, amounted to
$48,740,483 which consisted of aggregate gross unrealized appreciation of
$59,552,909 and aggregate gross unrealized depreciation of $10,812,426.
See Notes to Financial Statements.
26
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1996 1995 1994
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $ 19.44 $ 13.46 $ 13.72
- ----------------------------------------------------------------------------------------------------------
Net investment income (loss) 0.03 (0.03) 0.00(ii)
Net realized and unrealized gain (loss)
on investments 2.29 6.01 (0.21)
- ----------------------------------------------------------------------------------------------------------
Total from investment operations 2.32 5.98 (0.21)
Distributions from net realized gains (0.41) -- (0.05)
- ----------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 21.35 $ 19.44 $ 13.46
==========================================================================================================
Total Return 11.90% 44.45% (1.54%)
==========================================================================================================
Ratios and Supplemental Data:
Net assets, end of period (000's omitted) $394,847 $185,349 $62,178
==========================================================================================================
Ratio of expenses to average net assets 0.84% 0.90% 0.97%
==========================================================================================================
Decrease reflected in above expense ratio
due to expense reimbursements -- -- --
==========================================================================================================
Ratio of net investment income (loss) to average
net assets 0.08% (0.25%) 0.03%
==========================================================================================================
Portfolio Turnover Rate 90.97% 104.74% 83.96%
==========================================================================================================
Average Commission Rate Paid $ .0663
=======================================================================
</TABLE>
FROM MAY 3, 1993
(COMMENCEMENT OF
OPERATIONS)
TO DECEMBER 31, 1993(I)
- --------------------------------------------------------------------------------
Net asset value, beginning of period $ 10.00
- --------------------------------------------------------------------------------
Net investment income (loss) (0.02)
Net realized and unrealized gain (loss) on investments 3.88
- --------------------------------------------------------------------------------
Total from investment operations 3.86
Distributions from net realized gains (0.14)
- --------------------------------------------------------------------------------
Net asset value, end of period $ 13.72
================================================================================
Total Return 38.67%
================================================================================
Ratios and Supplemental Data:
Net assets, end of period (000's omitted) $21,301
================================================================================
Ratio of expenses to average net assets 1.50%
================================================================================
Decrease reflected in above expense ratio
due to expense reimbursements 0.03%
================================================================================
Ratio of net investment income (loss) to average
net assets (0.58%)
================================================================================
Portfolio Turnover Rate 67.22%
================================================================================
Average Commission Rate Paid
=========================================================
(i) Ratios have been annualized; total return has not been annualized.
(ii) Amount was computed based on average shares outstanding during the period.
See Notes to Financial Statements.
27
<PAGE>
- --------------------------------------------------------------------------------
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
PORTFOLIO HIGHLIGHTS THROUGH DECEMBER 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
The Alger American Leveraged AllCap Portfolio focuses on companies with
promising growth potential while using some special investment tools such as
leveraging and options and futures transactions.
- --------------------------------------------------------------------------------
$10,000 HYPOTHETICAL INVESTMENT SINCE INCEPTION January 25, 1995
- --------------------------------------------------------------------------------
[THE FOLLOWING TABLE REPRESENTS A GRAPH CONTAINING PLOT POINTS]
Alger American
Leveraged AllCap S&P 500 Index
---------------- -------------
1/25/95 ................. $10,000 $10,000
12/31/95 ................ 17,430 13,480
12/31/96 ................ 19,529 16,586
The chart above illustrates the growth in value of a hypothetical $10,000
investment made in the Alger American Leveraged AllCap Portfolio and the S&P
500 Index on January 25, 1995, the inception date of the Alger American
Leveraged AllCap Portfolio. Figures for the Alger American Leveraged AllCap
Portfolio and the S&P 500 Index, an unmanaged index of common stocks, include
reinvestment of dividends.
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON THROUGH DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
1 YEAR SINCE INCEPTION
-------------------------------
<S> <C> <C>
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO 12.04% 41.27%
S&P 500 INDEX 22.96% 29.85%
-------------------------------
</TABLE>
PERFORMANCE FIGURES DO NOT REFLECT DEDUCTION OF INSURANCE CHARGES AGAINST
ASSETS OR ANNUITIES. IF THESE CHARGES WERE DEDUCTED, THE TOTAL RETURN FIGURES
WOULD BE LOWER. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS.
28
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1996
- --------------------------------------------------------------------------------
SHARES COMMON STOCKS--96.8% VALUE
------ -----
AEROSPACE--5.3%
8,800 Boeing Company (The) .................. $ 936,100
6,500 Gulfstream Aerospace Corp.* ........... 157,625
10,000 Sundstrand Corp. ...................... 425,000
5,100 United Technologies Corp. ............. 336,600
---------
1,855,325
---------
APPAREL--.4%
1,600 Nautica Enterprises Inc.* ............. 40,400
2,000 Tommy Hilfiger Corporation* ........... 96,000
---------
136,400
---------
BIO-TECHNOLOGY--1.7%
2,500 Amgen Inc.* ........................... 135,938
6,100 BioChem Pharma Inc.*+ ................. 306,525
12,000 CellPro Incorporated* ................. 150,000
---------
592,463
---------
BUSINESS SERVICES--1.2%
9,900 Saville Systems PLC ADR* .............. 402,188
---------
CHEMICALS--2.1%
18,500 Monsanto Co. .......................... 719,188
---------
COMMUNICATIONS--2.6%
14,500 LCI International Inc.* ............... 311,750
2,700 Lucent Technologies Inc. .............. 124,875
3,700 Qualcomm Inc.* ........................ 147,538
13,700 WorldCom Inc.* ........................ 357,063
---------
941,226
---------
COMMUNICATIONS EQUIPMENT--12.5%
16,100 Ascend Communications, lnc.* .......... 1,000,212
7,000 Cascade Communications Corp.* ......... 385,875
16,000 Cisco Systems, Inc.* .................. 1,018,000
7,775 Glenayre Technologies Inc* ............ 167,652
14,000 Pairgain Technologies Inc.* ........... 426,132
9,600 PictureTel Corp.* ..................... 249,600
28,600 Tellabs, Inc.* ........................ 1,076,075
---------
4,323,546
---------
COMPUTER RELATED &
BUSINESS EQUIPMENT--4.9%
4,200 Hewlett-Packard Company ............... 211,050
14,800 Sun Microsystems Inc.* ................ 380,182
15,200 3 Com Corp.* .......................... 1,115,300
---------
1,706,532
---------
COMPUTER SERVICES--2.3%
10,000 FactSet Research Systems Inc.* ........ 210,000
11,800 Paychex, Inc. ......................... 606,968
---------
816,968
---------
COMPUTER SOFTWARE--11.7%
2,600 Computer Associates International Inc.* 129,350
10,000 Compuware Corp.* ...................... 501,250
8,700 Electronics For Imaging Inc.* ......... 715,575
9,900 HBO & Company ......................... 587,813
23,900 Informix Corporation* ................. 486,963
9,900 Learning Company Inc. (The)* .......... 142,313
6,000 Medic Computer Systems, lnc.* ......... 241,878
8,200 Microsoft Corporation* ................ 677,525
5,000 Parametric Technology Corporation* .... 256,875
18,100 Structural Dynamics Research Corp.* ... 362,000
---------
4,101,542
---------
COMPUTER TECHNOLOGY--1.9%
8,000 Citrix Systems, Inc.* ................. 312,504
10,300 Sterling Commerce, lnc.* .............. 363,075
---------
675,579
---------
CONSUMER PRODUCTS--2.0%
3,200 Colgate Palmolive Co. ................. 295,200
7,000 Nike, Inc. Cl. B ...................... 418,250
---------
713,450
---------
DEFENSE--.9%
3,500 Lockheed Martin Corp. ................. 320,250
---------
ENERGY & ENERGY SERVICES--1.4%
4,800 Schlumberger Ltd. ..................... 479,400
---------
FINANCIAL SERVICES--8.3%
7,600 Chase Manhattan Corp. ................. 678,300
7,000 Citicorp .............................. 721,000
18,000 First Data Corporation+ ............... 657,000
3,000 Green Tree Financial Corp. ............ 115,875
14,600 Money Store Inc. (The)+ ............... 403,325
10,000 Schwab (Charles) Corporation (The)+ ... 320,000
---------
2,895,500
---------
FOOD CHAINS--.4%
3,500 Safeway Inc.*+ ........................ 149,625
---------
INSURANCE--2.2%
7,000 American International Group Inc. ..... 757,750
---------
LEISURE & ENTERTAINMENT--1.9%
24,000 International Game Technology ......... 438,000
10,800 Mirage Resorts, Incorporated* ......... 233,550
---------
671,550
---------
MEDICAL DEVICES--3.5%
8,700 ESC Medical Systems Ltd. .............. 221,850
13,200 Hologic, Inc.* ........................ 326,700
1,000 Intercardia, Inc.* .................... 21,500
8,000 Medtronic, Inc. ....................... 544,000
2,700 Target Therapeutics, Inc.* ............ 113,400
---------
1,227,450
---------
29
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1996 (CONT'D)
- --------------------------------------------------------------------------------
SHARES COMMON STOCKS--(CONTINUED) VALUE
------ -----
MEDICAL SERVICES--2.4%
5,600 Lincare Holdings Inc.* .............. $ 229,600
11,000 PhyCor, Inc.*+ ...................... 312,125
4,300 Quintiles Transnational Corp.* ...... 284,875
-----------
826,600
-----------
METALS--.5%
5,000 Titanium Metals Corporation* ........ 164,375
-----------
OIL & GAS--.9%
1,800 Halliburton Co. ..................... 108,450
4,800 Tidewater Inc. ...................... 217,200
-----------
325,650
-----------
PHARMACEUTICALS--6.2%
1,500 Bristol Myers Squibb Co. ............ 163,125
9,000 Eli Lilly & Company ................. 657,000
6,200 Merck & Co., Inc. ................... 491,350
3,600 Pfizer Inc. ......................... 298,350
7,500 Warner-Lambert & Co. ................ 562,500
-----------
2,172,325
-----------
POLLUTION CONTROL--1.2%
10,000 USA Waste Services, Inc.* ........... 318,750
3,200 United Waste Systems, Inc.* ......... 110,000
-----------
428,750
-----------
RESTAURANTS & LODGING--.6%
7,900 Lone Star Steakhouse & Saloon Inc.* . 211,325
-----------
RETAILING--7.2%
10,500 Dollar General Corp. ................ 336,000
10,400 Gucci Group N.V. .................... 664,300
7,500 Home Depot, lnc.+ ................... 375,937
9,700 Nine West Group Inc.* ............... 449,837
17,000 Sports Authority Inc. (The)* ........ 369,750
6,500 TJX Companies, Inc. ................. 307,938
-----------
2,503,762
-----------
SEMICONDUCTORS--7.8%
19,200 Adaptec, Inc.* ...................... 768,000
12,900 Altera Corporation* ................. 937,675
1,600 Intel Corp. ......................... 209,501
4,300 Linear Technology Corporation ....... 188,662
6,600 Maxim Integrated Products, lnc.* .... 285,450
9,000 Xilinx, Inc.* ....................... 331,317
-----------
2,720,605
-----------
MISCELLANEOUS--2.8%
14,500 Loewen Group Inc. ................... 567,312
14,000 Service Corp. International ......... 392,000
-----------
959,312
-----------
TOTAL COMMON STOCKS
(COST $31,404,661) ................ 33,798,636
-----------
PREFERRED STOCK--.6%
COMMUNICATIONS
3,700 Nokia Corporation, ADR
(COST $174,550) ................... 213,213
-----------
SHORT TERM INVESTMENTS--4.0%
SECURITIES HELD
UNDER REPURCHASE
AGREEMENTS
Securities Held Under Repurchase
Agreements, 6.50%-6.625%, 1/2/97,
with Bear, Stearns & Co. Inc., dtd
12/31/96, repurchase price
$1,398,650; collateralized by
U.S. Treasury Strips (par
value $1,530,000 due 2/15/98)
(COST $1,398,139) ................ 1,398,139
-----------
TOTAL INVESTMENTS
(COST $32,977,350)(A) .............. 101.4% 35,409,988
Liabilities in Excess Of Other Assets. (1.4) (484,718)
----- -----------
NET ASSETS ........................... 100.0% $34,925,270
====== ===========
- --------------------------------------------------------------------------------
* Non-income producing security.
+ Securities partially or fully on loan.
(a) At December 31, 1996, the net unrealized appreciation on investments, based
on cost for federal income tax purposes of $32,977,350, amounted to
$2,432,638 which consisted of aggregate gross unrealized appreciation of
$3,746,272 and aggregate gross unrealized depreciation of $1,313,634.
See Notes to Financial Statements.
30
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FROM JANUARY 25, 1995
YEAR ENDED (COMMENCEMENT OF
DECEMBER 31, OPERATIONS)
1996 TO DECEMBER 31, 1995(I)
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 17.43 $ 10.00
- ---------------------------------------------------------------------------------------------------------------------
Net investment (loss) (0.03)(ii) (0.03)
Net realized and unrealized gain (loss) on investments 2.14 7.46
- ---------------------------------------------------------------------------------------------------------------------
Total from investment operations 2.11 7.43
Distribution from net realized gains (0.18) --
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 19.36 $ 17.43
=====================================================================================================================
Total Return 12.04% 74.30%
=====================================================================================================================
Ratios and Supplemental Data:
Net assets, end of period (000's omitted) $ 34,925 $ 5,497
=====================================================================================================================
Ratio of expenses excluding interest to average net assets 1.06% 1.50%
=====================================================================================================================
Ratio of expenses including interest to average net assets 1.09% 1.56%
=====================================================================================================================
Decrease reflected in above expense ratios
due to expense reimbursements -- 2.36%
=====================================================================================================================
Ratio of net investment (loss) to average net assets (0.15%) (0.71%)
=====================================================================================================================
Portfolio Turnover Rate 102.10% 178.23%
=====================================================================================================================
Amount of debt outstanding at end of period -- --
=====================================================================================================================
Average amount of debt outstanding during the period $ 76,079 $ 8,122
=====================================================================================================================
Average daily number of shares outstanding during the period 1,107,187 75,460
=====================================================================================================================
Average amount of debt per share during the period $ .07 $ 0.11
=====================================================================================================================
Average Commission Rate Paid $ .0682
==============================================================================================
</TABLE>
(i) Ratios have been annualized; total return has not been annualized.
(ii) Amount was computed based on average shares outstanding during the period.
See Notes to Financial Statements.
31
<PAGE>
THE ALGER AMERICAN FUND
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERICAN AMERICAN
SMALL INCOME
AMERICAN CAPITALIZA- AND
GROWTH TION GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Investments in securities, at value
(identified cost*)--see accompany-
ing schedules of investments $1,024,844,901 $1,468,783,069 $21,466,121
Receivable for investment securities
sold 11,532,925 10,730,639 --
Receivable for shares of beneficial
interest sold 6,171,974 686,631 52,160
Interest and dividends receivable 568,180 274,594 14,938
Other assets 16,876 28,519 --
- -----------------------------------------------------------------------------------------
Total Assets 1,043,134,856 1,480,503,452 21,533,219
- -----------------------------------------------------------------------------------------
LIABILITIES:
Payable for securities loaned 32,470,434 -- 600,436
Payable for investment securities
purchased 18,661,927 2,595,909 --
Payable for shares of beneficial
interest redeemed 253,478 7,201,135 1,934
Accrued investment management fees 648,454 1,080,267 11,151
Accrued expenses 72,195 107,672 9,458
- -----------------------------------------------------------------------------------------
Total Liabilities 52,106,488 10,984,983 622,979
- -----------------------------------------------------------------------------------------
NET ASSETS $ 991,028,368 $1,469,518,469 $20,910,240
=========================================================================================
NET ASSETS CONSIST OF:
Paid-in capital $ 853,061,438 $1,226,865,358 $16,599,760
Undistributed net investment
income (accumulated loss) 3,745,616 (5,560,628) 150,862
Undistributed net realized gain
(accumulated loss) 5,264,954 47,177,150 1,156,790
Net unrealized appreciation 128,956,360 201,036,589 3,002,828
- -----------------------------------------------------------------------------------------
NET ASSETS $ 991,028,368 $1,469,518,469 $20,910,240
=========================================================================================
Shares of beneficial interest
outstanding--Note 6 28,868,474 35,924,690 2,482,48
=========================================================================================
NET ASSET VALUE PER SHARE $ 34.33 $ 40.91 $ 8.42
=========================================================================================
*Identified cost $ 895,888,541 $1,267,746,480 $18,463,293
=========================================================================================
</TABLE>
<TABLE>
<CAPTION>
AMERICAN AMERICAN
AMERICAN MIDCAP LEVERAGED
BALANCED GROWTH ALLCAP
PORTFOLIO PORTFOLIO PORTFOLIO
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Investments in securities, at value
(identified cost*)--see accompany-
ing schedules of investments $10,523,735 $ 394,253,047 $ 35,409,988
Receivable for investment securities
sold 63,837 4,422,652 118,367
Receivable for shares of beneficial
interest sold 20,698 741,882 346,855
Interest and dividends receivable 40,014 53,395 9,199
Other assets 303 8,168 458
- --------------------------------------------------------------------------------------
Total Assets 10,648,587 399,479,144 35,884,867
- --------------------------------------------------------------------------------------
LIABILITIES:
Payable for securities loaned 66,334 -- 914,436
Payable for investment securities
purchased 74,638 3,761,381 --
Payable for shares of beneficial
interest redeemed 6,295 556,311 1,097
Accrued investment management fees 6,794 278,783 25,571
Accrued expenses 8,842 35,935 18,493
- --------------------------------------------------------------------------------------
Total Liabilities 162,903 4,632,410 959,597
- --------------------------------------------------------------------------------------
NET ASSETS $10,485,684 $ 394,846,734 $ 34,925,270
======================================================================================
NET ASSETS CONSIST OF:
Paid-in capital $ 9,293,064 $ 340,402,368 $ 33,283,516
Undistributed net investment
income (accumulated loss) 147,959 (62,882) (40,367)
Undistributed net realized gain
(accumulated loss) 208,689 5,766,765 (750,517)
Net unrealized appreciation 835,972 48,740,483 2,432,638
- --------------------------------------------------------------------------------------
NET ASSETS $10,485,684 $ 394,846,734 $ 34,925,270
======================================================================================
Shares of beneficial interest
outstanding--Note 6 1,134,492 18,494,256 1,803,878
======================================================================================
NET ASSET VALUE PER SHARE 9.24 21.35 19.36
======================================================================================
*Identified cost $ 9,687,763 $ 345,512,564 $ 32,977,350
======================================================================================
</TABLE>
See Notes to Financial Statements.
32
<PAGE>
THE ALGER AMERICAN FUND
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERICAN AMERICAN
SMALL INCOME
AMERICAN CAPITALIZA- AND
GROWTH TION GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
Income:
Interest $ 5,084,368 $ 8,662,712 $ 106,242
Dividends 4,541,995 1,218,045 154,109
- -------------------------------------------------------------------------------------------------
Total Income 9,626,363 9,880,757 260,351
- -------------------------------------------------------------------------------------------------
Expenses:
Management fees-- Note 3(a) 5,604,710 10,617,051 92,934
Interest expense -- -- --
Custodian fees 183,801 324,785 13,791
Transfer Agent fees 2,500 2,500 2,500
Professional fees 26,498 26,498 2,093
Trustees' fees 4,000 4,000 4,000
Miscellaneous 47,579 77,071 5,078
- -------------------------------------------------------------------------------------------------
Total Expenses 5,869,088 11,051,905 120,396
- -------------------------------------------------------------------------------------------------
Net Investment Income
(Loss) 3,757,275 (1,171,148) 139,955
- -------------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on investments 10,026,741 74,215,000 1,169,219
Net change in unrealized appreciation
(depreciation) on investments 75,821,385 (40,231,403) 1,638,507
- -------------------------------------------------------------------------------------------------
Net realized and unrealized gain
on investments 85,848,126 33,983,597 2,807,726
- -------------------------------------------------------------------------------------------------
NET INCREASE IN NET
ASSETS RESULTING FROM
OPERATIONS $89,605,401 $ 32,812,449 $2,947,681
=================================================================================================
</TABLE>
<TABLE>
<CAPTION>
AMERICAN AMERICAN
AMERICAN MIDCAP LEVERAGED
BALANCED GROWTH ALLCAP
PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INVESTMENT INCOME
Income:
Interest $ 210,102 $ 2,103,965 $ 116,532
Dividends 28,016 596,804 79,611
- ---------------------------------------------------------------------------------------------
Total Income 238,118 2,700,769 196,143
- ---------------------------------------------------------------------------------------------
Expenses:
Management fees-- Note 3(a) 55,775 2,330,374 177,612
Interest expense -- -- 6,433
Custodian fees 16,263 86,704 25,179
Transfer Agent fees 2,500 2,500 2,500
Professional fees 2,727 13,165 4,355
Trustees' fees 4,000 4,000 4,000
Miscellaneous 3,400 22,127 8,366
- ---------------------------------------------------------------------------------------------
Total Expenses 84,665 2,458,870 228,445
- ---------------------------------------------------------------------------------------------
Net Investment Income
(Loss) 153,453 241,899 (32,302)
- ---------------------------------------------------------------------------------------------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on investments 215,191 9,953,972 (496,035)
- ---------------------------------------------------------------------------------------------
Net change in unrealized appreciation
(depreciation) on investments 327,089 17,131,537 2,028,927
- ---------------------------------------------------------------------------------------------
Net realized and unrealized gain
on investments 542,280 27,085,509 1,532,892
- ---------------------------------------------------------------------------------------------
NET INCREASE IN NET
ASSETS RESULTING FROM
OPERATIONS $ 695,733 $27,327,408 $ 1,500,590
=============================================================================================
</TABLE>
See Notes to Financial Statements.
33
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH
<S> <C>
Cash flows from operating activities:
Interest received $ 116,197
Dividends received 72,865
Operating expenses paid (193,711)
Disposition (purchase) of short-term securities, net (185,661)
Purchase of portfolio securities (47,681,604)
Proceeds from disposition of portfolio securities 19,447,087
Other (446)
- -----------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities (28,425,273)
- -----------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Dividends paid (145,132)
Proceeds from shares sold and dividends reinvested 39,611,775
Payments on shares redeemed (11,767,133)
Increase (decrease) in cash collateral received on securities loaned 725,763
- -----------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 28,425,273
- -----------------------------------------------------------------------------------------------------
Net increase in cash --
Cash--beginning of year --
- -----------------------------------------------------------------------------------------------------
Cash--end of year $ --
=====================================================================================================
RECONCILIATION OF NET INCREASE IN NET ASSETS TO NET CASH PROVIDED BY (USED
IN) OPERATING ACTIVITIES:
Net increase in net assets resulting from operations $ 1,500,590
(Increase) decrease in investments (27,415,506)
(Increase) decrease in receivable for investments sold (118,367)
(Increase) decrease in interest and dividends receivable (7,081)
Increase (decrease) in payable for investments purchased (886,306)
Net realized (gain) loss 496,035
Net (increase) decrease in unrealized appreciation (2,028,927)
Increase (decrease) in accrued expenses 26,185
Net (increase) decrease in other assets 8,104
- -----------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities $ (28,425,273)
=====================================================================================================
</TABLE>
See Notes to Financial Statements.
34
<PAGE>
THE ALGER AMERICAN FUND
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERICAN
AMERICAN INCOME
AMERICAN SMALL AND
GROWTH CAPITALIZATION GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net investment income (loss) $ 3,757,275 $ (1,171,148) $ 139,955
Net realized gain (loss) on investments 10,026,741 74,215,000 1,169,219
Net change in unrealized appreciation
(depreciation) on investments 75,821,385 (40,231,403) 1,638,507
- ---------------------------------------------------------------------------------------------
Net increase in net assets resulting
from operations 89,605,401 32,812,449 2,947,681
Dividends to shareholders:
Net investment income (460,331) -- (229,100)
Net realized gains (19,459,452) (4,872,722) (7,658,484)
Additional paid-in capital -- 1,653,352 --
Net increase from
shares of beneficial
interest transactions-- Note 6 418,369,211 455,713,242 17,210,684
- ---------------------------------------------------------------------------------------------
Total increase 488,054,829 485,306,321 12,270,781
Net Assets
Beginning of year 502,973,539 984,212,148 8,639,459
- ---------------------------------------------------------------------------------------------
End of year $991,028,368 $1,469,518,469 $ 20,910,240
=============================================================================================
Undistributed net investment income
(accumulated loss) $ 3,745,616 $ (5,560,628) $ 150,862
=============================================================================================
</TABLE>
<TABLE>
<CAPTION>
AMERICAN AMERICAN
AMERICAN MIDCAP LEVERAGED
BALANCED GROWTH ALLCAP
PORTFOLIO PORTFOLIO PORTFOLIO
- -------------------------------------------------------------------------------------
<S> <C> <C>
Net investment income (loss) $ 153,453 $ 241,899 $ (32,302)
Net realized gain (loss) on investments 215,191 9,953,972 (496,035)
Net change in unrealized appreciation
(depreciation) on investments 327,089 17,131,537 2,028,927
- -------------------------------------------------------------------------------------
Net increase in net assets resulting
from operations 695,733 27,327,408 1,500,590
Dividends to shareholders:
Net investment income (324,679) -- --
Net realized gains (2,173,260) (5,502,860) (145,132)
Additional paid-in capital -- -- --
Net increase from
shares of beneficial
interest transactions-- Note 6 8,616,721 187,673,423 28,072,726
- -------------------------------------------------------------------------------------
Total increase 6,814,515 209,497,971 29,428,184
Net Assets
Beginning of year 3,671,169 185,348,763 5,497,086
- -------------------------------------------------------------------------------------
End of year $10,485,684 $ 394,846,734 $34,925,270
=====================================================================================
Undistributed net investment income
(accumulated loss) $ 147,959 $ (62,882) $ (40,367)
=====================================================================================
</TABLE>
See Notes to Financial Statements.
35
<PAGE>
THE ALGER AMERICAN FUND
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1995
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
AMERICAN
AMERICAN INCOME
AMERICAN SMALL AND
GROWTH CAPITALIZATION GROWTH
PORTFOLIO PORTFOLIO PORTFOLIO
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net investment income (loss) $ 447,177 $ (3,177,269) $ 229,201
Net realized gain (loss) on investments 15,710,698 (5,203,810) 10,080,314
Net change in unrealized appreciation
on investments 42,409,681 195,831,810 678,273
- ----------------------------------------------------------------------------------------
Net increase in net assets resulting
from operations 58,567,556 187,450,731 10,987,788
Dividends to shareholders:
Net investment income (480,697) -- (352,788)
Net realized gains (1,703,042) -- --
Net increase (decrease) from
shares of beneficial interest
transactions-- Note 6 296,199,246 399,724,319 (31,130,440)
- ----------------------------------------------------------------------------------------
Total increase (decrease) 352,583,063 587,175,050 (20,495,440)
Net Assets
Beginning of year 150,390,476 397,037,098 29,134,899
- ----------------------------------------------------------------------------------------
End of year $502,973,539 $984,212,148 $ 8,639,459
========================================================================================
Undistributed net investment income
(accumulated loss) $ 448,672 $ (4,389,480) $ 240,007
========================================================================================
</TABLE>
<TABLE>
<CAPTION>
AMERICAN AMERICAN
AMERICAN MIDCAP LEVERAGED
BALANCED GROWTH ALLCAP
PORTFOLIO PORTFOLIO PORTFOLIO(*)
- --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net investment income (loss) $ 320,176 $ (275,972) $ (8,065)
Net realized gain (loss) on investments 2,423,578 3,625,757 (109,350)
Net change in unrealized appreciation
on investments 354,713 26,654,319 403,711
- --------------------------------------------------------------------------------------
Net increase in net assets resulting
from operations 3,098,467 30,004,104 286,296
Dividends to shareholders:
Net investment income (217,622) (10,668) --
Net realized gains -- -- --
Net increase (decrease) from
shares of beneficial interest
transactions-- Note 6 (9,604,163) 93,177,691 5,210,790
- --------------------------------------------------------------------------------------
Total increase (decrease) (6,723,318) 123,171,127 5,497,086
Net Assets
Beginning of year 10,394,487 62,177,636 --
- --------------------------------------------------------------------------------------
End of year $ 3,671,169 $185,348,763 $5,497,086
======================================================================================
Undistributed net investment income
(accumulated loss) $ 319,185 $ (304,781) $ (8,065)
======================================================================================
</TABLE>
(*) Commenced operations January 25, 1995.
See Notes to Financial Statements.
36
<PAGE>
THE ALGER AMERICAN FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
NOTE 1--GENERAL:
The Alger American Fund (the "Fund") is a diversified, open-end registered
investment company organized as an unincorporated business trust under the laws
of the Commonwealth of Massachusetts. The Fund operates as a series company
currently issuing six classes of shares of beneficial interest: American Growth
Portfolio, American Small Capitalization Portfolio, American Income and Growth
Portfolio, American Balanced Portfolio, American MidCap Growth Portfolio and
American Leveraged AllCap Portfolio (collectively "the Portfolios"). Shares of
the Portfolios are available and are being marketed exclusively as a pooled
funding vehicle for qualified retirement plans and for life insurance companies
writing all types of variable annuity contracts and variable life insurance
policies.
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES:
(a) INVESTMENT VALUATION: Investments of the Portfolios are valued at 4:00 p.m.
Eastern time on each day the New York Stock Exchange is open. Listed and
unlisted securities for which such information is regularly reported are valued
at the last reported sales price or, in the absence of reported sales, at the
mean between the bid and the asked price, or, in the absence of a recent bid or
asked price, the equivalent as obtained from one or more of the major market
makers for the securities to be valued.
Securities for which market quotations are not readily available are valued
according to procedures established by the Board of Trustees to determine fair
value in good faith.
Securities having a remaining maturity of sixty days or less are valued at
amortized cost which approximates market value.
(b) SECURITY TRANSACTIONS AND INVESTMENT INCOME: Security transactions are
recorded on a trade date basis. Resulting receivables and payables are carried
at amounts which approximate fair value. Realized gains and losses from security
transactions are recorded on the identified cost basis. Dividend income is
recognized on the ex-dividend date and interest income is recognized on the
accrual basis.
(c) REPURCHASE AGREEMENTS: The Portfolios enter into repurchase agreements with
approved institutions, primarily U.S. Government securities dealers, and are
collateralized by U.S. Government securities. Such collateral is verified by the
investment manager as being either received and held in physical possession by
the custodian or as having been received by such custodian in book-entry form
through the Federal Reserve book-entry system. The investment manager monitors
the value of the collateral at the time the repurchase agreement is entered into
and on a daily basis during the term of the agreement to ensure that its value
equals or exceeds the agreed-upon repurchase price to be repaid to the
Portfolio. Additional collateral is obtained when necessary.
(d) LENDING OF PORTFOLIO SECURITIES: The Portfolios lend their securities to
financial institutions, including an affiliate of the custodian, provided that
the market value of securities loaned will not at any time exceed one-third of
the Portfolio's total assets. The Portfolios earn fees on the securities loaned
which are included in interest income in the accompanying Statements of
Operations. In order to protect against the risk of failure by the borrower to
return the securities loaned or any delay in the delivery of such securities,
the investment manager ensures that the loan is collateralized by cash, letters
of credit or U.S. Government securities that are maintained at all times in an
amount equal to at least 100 percent of the current market value of the loaned
securities. At December 31, 1996, the value of securities loaned and collateral
received thereon were as follows:
VALUE OF
SECURITIES VALUE OF
LOANED COLLATERAL
--------- ---------
American Growth Portfolio...... $ 31,835,521 $ 32,470,434
American Small Capitalization
Portfolio.................... 191,128,175 194,952,709
American Income and Growth
Portfolio.................... 607,566 600,436
American Balanced Portfolio.... 66,196 66,334
American MidCap Growth
Portfolio.................... 21,686,890 22,121,524
American Leveraged AllCap
Portfolio.................... 894,625 914,436
(e) DIVIDENDS TO SHAREHOLDERS: Dividends payable to shareholders are recorded by
the Fund on the ex-dividend date.
Dividends from net investment income are declared and paid annually.
Dividends from net realized gains, offset by any loss carry forward, are
declared and paid annually after the end of the fiscal year in which earned.
(f) FEDERAL INCOME TAXES: It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of the taxable income of each Portfolio to its
respective shareholders. Therefore, no federal income tax provision is required.
Each Portfolio is treated as a separate entity for the purpose of determining
such compliance. At December 31, 1996, the net capital loss carryforward of the
American Leveraged AllCap Portfolio which may be used to offset future net
realized gains was approximately $678,000, and expires in 2004.
37
<PAGE>
THE ALGER AMERICAN FUND
NOTES TO FINANCIAL STATEMENTS (CONT'D)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
(g) EXPENSES: The Fund accounts separately for the assets, liabilities and
operations of each Portfolio. Expenses directly attributable to each Portfolio
are charged to that Portfolio's operations; expenses which are applicable to all
Portfolios are allocated among them.
(h) OTHER: These financial statements have been prepared using estimates and
assumptions that affect the reported amounts therein. Actual results may differ
from those estimates.
NOTE 3--INVESTMENT MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES:
(a) INVESTMENT MANAGEMENT FEES: Fees incurred by each Portfolio, pursuant to the
provisions of the Investment Management Agreements (the "Agreements") with Fred
Alger Management, Inc. ("Alger Management"), are payable monthly and computed
based on the average daily net assets of each Portfolio at the following annual
rates:
American Growth Portfolio............................ .750%
American Small Capitalization Portfolio.............. .850
American Income and Growth Portfolio................. .625
American Balanced Portfolio.......................... .750
American MidCap Growth Portfolio..................... .800
American Leveraged AllCap Portfolio.................. .850
The Agreements further provide that if in any fiscal year the aggregate
expenses, excluding interest, taxes, brokerage commissions, and extraordinary
expenses, of the American Growth Portfolio exceed 1.50%; the American Small
Capitalization Portfolio exceed 1.50%; the American Income and Growth Portfolio
exceed 1.25%; the American Balanced Portfolio exceed 1.25%; the American MidCap
Growth Portfolio exceed 1.50% and the American Leveraged AllCap Portfolio exceed
1.50% of the average daily net assets of the applicable Portfolio, Alger
Management will reimburse that Portfolio for the excess expenses.
(b) BROKERAGE COMMISSIONS: During the year ended December 31, 1996, the American
Growth Portfolio, American Small Capitalization Portfolio, American Income and
Growth Portfolio, American Balanced Portfolio, American MidCap Growth Portfolio
and the American Leveraged AllCap Portfolio paid Fred Alger & Company,
Incorporated ("Alger Inc.") $1,406,836, $1,731,476, $50,688, $9,748, $561,637
and $42,363, respectively, in connection with securities transactions.
(c) TRANSFER AGENCY FEES: The Fund has entered into a transfer agency agreement
with Alger Shareholder Services, Inc. ("Services"), whereby Services will act as
transfer agent for the Fund for a fee of $2,500 per year, per Portfolio, plus
out-of-pocket expenses.
(d) OTHER TRANSACTIONS WITH AFFILIATES: Certain trustees and officers of the
Fund are directors and officers of Alger Management, Alger Inc. and Services. At
December 31, 1996, Alger Inc. and affiliates owned 36,243 shares, 21,807 shares,
2,836 shares, 2,380 shares, 1 share, and 24,714 shares of the American Growth
Portfolio, American Small Capitalization Portfolio, American Income and Growth
Portfolio, American Balanced Portfolio, American MidCap Growth Portfolio and
American Leveraged AllCap Portfolio, respectively.
During the year ended December 31, 1996, Alger Management contributed additional
paid in capital of approximately $1,653,000 to the American Small Capitalization
Portfolio for the purpose of correcting an error.
NOTE 4--SECURITIES TRANSACTIONS:
Purchases and sales of securities, other than short-term securities, for the
year ended December 31, 1996, were as follows:
PURCHASES SALES
--------- -----
American Growth Portfolio...... $ 975,333,681 $ 548,414,442
American Small Capitalization
Portfolio.................... 1,657,330,520 1,213,617,574
American Income and Growth
Portfolio.................... 25,498,206 15,777,721
American Balanced Portfolio.... 8,484,423 3,900,167
American MidCap Growth
Portfolio.................... 412,327,838 233,284,595
American Leveraged AllCap
Portfolio.................... 46,795,298 19,565,454
NOTE 5--SHORT-TERM BORROWINGS:
The American Leveraged AllCap Portfolio has a line of credit with a bank whereby
it may borrow up to one-third of its assets, as defined, up to a maximum of
$25,000,000. Such borrowings have a variable interest rate and are payable on
demand. During the year ended December 31, 1996, the American Leveraged AllCap
Portfolio had borrowings which averaged $76,079 at a weighted average interest
rate of 8.32%.
NOTE 6--SHARE CAPITAL:
The Fund has an unlimited number of authorized shares of beneficial interest of
$.001 par value.
38
<PAGE>
THE ALGER AMERICAN FUND
NOTES TO FINANCIAL STATEMENTS (CONT'D)
DECEMBER 31, 1996
- --------------------------------------------------------------------------------
During the year ended December 31, 1996, transactions of shares of beneficial
interest were as follows:
SHARES AMOUNT
------ -------
American Growth
Portfolio:
Shares sold................ 19,647,051 $642,965,537
Dividends reinvested....... 603,264 19,919,783
---------- ------------
20,250,315 662,885,320
Shares redeemed............ (7,525,422) (244,516,109)
---------- ------------
Net increase............. 12,724,893 $418,369,211
========== ============
SHARES AMOUNT
------ -------
American Small Capitalization
Portfolio:
Shares sold................ 23,962,644 $986,432,069
Dividends reinvested....... 107,827 4,872,722
---------- ------------
24,070,471 991,304,791
Shares redeemed............ (13,122,238) (535,591,549)
---------- ------------
Net increase............. 10,948,233 $455,713,242
========== ============
SHARES AMOUNT
------ -------
American Income and Growth
Portfolio:
Shares sold................ 1,280,083 $ 12,357,144
Dividends reinvested....... 1,064,451 7,887,584
---------- ------------
2,344,534 20,244,728
Shares redeemed............ (347,790) (3,034,044)
---------- ------------
Net increase............. 1,996,744 $ 17,210,684
========== ============
SHARES AMOUNT
------ -------
American Balanced
Portfolio:
Shares sold................ 701,980 $ 7,239,916
Dividends reinvested....... 278,167 2,497,939
---------- ------------
980,147 9,737,855
Shares redeemed............ (114,847) (1,121,134)
---------- ------------
Net increase............. 865,300 $ 8,616,721
========== ============
SHARES AMOUNT
------ -------
American MidCap Growth
Portfolio:
Shares sold................ 16,365,480 $340,608,341
Dividends reinvested....... 252,773 5,502,860
---------- ------------
16,618,253 346,111,201
Shares redeemed............ (7,657,192) (158,437,778)
---------- ------------
Net increase............. 8,961,061 $187,673,423
========== ============
SHARES AMOUNT
------ -------
American Leveraged AllCap
Portfolio:
Shares sold................ 2,109,229 $ 39,694,878
Dividends reinvested....... 7,221 145,132
---------- ------------
2,116,450 39,840,010
Shares redeemed............ (627,954) (11,767,284)
---------- ------------
Net increase............. 1,488,496 $ 28,072,726
========== ============
During the year ended December 31, 1995, transactions of shares of beneficial
interest were as follows:
SHARES AMOUNT
------ -------
American Growth
Portfolio:
Shares sold................ 13,397,031 $401,141,672
Dividends reinvested....... 84,119 2,183,739
---------- ------------
13,481,150 403,325,411
Shares redeemed............ (3,839,223) (107,126,165)
---------- ------------
Net increase............. 9,641,927 $296,199,246
========== ============
SHARES AMOUNT
------ -------
American Small Capitalization
Portfolio:
Shares sold................ 18,702,535 $691,048,373
Shares redeemed............ (8,263,881) (291,324,054)
---------- ------------
Net increase............. 10,438,654 $399,724,319
========== ============
SHARES AMOUNT
------ -------
American Income and Growth
Portfolio:
Shares sold................ 887,706 $ 14,574,940
Dividends reinvested....... 23,363 352,788
---------- ------------
911,069 14,927,728
Shares redeemed............ (2,616,215) (46,058,168)
---------- ------------
Net decrease............. (1,705,146) $(31,130,440)
========== ============
SHARES AMOUNT
------ -------
American Balanced
Portfolio:
Shares sold................ 392,582 $ 4,925,776
Dividends reinvested....... 18,568 217,622
---------- ------------
411,150 5,143,398
Shares redeemed............ (1,104,001) (14,747,561)
---------- ------------
Net decrease............. (692,851) $ (9,604,163)
========== ============
SHARES AMOUNT
------ -------
American MidCap Growth
Portfolio:
Shares sold................ 8,606,684 $160,082,716
Dividends reinvested....... 706 10,668
---------- ------------
8,607,390 160,093,384
Shares redeemed............ (3,694,620) (66,915,693)
---------- ------------
Net increase............. 4,912,770 $ 93,177,691
========== ============
SHARES AMOUNT
------ -------
American Leveraged AllCap
Portfolio:
Shares sold................ 405,310 $ 6,744,547
Shares redeemed............ (89,928) (1,533,757)
---------- ------------
Net increase............. 315,382 $ 5,210,790
========== ============
39
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE SHAREHOLDERS AND
BOARD OF TRUSTEES OF THE ALGER AMERICAN FUND:
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of The Alger American Fund (a Massachusetts
business trust comprising, respectively, the Alger American Growth Portfolio,
Alger American Small Capitalization Portfolio, Alger American Income and Growth
Portfolio, Alger American Balanced Portfolio, Alger American MidCap Growth
Portfolio and Alger American Leveraged AllCap Portfolio) as of December 31,
1996, and the related statements of operations and cash flows for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended and the financial highlights for each of the five years in the
period then ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1996, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective portfolios constituting The Alger American Fund as of December
31, 1996, the results of their operations and cash flows for the year then
ended, the changes in their net assets for each of the two years in the period
then ended, and the financial highlights for each of the five years in the
period then ended, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
New York, New York
January 31, 1997
40
