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 REPORT / DECEMBER 31, 1998
<PAGE>
FELLOW SHAREHOLDERS: JANUARY 22, 1999
THE YEAR IN REVIEW
Last year proved to be another rewarding, albeit challenging, year for investors
as the U.S. stock market embarked on a roller coaster ride to its fourth
consecutive year of double-digit gains. Upon review, we see a year divided into
four parts. The first phase began on January 1st and extended all the way until
mid-July. As the year began, the Dow Jones Industrial Average was trading at
approximately 8000 and the primary concern of the market was the crisis in Asia.
As the crisis in Asia improved, and the U.S. economy continued to be robust, the
market accelerated dramatically. By April 2nd, the DJIA broke through the 9000
level for the first time in history, having moved up in an almost straight line
from the beginning of the year. This upward momentum continued until May, with a
small setback in April, achieving a high of 9211 on May 1st. By May, however,
new concerns arose that the Federal Reserve might raise rates at the May Federal
Open-Market Committee meeting. These worries were driven by the very tight labor
market conditions as well as extremely rapid economic growth in the first
quarter. Moreover, there was some renewed concern about Asia as Korea had just
begun serious layoffs and its economy was declining rapidly. The market had also
just begun to focus on the problems in Japan. Driven by these factors the market
began to sell off, reaching an intra-day low on June 16th of 8524. Against this
background, it was assumed that the economy would grow slowly and inflation
would stay low. In fact, many assumed the rate of inflation would slow even
further. Beginning in late June, the market broke out of its sluggishness and
surged to a new high on July 20th of 9408.
This began the second major phase of the market, an actual bear market contained
within the bull market. From the 20th of July, the market fell in an almost
straight line to a new interim low on September 1st of 7379, a retracement from
high to low of 21.6%, an official bear market. This drop was created by several
factors: the crisis in Russia, the worsening of the Japanese economy, the crisis
in Brazil, the hedge fund debacle and the surging prominence of the Monica
Lewinsky scandal. I call these the five "primary worries" of the market. Against
this background, the American economy was essentially unchanged. While the
growth in the second quarter GDP was slower than the first quarter, it was
affected by the GM strike and consequently hard to assess. At the same time,
inflation remained very low. One offset to these problems was that the
government bond market surged in a flight to quality, driving the yield below
5%.
The third phase of the market was between September 2nd and October 15th. During
this period the market oscillated between the mid 7000's and the low 8000's,
testing the 7400 - 7500 level approximately six times. This level held, and on
October 15th the market began to rebound. The primary catalyst for the
turnaround was the surprise move by the Federal Reserve on October 15th to lower
the Fed funds rate to 5% and the discount rate to 4.75%. This followed a 25
basis point cut of the Fed funds rate on September 29th, which the market had
viewed as inadequate. This move on October 15th, coming between FOMC meetings,
was a very strong statement that the Fed would act to alleviate a credit crunch
and fend off a possible recession.
This led to the fourth phase driven by greater liquidity and lower interest
rates. The decision by the Fed on November 17th to lower both the Fed funds rate
and the discount rate by an additional 25 basis points contributed to the
markets' ascent. At the same time, the five "primary worries" appeared to abate.
From this point, the market continued to climb to an interim high of 9387 set on
November 25th. The re-emergence of some of the five "primary worries" drove the
market down to the mid 8000 level by mid-December. However, these problems
appeared to subside and the market surged once again to the 9200 level by year
end.
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
We are pleased to report that the Alger American Small Capitalization
Portfolio's total return for the year was 15.53%, significantly outperforming
the benchmark return of 1.23% for the Russell 2000 Growth Index. This past year
was a particularly difficult period for small cap growth stocks as investors
continued to place a high premium on liquidity and earnings predictability,
causing large cap stocks to drive the market. The explosive growth potential and
attractive relative valuations of smaller stocks were all but ignored by a
risk-averse investment community. The Portfolio's ability to significantly
outperform the benchmark return was not the result of increased or limited
exposure to certain sectors, as every economic sector in the small cap
discipline suffered, but rather was the result of careful stock selection.
ALGER AMERICAN GROWTH PORTFOLIO
For the year ended December 31, 1998, the Alger American Growth Portfolio's
total return was 48.07% compared to 28.58% for the S&P 500. During this volatile
period, investors once again favored larger, more predictable stocks.
Additionally, many of the market factors discussed previously contributed to an
environment wherein stocks of certain sectors performed exceptionally well. In
particular, the Portfolio's heavy exposure to health care, retailing and
technology stocks enabled it to post strong double-digit returns. The strength
in retailing was primarily attributable to high employment, high consumer
confidence and falling interest rates, while the health care sector, including
pharmaceuticals and medical devices, fared well in the face of a slowing
economy. The technology sector was driven largely by Internet companies, which
emerged as a major force in 1998.
1
<PAGE>
ALGER AMERICAN INCOME AND GROWTH PORTFOLIO
The Alger American Income and Growth Portfolio had a total return of 32.39%
compared to 28.58% 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 is found in our
other growth portfolios. Despite its conservative nature, the Portfolio was able
to generate returns that exceeded those of the S&P 500, driven largely by its
holdings in the health care and retailing sectors.
ALGER AMERICAN BALANCED PORTFOLIO
The Alger American Balanced Portfolio enjoyed a total return of 31.51% for the
year ended December 31, 1998, outperforming both the Lehman Brothers
Government/Corporate Bond Index which returned 9.46%, and the S&P 500 which
returned 28.58%. During this time period, the Portfolio maintained a ratio of
approximately 60/40 common stocks to debt securities, producing results that far
exceeded those of a blended index comprising the two comparative indices.
Similar to the Growth Portfolio, exposure to technology, retail and health care
sectors drove the equity portion of the Portfolio which, combined with strong
comparative returns in the more conservative bond portion of the Portfolio,
provided shareholders with excellent overall results.
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
For the year ended December 31, 1998, the Alger American MidCap Growth
Portfolio's performance exceeded that of its benchmark, returning 30.30%
compared to 19.11% for the S&P MidCap 400 Index. The Portfolio's industry
exposure was similar to that of the Growth Portfolio, so both were helped by the
same economic factors discussed previously. Of note, holdings in the technology
sector performed particularly well, driven by continued strong capital
investment by businesses hoping to improve their productivity, time to market
and competitive edge. Given the possibility of a slowing economic environment,
the Portfolio is well positioned for strong performance as midcap growth stocks,
with their generally higher earnings growth potential, are increasingly valued
by the market as earnings growth becomes more scarce.
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
For the year ended December 31, 1998, the Alger American Leveraged AllCap
Portfolio recorded excellent results, with a gain of 57.83% compared to 28.58%
for the S&P 500. This Portfolio employs an "allcap" (i.e. small, medium and
large capitalizations) portfolio management strategy, and was thereby aided by
its exposure to larger cap stocks. Additionally, many of the market factors
discussed previously contributed to an environment wherein certain holdings
performed exceptionally well. Similar to the Growth Portfolio, its exposure to
health care, retailing and technology stocks, most notably Internet stocks,
enabled the Leveraged AllCap Portfolio to realize an annual return that was
slightly more than double the return of the relevant benchmark.
LOOKING AHEAD
We believe that the outlook for the U.S. economy remains constructive. The
positives -- low inflation, low interest rates, high levels of employment,
reasonably high levels of consumer confidence, a well-capitalized banking
system, and prudent monetary and fiscal policies -- should offset the negative
impact of a weakening import/export sector. We expect growth in the U.S. to
slow, but do not foresee a recession on the horizon.
In conclusion, 1999 should be a wonderful year for the American economy and
American investors. While undoubtedly there are going to be problems around the
world, some new and some recycled (i.e. Japan, Brazil and Clinton), overall we
expect the stock market to continue to move upward. Moreover, we believe that
while growth of corporate profits will be subdued this year, growth in America's
more dynamic sectors will once again be spectacular, and we expect that
high-quality growth companies, which have the ability to generate high levels of
earnings, will once again be rewarded by investors. As a result, we believe that
The Alger American Fund portfolios should have another outstanding year.
Respectfully submitted,
/s/ David S. Alger
------------------
David D. Alger
President
2
<PAGE>
TABLE OF CONTENTS
Alger American Growth Portfolio:
Portfolio Highlights ................................................ 4
Schedule of Investments ............................................. 5-6
Financial Highlights ................................................ 7
Alger American Small Capitalization Portfolio:
Portfolio Highlights ................................................ 8
Schedule of Investments ............................................. 9-10
Financial Highlights ................................................ 11
Alger American Income and Growth Portfolio:
Portfolio Highlights ................................................ 12
Schedule of Investments ............................................. 13-14
Financial Highlights ................................................ 15
Alger American Balanced Portfolio:
Portfolio Highlights ................................................ 16
Schedule of Investments ............................................. 17-18
Financial Highlights ................................................ 19
Alger American MidCap Growth Portfolio:
Portfolio Highlights ................................................ 20
Schedule of Investments ............................................. 21-22
Financial Highlights ................................................ 23
Alger American Leveraged AllCap Portfolio:
Portfolio Highlights ................................................ 24
Schedule of Investments ............................................. 25-26
Financial Highlights ................................................ 27
Statements of Assets and Liabilities ..................................... 28
Statements of Operations ................................................. 29
Statement of Cash Flows (Alger American Leveraged AllCap Portfolio) ...... 30
Statements of Changes in Net Assets ...................................... 31
Notes to Financial Statements ............................................ 32-34
Report of Independent Public Accountants ................................. 35
3
<PAGE>
ALGER AMERICAN GROWTH PORTFOLIO
PORTFOLIO HIGHLIGHTS THROUGH DECEMBER 31, 1998 (UNAUDITED)
HYPOTHETICAL $10,000 INVESTMENT SINCE INCEPTION January 9, 1989
[FIGURES BELOW REPRESENTS CHART]
Alger American Growth S&P 500
1/9/89 10000 10000
12/31/89 12410 13012
12/31/90 12924 12598
12/31/91 18144 16437
12/31/92 20390 17684
12/31/93 24971 19460
12/31/94 25330 19717
12/31/95 34542 27127
12/31/96 39153 33213
12/31/97 49234 44295
12/31/98 72902 56956
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, 1998
Average Annual Total Returns
1 Year 5 Years Since Inception
------------------------------------------
Alger American Growth Portfolio 48.07% 23.90% 22.03%
S&P 500 Index 28.58% 24.06% 19.05%
------------------------------------------
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.
4
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1998
================================================================================
SHARES COMMON STOCKS--86.8% VALUE
------ -----
AIRLINES--1.0%
360,400 US Airways Group Inc.* $ 18,740,800
-------------
BROADCASTING--1.9%
605,400 Comcast Corp. Cl. A. Special 35,529,715
-------------
BUSINESS SERVICES--1.5%
368,000 IMS Health Inc. 27,761,184
-------------
COMMUNICATIONS--6.4%
363,500 America Online Inc. 58,160,000
134,500 COX Communications Inc. Cl. A.* 9,297,313
771,200 MCI Worldcom Inc.* 55,333,600
-------------
122,790,913
-------------
COMMUNICATION EQUIPMENT--4.5%
383,300 Ascend Communications, Inc.* 25,201,975
297,900 Cisco Systems, Inc.* 27,648,993
209,600 Corning Inc. 9,432,000
993,400 Ericsson(LM)Telephone Co. ADR B. 23,780,009
-------------
86,062,977
-------------
COMPUTER RELATED &
BUSINESS EQUIPMENT--7.5%
423,200 Compaq Computer Corp. 17,748,162
486,200 Dell Computer Corp.* 35,584,006
421,200 EMC Corp.* 35,802,000
292,800 International Business Machines Corp. 54,094,800
-------------
143,228,968
-------------
COMPUTER SOFTWARE--3.8%
221,600 Compuware Corp.* 17,312,500
389,800 Microsoft Corporation* 54,060,582
-------------
71,373,082
-------------
CONGLOMERATE--3.1%
787,880 Tyco International Ltd. 59,436,091
-------------
DRUG DISTRIBUTION--2.9%
459,450 Cardinal Health, Inc. 34,860,769
259,700 McKesson Corp. 20,532,661
-------------
55,393,430
-------------
FINANCIAL SERVICES--13.5%
453,100 BankAmerica Corp. 27,242,638
236,400 Bank of New York Inc. 9,515,100
956,200 Citigroup Inc. 47,331,900
579,800 Federal Home Loan Mortgage Corporation 37,361,152
1,636 Firstar Corp. 152,557
312,200 First Union Corp. 18,985,819
FINANCIAL SERVICES (CONT'D)
986,900 Household International Inc. $ 39,105,913
611,700 Kansas City Southern Industries Inc. 30,088,300
417,400 Morgan Stanley Dean Witter & Co. 29,635,400
110,100 State Street Corp. 7,658,886
124,400 SunAmerica Inc. 10,091,950
-------------
257,169,615
-------------
FOOD CHAINS--4.5%
150,000 Fred Meyer, Inc.* 9,037,500
620,200 Kroger Co.* 37,522,100
627,800 Safeway Inc.* 38,256,876
-------------
84,816,476
-------------
INSURANCE--1.7%
327,525 American International Group, Inc. 31,647,102
-------------
LEISURE & ENTERTAINMENT--1.3%
511,400 Carnival Corp. 24,547,200
-------------
MEDICAL DEVICES--1.8%
472,800 Medtronic, Inc. 35,105,400
-------------
PHARMACEUTICALS--13.7%
138,400 Bristol Myers Squibb Co. 18,519,719
155,000 Elan Corp PLC-ADR*+ 10,782,265
358,600 Eli Lilly & Company 31,870,575
299,700 Merck & Co., Inc. 44,262,094
392,200 Pfizer Inc. 49,196,784
455,600 Schering-Plough Corporation 25,171,900
513,700 SmithKline Beecham PLC-ADS 35,702,150
603,300 Warner-Lambert Co. 45,360,920
-------------
260,866,407
-------------
POLLUTION CONTROL--3.1%
1,279,100 Waste Management, Inc. 59,638,037
-------------
RETAILING--10.9%
600,000 CVS Corp. 33,000,000
348,100 Costco Companies Inc.* 25,128,643
1,014,300 Home Depot, Inc. 62,062,988
156,000 Office Depot Inc.* 5,762,328
694,000 Staples Inc.* 30,319,472
642,200 Wal-Mart Stores Inc. 52,299,484
-------------
208,572,915
-------------
SEMICONDUCTORS--3.7%
448,600 Intel Corp. 53,187,362
211,700 Texas Instruments, Incorporated 18,113,687
-------------
71,301,049
-------------
TOTAL COMMON STOCKS
(COST $1,137,197,676) 1,653,981,361
-------------
5
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1998 (CONT'D)
================================================================================
PRINCIPAL
AMOUNT SHORT-TERM CORPORATE NOTES--10.5% VALUE
- --------- -----
$48,000,000 Bank Austria Finance Inc.,
5.87%, 1/6/99 ................ $ 47,960,867
50,000,000 Bayerische Vereinsbank A.G.,
5.80%, 1/5/99 ................ 49,967,778
20,000,000 Ciba Speciality Chemicals Corp.,
5.75%, 1/13/99 ............... 19,961,667
15,000,000 Ford Motor Credit Company,
5.77%, 1/6/99 ................ 14,987,979
20,000,000 Hertz Corporation,
5.70%, 1/7/99 ................ 19,981,000
48,000,000 Paribas Finance, Inc.,
5.50%, 1/6/99 ................ 47,963,333
-------------
TOTAL SHORT-TERM CORPORATE NOTES
(COST $200,822,624) .......... 200,822,624
-------------
SECURITIES HELD UNDER
REPURCHASE AGREEMENTS--1.4%
Securities Held Under Repurchase Agreements, 4.70%, 1/4/99, with
Bear, Stearns & Co. Inc., dtd 12/31/98, repurchase price
$26,209,137; collateralized by U.S. Government Securities
(total par value $27,118,000
due 1/21/99-11/15/27) ........ 26,195,457
-------------
TOTAL SHORT-TERM INVESTMENTS
(COST $227,018,081 ) ......... 227,018,081
-------------
TOTAL INVESTMENTS
(COST $1,364,215,757)(A) ............. 98.7% 1,880,999,442
Other Assets in Excess of Liabilities .. 1.3 24,719,511
----- -------------
NET ASSETS ............................. 100.0% $1,905,718,953
===== =============
- --------------------------------------------------------------------------------
* Non-income producing security.
+ Securities partially or fully on loan.
(a) At December 31, 1998, the net unrealized appreciation on investments, based
on cost for federal income tax purposes of $1,364,215,757, amounted to
$516,783,685 which consisted of aggregate gross unrealized appreciation of
$526,745,601 and gross unrealized depreciation of $9,961,916.
See Notes to Financial Statements.
6
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR
================================================================================
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------
1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 42.76 $ 34.33 $ 31.16 $ 23.13 $ 24.67
- ----------------------------------------------------------------------------------------------------------------------------
Net investment income 0.09 0.13 0.12 0.02 0.07
Net realized and unrealized gain on investments 18.32 8.66 4.00 8.33 0.15
- ----------------------------------------------------------------------------------------------------------------------------
Total from investment operations 18.41 8.79 4.12 8.35 0.22
- ----------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (0.13) (0.13) (0.02) (0.07) (0.03)
Distributions from net realized gains (7.82) (0.23) (0.93) (0.25) (1.73)
- ----------------------------------------------------------------------------------------------------------------------------
Total Distributions (7.95) (0.36) (0.95) (0.32) (1.76)
- ----------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $ 53.22 $ 42.76 $ 34.33 $ 31.16 $ 23.13
============================================================================================================================
Total Return 48.07% 25.75% 13.35% 36.37% 1.45%
============================================================================================================================
Ratios and Supplemental Data:
Net assets, end of year (000's omitted) $1,905,719 $1,072,529 $991,028 $502,974 $150,390
============================================================================================================================
Ratio of expenses to average net assets 0.79% 0.79% 0.79% 0.85% 0.86%
============================================================================================================================
Ratio of net investment income to average
net assets 0.25% 0.27% 0.50% 0.18% 0.48%
============================================================================================================================
Portfolio Turnover Rate 127.38% 129.50% 82.86% 118.33% 111.76%
============================================================================================================================
</TABLE>
See Notes to Financial Statements.
7
<PAGE>
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
PORTFOLIO HIGHLIGHTS THROUGH DECEMBER 31, 1998 (UNAUDITED)
HYPOTHETICAL $10,000 INVESTMENT -- 10 Years Ended 12/31/98
[FIGURES BELOW REPRESENTS CHART]
Alger American Small Capitalization Russell 2000 Growth
1/1/89 10000 10000
12/31/89 16448 12017
12/31/90 17881 9925
12/31/91 28171 15005
12/31/92 29172 16171
12/31/93 33046 18331
12/31/94 31600 17885
12/31/95 45600 23433
12/31/96 47508 26071
12/31/97 52920 29447
12/31/98 61138 29812
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 for the ten years ended December 31, 1998. The figures
for both the Alger American Small Capitalization Portfolio and the Russell 2000
Growth Index, an unmanaged index of common stocks of small capitalization
companies, include reinvestment of dividends.
PERFORMANCE COMPARISON THROUGH December 31, 1998
Average Annual Total Returns
Since Inception
1 Year 5 Years 10 Years 9/21/88
-----------------------------------------------
Alger American Small
Capitalization Portfolio 15.53% 13.09% 19.85% 18.86%
Russell 2000 Growth Index 1.23% 10.22% 11.54% 11.22%
-----------------------------------------------
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.
8
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1998
================================================================================
SHARES COMMON STOCKS--89.2% VALUE
------ -----
ADVERTISING--1.9%
564,050 Outdoor Systems, Inc.* ............. $ 16,921,500
187,500 Young & Rubicam Inc.* .............. 6,070,313
-------------
22,991,813
-------------
AIRLINES--2.3%
135,600 ASA Holdings Inc. .................. 4,135,800
275,200 Continental Airlines Inc. Cl. B.* .. 9,219,200
466,000 SkyWest Inc. ....................... 15,232,608
-------------
28,587,608
-------------
APPAREL--.5%
148,600 AnnTaylor Stores Corporation*+ ..... 5,860,487
-------------
BIO-TECHNOLOGY--6.1%
117,500 Biogen Inc.* ....................... 9,752,500
411,500 Centocor, Inc.*+ ................... 18,568,938
229,800 IDEC Pharmaceuticals Corporation*+ . 10,800,600
358,500 Medimmune Inc.* .................... 35,648,523
-------------
74,770,561
-------------
BROADCASTING--1.6%
141,900 Cablevision Systems Corp. Cl. A.* .. 7,121,677
197,300 Jacor Communications Inc.* ......... 12,701,188
-------------
19,822,865
-------------
BUILDING & CONSTRUCTION--.5%
243,400 Champion Enterprises Inc.*+ ........ 6,663,075
-------------
BUSINESS SERVICES--4.2%
355,000 Bisys Group Inc.* .................. 18,326,875
112,900 ChoicePoint Inc. * ................. 7,282,050
257,500 Clarify Inc.*+ ..................... 6,292,785
21,900 IMS Health Inc. .................... 1,652,092
261,500 Rent-Way Inc.*+ .................... 6,357,850
201,400 Siebel Systems Inc.* ............... 6,835,113
144,700 United Stationers Inc.*+ ........... 3,762,200
-------------
50,508,965
-------------
COMMUNICATIONS--1.9%
310,400 At Home Corp. Series A.* ........... 23,047,200
-------------
COMMUNICATION EQUIPMENT--3.0%
185,200 Ascend Communications, Inc.* ....... 12,176,900
146,700 Dycom Industries Inc.*+ ............ 8,380,238
114,000 L-3 Communications Holdings, Inc.* . 5,308,182
152,700 Newbridge Networks Corp.* .......... 4,638,263
156,100 Visual Networks, Inc.*+ ............ 5,853,750
-------------
36,357,333
-------------
COMPUTER RELATED &
BUSINESS EQUIPMENT--2.4%
441,100 Maxtor Corp.* ...................... 6,175,400
380,200 Quantum Corp.* ..................... 8,079,250
232,100 Sanmina Corporation* ............... 14,506,250
-------------
28,760,900
-------------
COMPUTER SERVICES--8.2%
392,900 Ceridian Corp.* .................... $ 27,429,528
42,300 eBay Inc.* ......................... 10,204,875
304,000 Excite Inc.* ....................... 12,787,152
40,000 Inktomi Corp.* ..................... 5,175,000
217,000 Keane Inc.* ........................ 8,666,546
200,000 Lycos Inc.* ........................ 11,112,600
186,200 QRS Corp.* ......................... 8,937,600
17,500 Ticketmaster Online CitySearch
Inc. Cl. B.* .................... 980,000
61,000 Yahoo Inc.* ........................ 14,453,188
-------------
99,746,489
-------------
COMPUTER SOFTWARE--4.7%
232,500 Citrix Systems, Inc.* 22,567,148
170,000 Compuware Corp.* ................... 13,281,250
260,200 Dendrite International Inc. * ...... 6,496,934
196,500 Intuit Inc.* ....................... 14,246,250
-------------
56,591,582
-------------
CONSUMER PRODUCTS--1.9%
303,300 Dial Corp. ......................... 8,757,788
239,700 Furniture Brands International Inc.* 6,531,825
226,100 Pittway Corp. Cl. A. ............... 7,475,544
-------------
22,765,157
-------------
DRUG DISTRIBUTION--4.8%
65,000 AmeriSource Health Corp Cl. A.* .... 4,225,000
971,200 Bergen Brunswig Corp. Cl. A. ....... 33,870,600
591,900 Omnicare, Inc. ..................... 20,568,525
-------------
58,664,125
-------------
FINANCIAL SERVICES--7.4%
140,402 Commerce Bancshares Inc. ........... 5,967,085
326,300 Dime Bancorp Inc. .................. 8,626,719
293,900 Finova Group Inc. .................. 15,852,378
490,600 Kansas City Southern Industries Inc. 24,131,632
539,900 National Commerce Bancorp+ ......... 10,157,139
286,200 North Fork Bancorporation Inc. ..... 6,851,056
708,800 Sovereign Bancorp Inc. ............. 10,100,400
126,500 Wilmington Trust Corp. ............. 7,795,563
-------------
89,481,972
-------------
FOOD CHAINS--1.7%
585,000 Food Lion Inc. Cl. A. .............. 6,215,625
237,300 Fred Meyer, Inc.* .................. 14,297,325
-------------
20,512,950
-------------
FOODS & BEVERAGES--4.2%
419,000 Earthgrains Company ................ 12,963,021
456,500 Starbucks Corp.* ................... 25,621,063
255,700 U.S. Foodservice* .................. 12,529,300
-------------
51,113,384
-------------
INSURANCE--.1%
71,300 Fremont General Corp. .............. 1,764,674
-------------
9
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1998 (CONT'D)
================================================================================
SHARES COMMON STOCKS (CONT'D) VALUE
------ -----
MANUFACTURING--.8%
194,500 Leggett & Platt Inc. ............... $ 4,279,000
202,688 Palm Harbor Homes Inc.*+ ........... 5,105,292
-------------
9,384,292
-------------
MEDICAL DEVICES--.9%
282,500 Biomet Inc. ........................ 11,370,625
-------------
MEDICAL SERVICES--3.8%
503,800 Health Management Associates
Inc. Cl. A.* .................... 10,894,675
386,800 Hooper Holmes Inc.+ ................ 11,217,200
54,500 Impath Inc.* ....................... 1,444,250
573,400 MedQuist Inc.* ..................... 22,649,300
-------------
46,205,425
-------------
PHARMACEUTICALS--5.6%
567,400 Alza Corp.* ........................ 29,646,650
210,000 Elan Corp PLC-ADR*+ ................ 14,608,230
438,800 Forest Laboratories, Inc.* ......... 23,338,893
-------------
67,593,773
-------------
RESTAURANTS & LODGING--2.3%
166,672 CKE Restaurants Inc. ............... 4,906,490
587,100 Outback Steakhouse, Inc.* .......... 23,410,613
-------------
28,317,103
-------------
RETAILING--15.3%
66,200 Amazon.com Inc.* ................... 21,266,750
552,600 BJ's Wholesale Club Inc.* .......... 25,592,564
855,800 Bed Bath & Beyond Inc.* ............ 29,204,175
483,000 Borders Group Inc.* ................ 12,045,054
249,700 Ethan Allen Interiors Inc. ......... 10,237,700
1,003,300 Family Dollar Stores Inc. .......... 22,072,600
594,800 Linens'n Things Inc.* .............. 23,568,950
105,000 Mens Wearhouse Inc.* ............... 3,333,750
400,000 Office Depot Inc.* ................. 14,775,200
600,700 Williams Sonoma Inc.* .............. 24,216,018
-------------
186,312,761
-------------
SEMICONDUCTORS--.6%
212,500 Microchip Technology Incorporated*+ 7,862,500
-------------
SEMICONDUCTOR CAPITAL EQUIPMENT--.8%
323,500 ASM Lithography Holding NV* ........ 9,866,750
-------------
TEXTILES--.7%
253,900 WestPoint Stevens Inc.* ............ 8,013,846
-------------
TRANSPORTATION--1.0%
347,200 Coach USA Inc.*+ ................... 12,043,674
-------------
TOTAL COMMON STOCKS
(COST $810,130,782) ..............1,084,981,889
-------------
PRINCIPAL
AMOUNT SHORT-TERM CORPORATE NOTES--10.3% VALUE
- --------- -----
$40,000,000 Bayerische Vereinsbank A.G.,
5.80%, 1/5/99 .................... $ 39,974,222
20,000,000 Cooperative Association of
Tractor Dealers Inc. Cl. A.,
5.75%, 1/11/99 ................... 19,968,056
Ford Motor Credit Company,
15,000,000 5.77%, 1/6/99 .................... 14,987,979
30,000,000 5.69%, 1/8/99 .................... 29,966,808
20,000,000 Hertz Corporation,
5.70%, 1/7/99 .................... 19,981,000
-------------
TOTAL SHORT-TERM CORPORATE NOTES
(COST $124,878,065) .............. 124,878,065
-------------
SECURITIES HELD UNDER
REPURCHASE AGREEMENTS--.9%
Securities Held Under Repurchase Agreements, 4.70%, 1/4/99, with
Bear, Stearns & Co. Inc., dtd 12/31/98, repurchase price
$11,347,964; collateralized by U.S. Government Securities
(total par value $11,650,000
due 1/15/07-11/15/27) ............ 11,342,041
-------------
TOTAL SHORT-TERM INVESTMENTS
(COST $136,220,106) .............. 136,220,106
-------------
TOTAL INVESTMENTS
(COST $946,350,888)(A) .............. 100.4% 1,221,201,995
Liabilities in Excess of Other Assets . (.4) (4,618,255)
------ -------------
NET ASSETS ............................ 100.0% $1,216,583,740
====== =============
- --------------------------------------------------------------------------------
* Non-income producing security.
+ Securities partially or fully on loan.
(a) At December 31, 1998, the net unrealized appreciation on investments, based
on cost for federal income tax purposes of $946,350,888, amounted to
$274,851,107 which consisted of aggregate gross unrealized appreciation of
$287,853,658 and gross unrealized depreciation of $13,002,551.
See Notes to Financial Statements.
10
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN SMALL CAPITALIZATION PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR
================================================================================
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------
1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 43.75 $ 40.91 $ 39.41 $ 27.31 $ 30.88
- ------------------------------------------------------------------------------------------------------------------------
Net investment loss (0.02) (0.05)(i) (0.04)(i) (0.09) (0.03)(i)
Net realized and unrealized gain
(loss) on investments 6.30 4.45 1.70 12.19 (1.45)
- ------------------------------------------------------------------------------------------------------------------------
Total from investment operations 6.28 4.40 1.66 12.10 (1.48)
Distributions from net realized gains (6.06) (1.56) (0.16) -- (2.09)
- ------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $ 43.97 $ 43.75 $ 40.91 $ 39.41 $ 27.31
========================================================================================================================
Total Return 15.53% 11.39% 4.18% 44.31% (4.38%)
========================================================================================================================
Ratios and Supplemental Data:
Net assets, end of year (000's omitted) $1,216,584 $997,586 $1,469,518 $984,212 $397,037
========================================================================================================================
Ratio of expenses to average net assets 0.89% 0.89% 0.88% 0.92% 0.96%
========================================================================================================================
Ratio of net investment loss to
average net assets (0.20%) (0.12%) (0.09%) (0.48%) (0.10%)
========================================================================================================================
Portfolio Turnover Rate 142.90% 104.43% 110.04% 80.66% 117.61%
========================================================================================================================
(i) Amount was computed based on average shares outstanding during the year.
</TABLE>
See Notes to Financial Statements.
11
<PAGE>
ALGER AMERICAN INCOME AND GROWTH PORTFOLIO
PORTFOLIO HIGHLIGHTS THROUGH DECEMBER 31, 1998 (UNAUDITED)
HYPOTHETICAL $10,000 INVESTMENT -- 10 Years Ended 12/31/98
[FIGURES BELOW REPRESENTS CHART]
Alger American Growth S&P 500
1/1/89 10000 10000
12/31/89 10740 13169
12/31/90 10770 12761
12/31/91 13302 16649
12/31/92 14452 17918
12/31/93 15946 19724
12/31/94 14626 19984
12/31/95 19764 27496
12/31/96 23653 33808
12/31/97 32236 45089
12/31/98 42677 57976
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 for the ten years ended December 31, 1998. 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, 1998
Average Annual Total Returns
Since Inception
1 Year 5 Years 10 Years 11/15/88
-----------------------------------------------
Alger American Income
and Growth Portfolio 32.39% 21.76% 15.62% 15.51%
S&P 500 Index 28.58% 24.06% 19.21% 19.06%
-----------------------------------------------
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.
12
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN INCOME AND GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1998
================================================================================
SHARES COMMON STOCKS--94.7% VALUE
------ -----
BROADCASTING--2.1%
28,000 Comcast Corp. Cl. A. Special ....... $ 1,643,264
-----------
BUSINESS SERVICES--3.4%
34,700 IMS Health Inc. .................... 2,617,699
-----------
COMMUNICATIONS--4.6%
33,000 MCI Worldcom Inc.* ................. 2,367,750
20,000 Time Warner Inc. ................... 1,241,260
-----------
3,609,010
-----------
COMMUNICATION EQUIPMENT--2.0%
17,000 Cisco Systems, Inc.* ............... 1,577,820
-----------
COMPUTER RELATED &
BUSINESS EQUIPMENT--2.4%
10,000 International Business
Machines Corp. .................. 1,847,500
-----------
COMPUTER SOFTWARE--2.8%
16,000 Microsoft Corporation* ............. 2,219,008
-----------
CONGLOMERATE--7.5%
26,000 General Electric Co. ............... 2,653,638
41,804 Tyco International Ltd. ............ 3,153,610
-----------
5,807,248
-----------
DRUG DISTRIBUTION--3.7%
37,500 Cardinal Health, Inc. .............. 2,845,313
-----------
FINANCIAL SERVICES--15.4%
21,000 Bank of New York Inc. .............. 845,250
43,000 Citigroup Inc. ..................... 2,128,500
21,400 Federal Home Loan Mortgage
Corporation ..................... 1,378,973
21,000 Fifth Third Bancorp ................ 1,497,573
29,000 First Union Corp. .................. 1,763,577
31,000 Kansas City Southern
Industries Inc. ................. 1,524,828
12,000 Mellon Bank Corp. .................. 825,000
11,000 Morgan Stanley Dean Witter & Co. ... 781,000
8,500 State Street Corp. ................. 591,286
20,000 U.S. Bancorp Inc. .................. 710,000
-----------
12,045,987
-----------
FOOD CHAINS--2.6%
34,000 Kroger Co.* ........................ 2,057,000
-----------
FOODS & BEVERAGES--1.5%
38,000 Earthgrains Company ................ 1,175,644
-----------
INSURANCE--2.9%
23,025 American International Group,
Inc. ............................. 2,224,790
-----------
LEISURE & ENTERTAINMENT--1.2%
19,000 Carnival Corp. ..................... $ 912,000
-----------
MEDICAL DEVICES--2.5%
10,000 Allegiance Corp. ................... 466,250
20,000 Medtronic, Inc. .................... 1,485,000
-----------
1,951,250
-----------
PHARMACEUTICALS--16.0%
15,000 Alza Corp.* ........................ 783,750
17,000 Bristol Myers Squibb Co. ........... 2,274,821
15,000 Elan Corp PLC-ADR* ................. 1,043,445
14,400 Forest Laboratories, Inc.* ......... 765,907
26,900 Pfizer Inc. ........................ 3,374,282
34,800 Schering-Plough Corporation ........ 1,922,700
30,500 Warner-Lambert Co. ................. 2,293,234
-----------
12,458,139
-----------
POLLUTION CONTROL--2.6%
42,900 Waste Management, Inc. ............. 2,000,213
-----------
RETAILING--18.5%
26,000 Bed Bath & Beyond Inc.* ............ 887,250
28,800 CVS Corp. .......................... 1,584,000
12,000 Costco Companies Inc.* ............. 866,256
40,000 Family Dollar Stores Inc. .......... 880,000
15,000 Gap Inc. ........................... 843,750
50,000 Home Depot, Inc. ................... 3,059,400
37,000 Rite Aid Corp. ..................... 1,833,831
39,000 Wal-Mart Stores Inc. ............... 3,176,082
22,000 Walgreen Co. ....................... 1,288,386
-----------
14,418,955
-----------
SEMICONDUCTORS--3.0%
20,000 Intel Corp. ........................ 2,371,260
-----------
TOTAL COMMON STOCKS
(COST $55,020,005) ............... 73,782,100
-----------
PRINCIPAL SHORT-TERM INVESTMENTS--5.4%
AMOUNT SHORT-TERM CORPORATE NOTES--4.5%
- --------
$2,000,000 Bayerische Vereinsbank A.G.,
5.80%, 1/5/99 .................... 1,998,711
1,500,000 Ford Motor Credit Company,
5.77%, 1/6/99 .................... 1,498,799
-----------
TOTAL SHORT-TERM CORPORATE NOTES
(COST $3,497,510) ................ 3,497,510
-----------
13
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN INCOME AND GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1998 (CONT'D)
================================================================================
SHORT-TERM INVESTMENTS (CONT'D) VALUE
-----
SECURITIES HELD UNDER
REPURCHASE AGREEMENTS--.9%
Securities Held Under Repurchase Agreements, 4.70%, 1/4/99, with
Bear, Stearns & Co. Inc., dtd 12/31/98, repurchase price
$688,452; collateralized by U.S. Treasury Bonds (par value
$625,000
due 11/15/27) .................... $ 688,092
----------
TOTAL SHORT-TERM INVESTMENTS
(COST $4,185,602) ................ 4,185,602
----------
TOTAL INVESTMENTS
(COST $59,205,607)(a) ................. 100.1% 77,967,702
Liabilities in Excess of Other Assets .. (.1) (42,081)
----- ----------
NET ASSETS ............................. 100.0% $77,925,621
===== ==========
- --------------------------------------------------------------------------------
* Non-income producing security.
(a) At December 31, 1998, the net unrealized appreciation on investments, based
on cost for federal income tax purposes of $59,205,607, amounted to
$18,762,095 which consisted of aggregate gross unrealized appreciation of
$18,844,645 and gross unrealized depreciation of $82,550.
See Notes to Financial Statements.
14
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN INCOME AND GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR
================================================================================
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------
1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 10.99 $ 8.42 $ 17.79 $ 13.30 $ 15.31
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income 0.03 0.03 0.09(i) 0.11(i) 0.17
Net realized and unrealized gain
(loss) on investments 3.30 2.94 1.87 4.54 (1.47)
- ---------------------------------------------------------------------------------------------------------------------------
Total from investment operations 3.33 2.97 1.96 4.65 (1.30)
- ---------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (0.04) (0.04) (0.33) (0.16) (0.15)
Distributions from net realized gains (1.16) (0.36) (11.00) -- (0.56)
- ---------------------------------------------------------------------------------------------------------------------------
Total Distributions (1.20) (0.40) (11.33) (0.16) (0.71)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $ 13.12 $ 10.99 $ 8.42 $ 17.79 $ 13.30
===========================================================================================================================
Total Return 32.39% 36.29% 19.68% 35.13% (8.28%)
===========================================================================================================================
Ratios and Supplemental Data:
Net assets, end of year (000's omitted) $77,926 $47,399 $20,910 $ 8,639 $29,135
===========================================================================================================================
Ratio of expenses to average net assets 0.70% 0.74% 0.81% 0.75% 0.75%
===========================================================================================================================
Ratio of net investment income to average
net assets 0.31% 0.56% 0.94% 0.61% 1.22%
===========================================================================================================================
Portfolio Turnover Rate 131.67% 150.09% 121.60% 164.05% 177.97%
===========================================================================================================================
(i) Amount was computed based on average shares outstanding during the year.
</TABLE>
See Notes to Financial Statements.
15
<PAGE>
ALGER AMERICAN BALANCED PORTFOLIO
PORTFOLIO HIGHLIGHTS THROUGH DECEMBER 31, 1998 (UNAUDITED)
HYPOTHETICAL $10,000 INVESTMENT SINCE INCEPTION September 5, 1989
[FIGURES BELOW REPRESENT CHART]
Alger American Balanced S&P 500 Lehman Brothers Govt/Corp Bond Index
9/5/89 10000 10000 10000
12/31/89 10265 10170 10399
12/31/90 10933 9847 11261
12/31/91 11447 12847 13077
12/31/92 12535 13822 14067
12/31/93 13511 15210 15623
12/31/94 12935 15410 15075
12/31/95 16638 21201 17975
12/31/96 18329 26113 18501
12/31/97 21961 32095 20305
12/31/98 28882 44779 22227
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, 1998
Average Annual Total Returns
1 Year 5 Years Since Inception
----------------------------------------------
Alger American Balanced Portfolio 31.51% 16.41% 12.05%
S&P 500 Index 28.58% 24.06% 17.44%
Lehman Brothers Gov't/Corp Bond Index 9.46% 7.30% 8.94%
----------------------------------------------
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.
16
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1998
================================================================================
SHARES COMMON STOCKS--58.0% VALUE
- ------ -----
AIRLINES--.2%
1,000 US Airways Group Inc.* ............. $ 52,000
-----------
BIO-TECHNOLOGY--.4%
1,200 Biogen Inc.* ....................... 99,600
-----------
BROADCASTING--.8%
4,100 Comcast Corp. Cl. A. Special ....... 240,621
-----------
BUSINESS SERVICES--.8%
3,000 IMS Health Inc. .................... 226,314
-----------
COMMUNICATIONS--4.0%
3,200 America Online Inc. ................ 512,000
1,400 COX Communications Inc. Cl. A.* .... 96,775
7,200 MCI Worldcom Inc.* ................. 516,600
-----------
1,125,375
-----------
COMMUNICATION EQUIPMENT--3.2%
4,400 Ascend Communications, Inc.* ....... 289,300
2,800 Cisco Systems, Inc.* ............... 259,876
2,200 Corning Inc. ....................... 99,000
9,500 Ericsson(LM)Telephone Co. ADR B. ... 227,411
-----------
875,587
-----------
COMPUTER RELATED &
BUSINESS EQUIPMENT--5.2%
4,400 Compaq Computer Corp. .............. 184,527
5,300 Dell Computer Corp.* ............... 387,896
4,500 EMC Corp.* ......................... 382,500
2,900 International Business
Machines Corp. ................... 535,775
-----------
1,490,698
-----------
COMPUTER SOFTWARE--2.5%
2,400 Compuware Corp.* .................... 187,500
3,800 Microsoft Corporation* .............. 527,014
-----------
714,514
-----------
CONGLOMERATE--2.1%
7,950 Tyco International Ltd. ............. 599,732
-----------
DRUG DISTRIBUTION--1.7%
3,900 Cardinal Health, Inc. ............... 295,913
2,400 McKesson Corp. ...................... 189,751
-----------
485,664
-----------
FINANCIAL SERVICES--9.6%
4,900 BankAmerica Corp. ................... 294,613
2,300 Bank of New York Inc. ............... 92,575
9,300 Citigroup Inc. ...................... 460,350
5,300 Federal Home Loan Mortgage
Corporation ..................... 341,521
3,000 First Union Corp. .................. 182,439
9,400 Household International Inc. ....... 372,475
FINANCIAL SERVICES (CONT'D)
6,000 Kansas City Southern
Industries Inc. ................. $ 295,128
5,300 Morgan Stanley Dean Witter & Co. ... 376,300
3,300 Paine Webber Group Inc. ............ 127,463
1,200 State Street Corp. ................. 83,476
1,100 SunAmerica Inc. .................... 89,238
-----------
2,715,578
-----------
FOOD CHAINS--3.3%
1,500 Fred Meyer, Inc.* .................. 90,375
7,700 Kroger Co.* ........................ 465,850
6,200 Safeway Inc.* ...................... 377,816
-----------
934,041
-----------
INSURANCE--1.0%
2,850 American International Group, Inc. . 275,381
-----------
LEISURE & ENTERTAINMENT--.8%
4,500 Carnival Corp. ..................... 216,000
-----------
MEDICAL DEVICES--1.3%
4,800 Medtronic, Inc. .................... 356,400
-----------
PHARMACEUTICALS--9.5%
1,300 Bristol Myers Squibb Co. ........... 173,957
1,000 Elan Corp PLC-ADR* ................. 69,563
1,600 Forest Laboratories, Inc.* ......... 85,101
3,500 Eli Lilly & Company ................ 311,063
2,900 Merck & Co., Inc. .................. 428,295
4,100 Pfizer Inc. ........................ 514,296
4,400 Schering-Plough Corporation ........ 243,100
5,000 SmithKline Beecham PLC-ADS ......... 347,500
6,600 Warner-Lambert Co. ................. 496,241
-----------
2,669,116
-----------
POLLUTION CONTROL--2.0%
12,400 Waste Management, Inc. ............. 578,150
-----------
RETAILING--7.1%
4,700 CVS Corp. .......................... 258,500
2,700 Costco Companies Inc.* ............. 194,908
10,800 Home Depot, Inc. ................... 660,830
2,500 Office Depot Inc.* ................. 92,345
6,700 Staples Inc.* ...................... 292,710
6,300 Wal-Mart Stores Inc. ............... 513,059
-----------
2,012,352
-----------
SEMICONDUCTORS--2.5%
4,400 Intel Corp. ........................ 521,677
2,000 Texas Instruments, Incorporated .... 171,126
-----------
692,803
-----------
TOTAL COMMON STOCKS
(COST $11,287,179) ............... 16,359,926
-----------
17
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1998 (CONT'D)
================================================================================
PRINCIPAL
AMOUNT CORPORATE BONDS--12.1% VALUE
- --------- -----
AUTOMOTIVE--1.7%
$200,000 Ford Capital B.V.,
9.50%, 6/1/10 .................... $ 260,982
200,000 General Motors Acceptance Corp.,
7.125%, 6/1/99 ................... 201,706
-----------
462,688
-----------
BANKS--.7%
200,000 NationsBank Corp. MTN,
7.23%, 5/2/99 .................... 201,124
-----------
ELECTRIC & GAS COMPANIES--1.8%
100,000 Cincinnati Gas & Electric Co. A.,
7.20%, 10/1/23 ................... 108,890
400,000 Potomac Electric Power Co.,
7.00%, 1/15/24 ................... 406,000
-----------
514,890
-----------
FINANCIAL SERVICES--6.1%
BankAmerica Corp.,
200,000 6.625%, 10/15/07 ................. 210,606
100,000 7.125%, 5/12/05+ ................. 106,932
400,000 Bankers Trust Corp.,
7.00%, 3/13/18 ................... 404,000
260,000 Chase Manhattan Bank,
8.50%, 2/15/02 ................... 281,970
200,000 Citicorp,
7.125%, 6/1/03 ................... 211,328
100,000 Citigroup Inc.,
7.75%, 6/15/99 ................... 101,097
200,000 Merrill Lynch & Co.,
6.75%, 4/30/01 ................... 204,778
200,000 Transamerica Finance Corp.,
7.85%, 10/21/99 .................. 202,982
-----------
1,723,693
-----------
LEISURE & ENTERTAINMENT--1.1%
300,000 Walt Disney Corp.,
6.375%, 3/30/01 .................. 306,519
-----------
POLLUTION CONTROL--.7%
200,000 Waste Management Inc.,
8.25%, 11/15/99 .................. 204,302
-----------
TOTAL CORPORATE BONDS
(COST $3,419,380) ................ $ 3,413,216
-----------
200,000 U.S. Treasury Notes,
7.50%, 10/31/99 .................. $ 204,438
Federal Home Loan Bank,
250,000 6.00%, 1/27/03 ................... 250,050
255,000 6.55%, 9/9/13 .................... 253,286
Federal National Mortgage Association,
200,000 8.50%, 2/1/05 .................... 207,250
400,000 6.75%, 2/4/28 .................... 400,876
633,000 7.00%, 3/4/13 .................... 632,899
300,000 6.42%, 7/14/08 ................... 300,375
-----------
TOTAL U.S. GOVERNMENT & AGENCY OBLIGATIONS
(COST $2,253,705) ................ 2,249,174
-----------
SHORT-TERM INVESTMENTS--20.6%
SHORT-TERM CORPORATE NOTES--17.7%
$1,000,000 Bayerische Vereinsbank A.G.,
5.80%, 1/5/99 .................... 999,354
1,000,000 Ford Motor Credit Company,
5.77%, 1/6/99 .................... 999,199
1,000,000 Duke Energy Corporation,
5.35%, 1/7/99 ................... 999,108
1,000,000 EagleFunding Capital Corp.,
5.70%, 1/19/99 ................... 997,150
1,000,000 Hertz Corporation,
5.70%, 1/7/99 .................... 999,050
-----------
TOTAL SHORT-TERM CORPORATE NOTES
(COST $4,993,861) ................ 4,993,861
-----------
SECURITIES HELD UNDER
REPURCHASE AGREEMENTS--2.9%
Securities Held Under Repurchase Agreements, 4.70%, 1/4/99, with
Bear, Stearns & Co. Inc., dtd 12/31/98, repurchase price
$823,899; collateralized by U.S. Treasury Strips (par value
$3,240,000
due 8/15/23) ..................... 823,469
-----------
TOTAL SHORT-TERM INVESTMENTS
(COST $5,817,330) ............... 5,817,330
-----------
TOTAL INVESTMENTS
(COST $22,777,594)(A) ................ 98.7% 27,839,646
Other Assets in Excess of Liabilities .. 1.3 368,674
----- ----------
NET ASSETS ............................. 100.0% $28,208,320
===== ==========
- --------------------------------------------------------------------------------
* Non-income producing security.
+ Securities partially or fully on loan.
(a) At December 31, 1998, the net unrealized appreciation on investments, based
on cost for federal income tax purposes of $22,777,594, amounted to
$5,062,052 which consisted of aggregate gross unrealized appreciation of
$5,163,753 and gross unrealized depreciation of $101,701.
See Notes to Financial Statements.
18
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN BALANCED PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR
================================================================================
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------------------
1998 1997 1996 1995 1994
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 10.76 $ 9.24 $ 13.64 $ 10.80 $ 11.58
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income 0.19 0.17 0.21(i) 0.33(i) 0.20
Net realized and unrealized gain
(loss) on investments 3.02 1.63 1.01 2.73 (0.70)
- ---------------------------------------------------------------------------------------------------------------------------
Total from investment operations 3.21 1.80 1.22 3.06 (0.50)
- ---------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income (0.18) (0.12) (0.73) (0.22) (0.13)
Distributions from net realized gains (0.81) (0.16) (4.89) -- (0.15)
- ---------------------------------------------------------------------------------------------------------------------------
Total Distributions (0.99) (0.28) (5.62) (0.22) (0.28)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $ 12.98 $ 10.76 $ 9.24 $ 13.64 $ 10.80
===========================================================================================================================
Total Return 31.51% 19.82% 10.17% 28.62% (4.27%)
===========================================================================================================================
Ratios and Supplemental Data:
Net assets, end of year (000's omitted) $28,208 $16,614 $10,486 $ 3,671 $ 10,394
===========================================================================================================================
Ratio of expenses to average net assets 0.92% 1.01% 1.14% 1.00% 1.08%
===========================================================================================================================
Ratio of net investment income to
average net assets 2.09% 2.14% 2.06% 2.49% 2.30%
===========================================================================================================================
Portfolio Turnover Rate 94.64% 105.01% 68.66% 113.02% 78.80%
===========================================================================================================================
(i) Amount was computed based on average shares outstanding during the year.
</TABLE>
See Notes to Financial Statements.
19
<PAGE>
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
PORTFOLIO HIGHLIGHTS THROUGH DECEMBER 31, 1998 (UNAUDITED)
HYPOTHETICAL $10,000 INVESTMENT SINCE INCEPTION May 3, 1993
[FIGURES BELOW REPRESENT CHART]
Alger Midcap Growth S&P Midcap 400
5/23/93 10000 10000
12/31/93 13867 11297
12/31/94 13653 10893
12/31/95 19722 14624
12/31/96 22068 17001
12/31/97 25380 22483
12/31/98 33069 26781
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, 1998
Average Annual Total Returns
1 Year 5 Years Since Inception
-------------------------------------------
Alger American MidCap Growth Portfolio 30.30% 18.98% 23.50%
S&P MidCap 400 Index 19.11% 18.84% 18.99%
-------------------------------------------
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.
20
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1998
================================================================================
SHARES COMMON STOCKS--84.8% VALUE
- ------ -----
ADVERTISING--.5%
102,000 Young & Rubicam Inc.* .............. $ 3,302,250
-----------
AIRLINES--2.1%
165,300 Continental Airlines Inc. Cl. B.* .. 5,537,550
168,000 US Airways Group Inc.* ............. 8,736,000
-----------
14,273,550
-----------
APPLIANCES & TOOLS--.5%
65,300 Black & Decker Corp. ............... 3,660,914
-----------
BIO-TECHNOLOGY--4.1%
127,600 Biogen Inc.* ....................... 10,590,800
397,600 Centocor, Inc.*+ ................... 17,941,700
-----------
28,532,500
-----------
BROADCASTING--2.6%
187,900 Comcast Corp. Cl. A. Special ....... 11,027,475
109,400 Jacor Communications Inc.* ......... 7,042,625
-----------
18,070,100
-----------
BUILDING & CONSTRUCTION--1.4%
347,700 Champion Enterprises Inc.* ......... 9,518,288
-----------
BUSINESS SERVICES--2.4%
147,400 IMS Health Inc. .................... 11,119,561
166,600 Siebel Systems Inc.* ............... 5,654,071
-----------
16,773,632
-----------
COMMUNICATIONS--5.1%
133,400 America Online Inc. ................ 21,344,000
94,700 At Home Corp. Series A.* ........... 7,031,475
93,000 COX Communications Inc. Cl. A.* .... 6,428,625
-----------
34,804,100
-----------
COMMUNICATION EQUIPMENT--2.8%
95,900 Ascend Communications, Inc.* ....... 6,305,425
151,800 Corning Inc. ....................... 6,831,000
205,400 Newbridge Networks Corp.* .......... 6,239,025
-----------
19,375,450
-----------
COMPUTER RELATED
& BUSINESS EQUIPMENT--4.1%
523,000 Quantum Corp.* ..................... 11,113,750
277,600 Sanmina Corporation* ............... 17,350,000
-----------
28,463,750
-----------
COMPUTER SERVICES--2.9%
282,500 Ceridian Corp.* .................... 19,722,173
-----------
COMPUTER SOFTWARE--4.8%
97,000 Citrix Systems, Inc.* .............. 9,415,110
86,700 Compuware Corp.* ................... 6,773,438
233,900 Intuit Inc.* ....................... 16,957,750
-----------
33,146,298
-----------
CONSUMER PRODUCTS--1.5%
113,500 Dial Corp. ......................... 3,277,312
250,000 Furniture Brands
International Inc.* ............. 6,812,500
-----------
10,089,812
-----------
DRUG DISTRIBUTION--5.9%
75,900 Cardinal Health, Inc. .............. $ 5,758,913
274,500 McKesson Corp. ..................... 21,702,794
384,200 Omnicare, Inc. ..................... 13,350,950
-----------
40,812,657
-----------
FINANCIAL SERVICES--10.0%
401,100 Dime Bancorp Inc. .................. 10,604,282
95,200 Finova Group Inc. .................. 5,134,898
91,076 Firstar Corp. ...................... 8,492,837
444,200 Kansas City Southern
Industries Inc. ................. 21,849,310
154,850 Paine Webber Group Inc. ............ 5,981,081
423,000 Sovereign Bancorp Inc. ............. 6,027,750
159,800 State Street Corp. ................. 11,116,167
-----------
69,206,325
-----------
FOOD CHAINS--1.3%
151,800 Fred Meyer, Inc.* .................. 9,145,950
-----------
FOODS & BEVERAGES--4.1%
223,300 Aurora Foods Inc.*+ ................ 4,424,243
188,200 Starbucks Corp.* ................... 10,562,725
201,000 Suiza Foods Corp.*+ ................ 10,238,538
62,000 U.S. Foodservice* .................. 3,038,000
-----------
28,263,506
-----------
INSURANCE--.4%
118,000 Fremont General Corp. .............. 2,920,500
-----------
LEISURE & ENTERTAINMENT--2.0%
555,900 International Game Technology ...... 13,515,597
-----------
MANUFACTURING--2.0%
526,600 Leggett & Platt Inc. ............... 11,585,200
123,000 Wabash National Corp. .............. 2,498,498
-----------
14,083,698
-----------
MEDICAL DEVICES--1.9%
285,000 Allegiance Corp. ................... 13,288,125
-----------
MEDICAL SERVICES--1.4%
458,700 Health Management Associates
Inc. Cl. A.* .................... 9,919,388
-----------
PAPER PACKAGING & FOREST PRODUCTS--.5%
69,600 Sealed Air Corp.* .................. 3,553,985
-----------
PHARMACEUTICALS--4.4%
238,600 Alza Corp.* ........................ 12,466,850
112,600 Elan Corp PLC-ADR*+ ................ 7,832,793
189,200 Forest Laboratories, Inc.* ......... 10,063,170
-----------
30,362,813
-----------
POLLUTION CONTROL--1.7%
231,500 Waste Management, Inc. ............. 10,793,688
-----------
RESTAURANTS & LODGING--2.6%
369,700 Outback Steakhouse, Inc.* .......... 14,741,788
75,000 Papa John's International Inc.* .... 3,309,375
-----------
18,051,163
-----------
21
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1998 (CONT'D)
================================================================================
SHARES COMMON STOCKS (CONT'D) VALUE
------ -----
RETAILING--7.8%
403,800 Bed Bath & Beyond Inc.* ............ $13,779,675
57,200 Best Buy Company Inc.* ............. 3,510,650
169,000 CVS Corp. .......................... 9,295,000
469,400 Office Depot Inc.* ................. 17,338,697
240,700 Williams Sonoma Inc.* .............. 9,703,338
-----------
53,627,360
-----------
SEMICONDUCTORS--3.1%
61,000 Linear Technology Corporation ...... 5,463,343
438,300 Microchip Technology
Incorporated*+ .................. 16,217,100
-----------
21,680,443
-----------
TRANSPORTATION--.9%
170,300 Coach USA Inc* ..................... 5,907,366
-----------
TOTAL COMMON STOCKS
(COST $479,473,074) .............. 584,865,381
-----------
PRINCIPAL
AMOUNT SHORT-TERM INVESTMENTS--8.7% VALUE
------- -----
SHORT-TERM CORPORATE NOTES--7.0%
$18,000,000 Bayerische Vereinsbank A.G.,
5.80%, 1/5/99 .................... $17,988,400
15,000,000 CSC Enterprises,
5.65%, 1/14/99 ................... 14,969,396
15,000,000 Ford Motor Credit Company,
5.69%, 1/8/99 .................... 14,983,404
-----------
TOTAL SHORT-TERM CORPORATE NOTES
(COST $47,941,200) ............... 47,941,200
-----------
SECURITIES HELD UNDER
REPURCHASE AGREEMENTS--1.7%
Securities Held Under Repurchase Agreements, 4.70%, 1/4/99, with
Bear, Stearns & Co. Inc., dtd 12/31/98, repurchase price
$11,608,043; collateralized by U.S. Treasury Strips (total par
value
$41,712,000 due 8/15/21-8/15/23) . 11,601,984
-----------
TOTAL SHORT-TERM INVESTMENTS
(COST $59,543,184) ............... 59,543,184
-----------
TOTAL INVESTMENTS
(COST $539,016,258)(aA) ................. 93.5% 644,408,565
Other Assets in Excess of Other Liabilities 6.5 45,162,892
----- -----------
NET ASSETS ................................ 100.0% 689,571,457
===== ===========
- --------------------------------------------------------------------------------
* Non-income producing security.
+ Securities partially or fully on loan.
(a) At December 31, 1998, the net unrealized appreciation on investments, based
on cost for federal income tax purposes of $539,016,258, amounted to
$105,392,307 which consisted of aggregate gross unrealized appreciation of
$111,771,452 and aggregate gross unrealized depreciation of $6,379,145.
See Notes to Financial Statements.
22
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN MIDCAP GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR
================================================================================
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 24.18 $ 21.35 $ 19.44 $ 13.46 $ 13.72
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income (loss) 0.00(i) (0.04) 0.03 (0.03) 0.00(i)
Net realized and unrealized gain
(loss) on investments 6.95 3.20 2.29 6.01 (0.21)
- -----------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 6.95 3.16 2.32 5.98 (0.21)
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends from net investment income -- (0.01) -- -- --
Distributions from net realized gains (2.26) (0.32) (0.41) -- (0.05)
- -----------------------------------------------------------------------------------------------------------------------------------
Total Distributions (2.26) (0.33) (0.41) -- (0.05)
- -----------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $ 28.87 $ 24.18 $ 21.35 $ 19.44 $ 13.46
===================================================================================================================================
Total Return 30.30% 15.01% 11.90% 44.45% (1.54%)
===================================================================================================================================
Ratios and Supplemental Data:
Net assets, end of year (000's omitted) $689,571 $444,967 $394,847 $185,349 $62,178
===================================================================================================================================
Ratio of expenses to average net assets 0.84% 0.84% 0.84% 0.90% 0.97%
===================================================================================================================================
Ratio of net investment income (loss) to
average net assets 0.00% (0.15%) 0.08% (0.25%) 0.03%
===================================================================================================================================
Portfolio Turnover Rate 152.21% 151.98% 90.97% 104.74% 83.96%
===================================================================================================================================
(i) Amount was computed based on average shares outstanding during the year.
</TABLE>
See Notes to Financial Statements.
23
<PAGE>
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
PORTFOLIO HIGHLIGHTS THROUGH DECEMBER 31, 1998 (UNAUDITED)
HYPOTHETICAL $10,000 INVESTMENT SINCE INCEPTION January 25, 1995
[FIGURES BELOW REPRESENTS CHART]
Alger Leveraged AllCap Growth S&P Midcap 500
1/25/95 10000 10000
12/31/95 17430 13480
12/31/96 19529 16586
12/31/97 23372 22120
12/31/98 36888 28442
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, 1998
Average Annual Total Return
1 Year Since Inception
-------------------------------
Alger American Leveraged AllCap Portfolio 57.83% 39.34%
S&P 500 Index 28.58% 30.43%
-------------------------------
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.
24
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1998
================================================================================
SHARES COMMON STOCKS--96.5% VALUE
- ------ -----
BROADCASTING--4.1%
32,000 Cablevision Systems Corp. Cl. A*. .. $ 1,606,016
30,000 Comcast Corp. Cl. A. Special ....... 1,760,640
28,000 Infinity Broadcasting Corp. Cl. A.* 766,500
-----------
4,133,156
-----------
BUSINESS SERVICES--2.5%
33,700 IMS Health Inc. .................... 2,542,261
-----------
COMMUNICATION EQUIPMENT--6.9%
29,200 Ascend Communications, Inc.* ....... 1,919,900
49,000 Cisco Systems, Inc.* ............... 4,547,837
23,000 Ericsson(LM)Telephone Co. ADR B. ... 550,574
-----------
7,018,311
-----------
COMMUNICATIONS--9.7%
29,500 America Online Inc. ................ 4,720,000
14,000 COX Communications Inc. Cl. A.* .... 967,750
58,700 MCI Worldcom Inc.* ................. 4,211,725
-----------
9,899,475
-----------
COMPUTER RELATED &
BUSINESS EQUIPMENT--4.4%
36,500 Dell Computer Corp.* ............... 2,671,361
21,400 EMC Corp.* ......................... 1,819,000
-----------
4,490,361
-----------
COMPUTER SERVICES--4.0%
2,500 eBay Inc.* ......................... 603,125
4,000 Inktomi Corp.* ..................... 517,500
10,000 Ticketmaster Online CitySearch
Inc. Cl. B.* .................... 560,000
10,000 Yahoo Inc.* ........................ 2,369,375
-----------
4,050,000
-----------
COMPUTER SOFTWARE--7.4%
10,000 Citrix Systems, Inc.* .............. 970,630
20,900 Compuware Corp.* ................... 1,632,813
35,600 Microsoft Corporation* ............. 4,937,293
-----------
7,540,736
-----------
CONGLOMERATE--2.8%
37,730 Tyco International Ltd. ............ 2,846,276
-----------
DRUG DISTRIBUTION--2.8%
37,500 Cardinal Health, Inc. .............. 2,845,313
-----------
FINANCIAL SERVICES--10.9%
23,100 Bank of New York Inc. .............. 929,775
52,000 Citigroup Inc. ..................... 2,574,000
FINANCIAL SERVICES (CONT'D)
24,100 Federal Home Loan Mortgage
Corporation ..................... $ 1,552,956
25,000 First Union Corp. ................... 1,520,325
40,000 Kansas City Southern
Industries Inc. ................. 1,967,520
25,000 Morgan Stanley Dean Witter & Co. ... 1,775,000
20,000 U.S. Bancorp Inc. .................. 710,000
-----------
11,029,576
-----------
FOOD CHAINS--2.4%
39,900 Kroger Co.* ........................ 2,413,950
-----------
INSURANCE--2.3%
24,350 American International Group, Inc. . 2,352,819
-----------
MEDICAL DEVICES--2.0%
20,000 Allegiance Corp. ................... 932,500
15,000 Medtronic, Inc. .................... 1,113,750
-----------
2,046,250
-----------
PHARMACEUTICALS--10.0%
25,000 Alza Corp.* ........................ 1,306,250
20,100 Elan Corp PLC-ADR* ................. 1,398,216
24,300 Pfizer Inc. ........................ 3,048,143
32,400 Schering-Plough Corporation ........ 1,790,100
35,100 Warner-Lambert Co. ................. 2,639,099
-----------
10,181,808
-----------
POLLUTION CONTROL--2.2%
48,240 Waste Management, Inc. ............. 2,249,190
-----------
RETAILING--18.1%
15,500 Amazon.com Inc.* ................... 4,979,375
50,000 Bed Bath & Beyond Inc.* ............ 1,706,250
10,000 Costco Companies Inc.* ............. 721,880
18,000 CVS Corp. .......................... 990,000
50,000 Ethan Allen Interiors Inc. ......... 2,050,000
56,400 Home Depot, Inc. ................... 3,451,003
10,000 Linens'n Things Inc.* .............. 396,250
27,000 Rite Aid Corp. ..................... 1,338,200
34,200 Wal-Mart Stores Inc. ............... 2,785,180
-----------
18,418,138
-----------
SEMICONDUCTORS--4.0%
20,000 Intel Corp. ........................ 2,371,260
20,000 Texas Instruments, Incorporated .... 1,711,260
-----------
4,082,520
-----------
TOTAL COMMON STOCKS
(COST $68,173,626) ............... 98,140,140
-----------
25
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
SCHEDULE OF INVESTMENTS--DECEMBER 31, 1998 (CONT'D)
================================================================================
PRINCIPAL
AMOUNT SHORT-TERM CORPORATE NOTES--1.9% VALUE
- --------- -----
$2,000,000 Bayerische Vereinsbank A.G.,
5.80%, 1/5/99 (COST $1,998,711) .. $ 1,998,711
-----------
SECURITIES HELD UNDER
REPURCHASE AGREEMENTS--.8%
Securities Held Under Repurchase Agreements, 4.70%, 1/4/99, with
Bear, Stearns & Co. Inc., dtd 12/31/98, repurchase price
$793,707; collateralized by U.S. Treasury Strips (par value
$875,000
due 8/15/00) ..................... 793,293
-----------
TOTAL SHORT-TERM INVESTMENTS
(COST $2,792,004) ................ 2,792,004
-----------
TOTAL INVESTMENTS
(COST $70,965,630)(A) ................ 99.2% 100,932,144
Other Assets in Excess of Liabilities .. .8 777,381
----- -----------
NET ASSETS ............................. 100.0% $101,709,525
===== ===========
- --------------------------------------------------------------------------------
* Non-income producing security.
(a) At December 31, 1998, the net unrealized appreciation on investments, based
on cost for federal income tax purposes of $70,965,630, amounted to
$29,966,514 which consisted of aggregate gross unrealized appreciation of
$30,277,996 and aggregate gross unrealized depreciation of $311,482.
See Notes to Financial Statements.
26
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
================================================================================
<TABLE>
<CAPTION>
FROM JANUARY 25, 1995
YEAR ENDED DECEMBER 31, (COMMENCEMENT OF
------------------------------------------------ OPERATIONS)
1998 1997 1996 TO DECEMBER 31, 1995(I)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period $ 23.17 $ 19.36 $ 17.43 $ 10.00
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment loss (0.05) (0.03) (0.03)(ii) (0.03)
Net realized and unrealized gain on investments 12.99 3.84 2.14 7.46
- ------------------------------------------------------------------------------------------------------------------------------------
Total from investment operations 12.94 3.81 2.11 7.43
Distribution from net realized gains (1.21) -- (0.18) --
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 34.90 $ 23.17 $ 19.36 $ 17.43
====================================================================================================================================
Total Return 57.83% 19.68% 12.04% 74.30%
====================================================================================================================================
Ratios and Supplemental Data:
Net assets, end of period (000's omitted) $ 101,710 $ 53,488 $ 34,925 $ 5,497
====================================================================================================================================
Ratio of expenses excluding interest to average net assets 0.93% 0.96% 1.06% 1.50%
====================================================================================================================================
Ratio of expenses including interest to average net assets 0.96% 1.00% 1.09% 1.56%
====================================================================================================================================
Decrease reflected in above expense ratios
due to expense reimbursements -- -- -- 2.36%
====================================================================================================================================
Ratio of net investment loss to average net assets (0.27%) (0.17%) (0.15%) (0.71%)
====================================================================================================================================
Portfolio Turnover Rate 143.59% 164.27% 102.10% 178.23%
====================================================================================================================================
Amount of debt outstanding at end of period -- -- -- --
====================================================================================================================================
Average amount of debt outstanding during the period $ 246,101 $ 201,644 $ 76,079 $ 8,122
====================================================================================================================================
Average daily number of shares outstanding during the period 2,480,478 2,135,458 1,107,187 75,460
====================================================================================================================================
Average amount of debt per share during the period $ 0.10 $ 0.09 $ 0.07 $ 0.11
====================================================================================================================================
(i)Ratios have been annualized; total return has not been annualized.
(ii)Amount was computed based on average shares outstanding during the period.
</TABLE>
See Notes to Financial Statements.
27
<PAGE>
THE ALGER AMERICAN FUND
STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
================================================================================
<TABLE>
<CAPTION>
AMERICAN AMERICAN
SMALL INCOME AMERICAN AMERICAN
AMERICAN CAPITALIZA- AND AMERICAN MIDCAP LEVERAGED
GROWTH TION GROWTH BALANCED GROWTH ALLCAP
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS:
Investments in securities, at value
(identified cost*)--see accompany-
ing schedules of investments $1,880,999,442 $1,221,201,995 $77,967,702 $27,839,646 $644,408,565 $100,932,144
Receivable for investment securities
sold 67,223,370 7,281,631 -- 585,165 52,345,195 919,769
Receivable for shares of beneficial
interest sold 2,140,294 4,607,505 62,245 52,575 4,853,289 168,553
Interest and dividends receivable 545,459 355,394 29,533 122,171 268,911 13,148
Other assets 36,231 40,075 1,444 445 13,915 1,584
- ------------------------------------------------------------------------------------------------------------------------------------
Total Assets 1,950,944,796 1,233,486,600 78,060,924 28,600,002 701,889,875 102,035,198
- ------------------------------------------------------------------------------------------------------------------------------------
LIABILITIES:
Payable for investment securities
purchased 29,424,198 -- -- 363,447 11,593,130 --
Payable for shares of beneficial
interest redeemed 14,531,520 16,035,380 79,100 478 262,138 239,244
Accrued investment management fees 1,135,764 798,623 38,673 16,845 420,617 65,807
Accrued expenses 134,361 68,857 17,530 10,912 42,533 20,622
- ------------------------------------------------------------------------------------------------------------------------------------
Total Liabilities 45,225,843 16,902,860 135,303 391,682 12,318,418 325,673
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $1,905,718,953 $1,216,583,740 $77,925,621 $28,208,320 $689,571,457 $101,709,525
====================================================================================================================================
NET ASSETS CONSIST OF:
Paid-in capital $1,161,760,391 $ 828,708,591 $53,542,097 $20,583,206 $475,420,338 $ 61,621,845
Undistributed net investment
income (accumulated loss) 3,387,974 (9,405,907) 192,762 422,191 (971,480) (298,637)
Undistributed net realized gain 223,786,903 122,429,949 5,428,667 2,140,871 109,730,292 10,419,803
Net unrealized appreciation 516,783,685 274,851,107 18,762,095 5,062,052 105,392,307 29,966,514
- ------------------------------------------------------------------------------------------------------------------------------------
NET ASSETS $1,905,718,953 $1,216,583,740 $77,925,621 $28,208,320 $689,571,457 $101,709,525
====================================================================================================================================
Shares of beneficial interest
outstanding--Note 6 35,808,945 27,669,504 5,937,397 2,173,431 23,881,618 2,914,691
====================================================================================================================================
NET ASSET VALUE PER SHARE $ 53.22 $ 43.97 $ 13.12 $ 12.98 $ 28.87 $ 34.90
====================================================================================================================================
*Identified cost $1,364,215,757 $ 946,350,888 $59,205,607 $22,777,594 $539,016,258 $70,965,630
====================================================================================================================================
</TABLE>
See Notes to Financial Statements.
28
<PAGE>
THE ALGER AMERICAN FUND
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
================================================================================
<TABLE>
<CAPTION>
AMERICAN AMERICAN
SMALL INCOME AMERICAN AMERICAN
AMERICAN CAPITALIZA- AND AMERICAN MIDCAP LEVERAGED
GROWTH TION GROWTH BALANCED GROWTH ALLCAP
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment income
Income:
Interest $ 6,378,360 $ 3,990,237 $ 216,449 $ 543,563 $ 2,334,780 $ 154,673
Dividends 7,822,844 3,040,556 377,898 76,299 2,014,176 304,913
- ------------------------------------------------------------------------------------------------------------------------------------
Total Income 14,201,204 7,030,793 594,347 619,862 4,348,956 459,586
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses:
Management fees-- Note 3(a) 10,304,264 8,665,222 365,820 154,672 4,156,932 567,333
Interest on line of credit utilized -- -- -- -- -- 21,006
Custodian fees 301,295 244,875 24,056 18,875 130,055 26,946
Transfer agent fees 2,500 2,500 2,500 2,500 2,500 2,500
Professional fees 55,065 37,650 5,351 3,923 20,937 5,555
Trustees' fees 3,750 3,750 3,750 3,750 3,750 3,750
Miscellaneous 162,118 101,950 10,883 5,935 39,194 11,455
- ------------------------------------------------------------------------------------------------------------------------------------
Total Expenses 10,828,992 9,055,947 412,360 189,655 4,353,368 638,545
- ------------------------------------------------------------------------------------------------------------------------------------
Net Investment Income (Loss) 3,372,212 (2,025,154) 181,987 430,207 (4,412) (178,959)
- ------------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized
Gain on Investments
Net realized gain on investments 223,813,556 122,430,214 5,444,249 2,135,374 112,933,261 10,343,897
Net change in unrealized appreciation
on investments 338,483,830 51,310,113 11,504,771 3,469,514 35,788,129 23,275,972
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
on investments 562,297,386 173,740,327 16,949,020 5,604,888 148,721,390 33,619,869
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net
assets resulting from
operations $565,669,598 $171,715,173 $17,131,007 $6,035,095 $148,716,978 $33,440,910
====================================================================================================================================
</TABLE>
See Notes to Financial Statements.
29
<PAGE>
THE ALGER AMERICAN FUND
ALGER AMERICAN LEVERAGED ALLCAP PORTFOLIO
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1998
================================================================================
- --------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH
Cash flows from operating activities:
Interest received $ 154,017
Dividends received 321,648
Interest paid (21,044)
Operating expenses paid (591,266)
Purchase of short-term securities, net (372,727)
Purchase of portfolio securities (106,914,674)
Proceeds from disposition of portfolio securities 92,576,905
Other 514
- --------------------------------------------------------------------------------
Net cash used in operating activities (14,846,627)
- --------------------------------------------------------------------------------
Cash flows from financing activities:
Dividends paid (2,761,338)
Proceeds from shares sold and dividends reinvested 40,194,208
Payments on shares redeemed (22,586,243)
- --------------------------------------------------------------------------------
Net cash provided by financing activities 14,846,627
- --------------------------------------------------------------------------------
Net increase in cash --
Cash--beginning of year --
- --------------------------------------------------------------------------------
Cash--end of year $ --
================================================================================
RECONCILIATION OF NET INCREASE IN NET ASSETS TO NET CASH
PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Net increase in net assets resulting from operations $ 33,440,910
Increase in investments (13,790,727)
Increase in receivable for investments sold (919,769)
Decrease in interest and dividends receivable 16,079
Net realized gain (10,343,897)
Net increase in unrealized appreciation (23,275,972)
Increase in accrued expenses 26,235
Net decrease in other assets 514
- --------------------------------------------------------------------------------
Net cash used in operating activities $ (14,846,627)
================================================================================
See Notes to Financial Statements.
30
<PAGE>
THE ALGER AMERICAN FUND
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
====================================================================================================================================
AMERICAN
AMERICAN INCOME AMERICAN AMERICAN
AMERICAN SMALL AND AMERICAN MIDCAP LEVERAGED
GROWTH CAPITALIZATION GROWTH BALANCED GROWTH ALLCAP
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net investment income (loss) $ 3,372,212 $ (2,025,154) $ 181,987 $ 430,207 $ (4,412) $ (178,959)
Net realized gain on investments 223,813,556 122,430,214 5,444,249 2,135,374 112,933,261 10,343,897
Net change in unrealized appreciation
on investments 338,483,830 51,310,113 11,504,771 3,469,514 35,788,129 23,275,972
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting
from operations 565,669,598 171,715,173 17,131,007 6,035,095 148,716,978 33,440,910
Dividends to shareholders:
Net investment income (3,246,329) -- (194,463) (295,352) -- --
Net realized gains (198,381,152) (131,575,498) (5,380,156) (1,311,952) (41,830,668) (2,761,338)
Net increase from
shares of beneficial
interest transactions-- Note 6 469,147,944 178,858,157 18,970,341 7,166,779 137,718,447 17,541,955
- ------------------------------------------------------------------------------------------------------------------------------------
Total increase 833,190,061 218,997,832 30,526,729 11,594,570 244,604,757 48,221,527
Net Assets
Beginning of year 1,072,528,892 997,585,908 47,398,892 16,613,750 444,966,700 53,487,998
- ------------------------------------------------------------------------------------------------------------------------------------
End of year $1,905,718,953 $1,216,583,740 $ 77,925,621 $28,208,320 $689,571,457 $ 101,709,525
====================================================================================================================================
Undistributed net investment income
(accumulated loss) $ 3,387,974 $ (9,405,907) $ 192,762 $ 422,191 $ (971,480) (298,637)
====================================================================================================================================
</TABLE>
THE ALGER AMERICAN FUND
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
====================================================================================================================================
AMERICAN
AMERICAN INCOME AMERICAN AMERICAN
AMERICAN SMALL AND AMERICAN MIDCAP LEVERAGED
GROWTH CAPITALIZATION GROWTH BALANCED GROWTH ALLCAP
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net investment income (loss) $ 3,277,196 $ (1,820,125) $ 195,876 $ 294,655 $ (653,590) $ (79,311)
Net realized gain on investments 199,900,299 139,147,522 5,378,374 1,319,306 38,971,626 3,587,761
Net change in unrealized appreciation
on investments 49,343,495 22,504,405 4,254,496 756,566 20,863,695 4,257,904
- ------------------------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting
from operations 252,520,990 159,831,802 9,828,746 2,370,527 59,181,731 7,766,354
Dividends to shareholders:
Net investment income (3,760,721) -- (141,500) (155,278) (250,596) --
Net realized gains (6,810,754) (54,749,439) (1,170,590) (210,546) (6,110,692) --
Net increase (decrease) from
shares of beneficial interest
transactions-- Note 6 (160,448,991) (577,014,924) 17,971,996 4,123,363 (2,700,477) 10,796,374
- ------------------------------------------------------------------------------------------------------------------------------------
Total increase (decrease) 81,500,524 (471,932,561) 26,488,652 6,128,066 50,119,966 18,562,728
Net Assets
Beginning of year 991,028,368 1,469,518,469 20,910,240 10,485,684 394,846,734 34,925,270
- ------------------------------------------------------------------------------------------------------------------------------------
End of year $1,072,528,892 $ 997,585,908 $ 47,398,892 $16,613,750 $444,966,700 $ 53,487,998
====================================================================================================================================
Undistributed net investment income
(accumulated loss) $ 3,262,091 $ (7,380,753) $ 205,238 $ 287,336 $ (967,068) $ (119,678)
====================================================================================================================================
</TABLE>
See Notes to Financial Statements.
31
<PAGE>
THE ALGER AMERICAN FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
================================================================================
NOTE 1--GENERAL:
The Alger American Fund (the "Fund") is a diversified, open-end registered
investment company organized as a business trust under the laws of the
Commonwealth of Massachusetts. The Fund operates as a series company currently
issuing six series of shares of beneficial interest: American Growth Portfolio,
American Small Capitalization Portfolio, American Income and Growth Portfolio,
American Balanced Portfolio, American MidCap Growth Portfolio and American
Leveraged AllCap Portfolio (collectively the "Portfolios"). The American Growth
Portfolio, American Small Capitalization Portfolio, American MidCap Growth
Portfolio and American Leveraged AllCap Portfolio invest primarily in equity
securities and each has an investment objective of long-term capital
appreciation. The American Income and Growth Portfolio's primary investment
objective is to provide a high level of dividend income by investing primarily
in dividend-paying equity securities; capital appreciation is a secondary
objective. The American Balanced Portfolio's investment objectives are current
income and long-term capital appreciation which it seeks to achieve through
investing in equity and fixed income securities. Shares of the Portfolios are
available and are being marketed exclusively as a pooled funding vehicle for
qualified retirement plans and for life insurance companies writing all types of
variable annuity contracts and variable life insurance policies.
NOTE 2--SIGNIFICANT ACCOUNTING POLICIES:
(a) INVESTMENT VALUATION: Investments of the Portfolios are valued on each day
the New York Stock Exchange ("NYSE") is open as of the close of the NYSE
(normally 4:00 p.m. Eastern time). Listed and unlisted securities for which such
information is regularly reported are valued at the last reported sales price
or, in the absence of reported sales, at the mean between the bid and the asked
price, or, in the absence of a recent bid or asked price, the equivalent as
obtained from one or more of the major market makers for the securities to be
valued.
Securities for which market quotations are not readily available are valued
according to procedures established by the Board of Trustees to determine fair
value in good faith.
Securities having a remaining maturity of sixty days or less are valued at
amortized cost which approximates market value.
(b) SECURITY TRANSACTIONS AND INVESTMENT INCOME: Security transactions are
recorded on a trade date basis. Resulting receivables and payables are carried
at amounts which approximate fair value. Realized gains and losses from security
transactions are recorded on the identified cost basis. Dividend income is
recognized on the ex-dividend date and interest income is recognized on the
accrual basis.
(c) REPURCHASE AGREEMENTS: The Portfolios enter into repurchase agreements with
approved institutions, primarily U.S. Government securities dealers. The
repurchase agreements are collateralized by U.S. Government securities which are
verified by the investment manager as being either received and held in physical
possession by the custodian or as having been received by such custodian in
book-entry form through the Federal Reserve book-entry system. The investment
manager monitors the value of the collateral at the time the repurchase
agreement is entered into and on a daily basis during the term of the agreement
to ensure that its value equals or exceeds the agreed-upon repurchase price to
be repaid to the Portfolio. Additional collateral is obtained when necessary.
(d) LENDING OF PORTFOLIO SECURITIES: The Portfolios lend their securities to
financial institutions, including an affiliate of the custodian, provided that
the market value of securities loaned will not at any time exceed one-third of
the Portfolio's total assets, as defined. The Portfolios earn fees on the
securities loaned which are included in interest income in the accompanying
Statements of Operations. In order to protect against the risk of failure by the
borrower to return the securities loaned or any delay in the delivery of such
securities, the investment manager ensures that the loan is collateralized by
cash, letters of credit or U.S. Government securities that are maintained at all
times in an amount equal to at least 100 percent of the current market value of
the loaned securities. At December 31, 1998, the value of securities loaned and
collateral received thereon were as follows:
VALUE OF
SECURITIES VALUE OF
LOANED COLLATERAL
------------ ------------
American Growth Portfolio...... $ 4,758,109 $ 4,884,033
American Small Capitalization
Portfolio.................... 63,585,006 64,909,546
American Income and Growth
Portfolio.................... -- --
American Balanced Portfolio.... 106,932 110,237
American MidCap Growth
Portfolio.................... 27,724,121 28,330,588
American Leveraged AllCap
Portfolio.................... -- --
(e) DIVIDENDS TO SHAREHOLDERS: Dividends and distributions payable to
shareholders are recorded by the Fund on the ex-dividend date.
Dividends from net investment income are declared and paid annually.
32
<PAGE>
THE ALGER AMERICAN FUND
NOTES TO FINANCIAL STATEMENTS (CONT'D)
DECEMBER 31, 1998
================================================================================
Distributions from net realized gains, offset by any loss carryforward, are
declared and paid annually after the end of the fiscal year in which earned.
(f) FEDERAL INCOME TAXES: It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of the taxable income, including net realized
capital gains, of each Portfolio to its respective shareholders. Therefore, no
federal income tax provision is required. Each Portfolio is treated as a
separate entity for the purpose of determining such compliance.
(g) EXPENSES: The Fund accounts separately for the assets, liabilities and
operations of each Portfolio. Expenses directly attributable to each Portfolio
are charged to that Portfolio's operations; expenses which are applicable to all
Portfolios are allocated among them.
(h) OTHER: These financial statements have been prepared using estimates and
assumptions that affect the reported amounts therein. Actual results may differ
from those estimates.
NOTE 3--INVESTMENT MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES:
(a) INVESTMENT MANAGEMENT FEES: Fees incurred by each Portfolio, pursuant to the
provisions of its Investment Management Agreement (the "Agreement") with Fred
Alger Management, Inc. ("Alger Management"), are payable monthly and computed
based on the average daily net assets of each Portfolio at the following annual
rates:
American Growth Portfolio............................ .750%
American Small Capitalization Portfolio.............. .850
American Income and Growth Portfolio................. .625
American Balanced Portfolio.......................... .750
American MidCap Growth Portfolio..................... .800
American Leveraged AllCap Portfolio.................. .850
Each Agreement further provides that if in any fiscal year the aggregate
expenses, excluding interest, taxes, brokerage commissions, and extraordinary
expenses, of the American Growth Portfolio exceed 1.50%; the American Small
Capitalization Portfolio exceed 1.50%; the American Income and Growth Portfolio
exceed 1.25%; the American Balanced Portfolio exceed 1.25%; the American MidCap
Growth Portfolio exceed 1.50% and the American Leveraged AllCap Portfolio exceed
1.50% of the average daily net assets of the applicable Portfolio, Alger
Management will reimburse that Portfolio for the excess expenses.
(b) BROKERAGE COMMISSIONS: During the year ended December 31, 1998, the American
Growth Portfolio, American Small Capitalization Portfolio, American Income and
Growth Portfolio, American Balanced Portfolio, American MidCap Growth Portfolio
and the American Leveraged AllCap Portfolio paid Fred Alger & Company,
Incorporated ("Alger Inc.") $3,372,838, $2,535,652, $171,919, $31,609,
$1,636,242 and $168,804, respectively, in connection with securities
transactions.
(c) TRANSFER AGENCY FEES: The Fund has entered into a transfer agency agreement
with Alger Shareholder Services, Inc. ("Services"), an affiliate of Alger
Management, whereby Services will act as transfer agent for the Fund for a fee
of $2,500 per year, per Portfolio, plus out-of-pocket expenses.
(d) Certain trustees and officers of the Fund are directors and officers of
Alger Management, Alger Inc. and Services.
NOTE 4--SECURITIES TRANSACTIONS:
Purchases and sales of securities, other than short-term securities, for the
year ended December 31, 1998, were as follows:
PURCHASES SALES
----------- -----------
American Growth Portfolio...... $1,723,985,203 $1,598,358,938
American Small Capitalization
Portfolio.................... 1,360,996,321 1,371,887,498
American Income and Growth
Portfolio.................... 84,664,292 72,045,184
American Balanced Portfolio.... 19,187,530 16,675,060
American MidCap Growth
Portfolio.................... 751,122,359 726,513,142
American Leveraged AllCap
Portfolio.................... 106,914,674 93,496,190
NOTE 5--LINE OF CREDIT:
The American Leveraged AllCap Portfolio has a line of credit with its custodian
bank whereby it may borrow up to one-third of the value of its assets, as
defined, up to a maximum of $25,000,000. Such borrowings have a variable
interest rate and are payable on demand. To the extent American Leveraged AllCap
Portfolio borrows under this line, it must pledge securities with a total value
of at least twice the amount borrowed. During the year ended December 31, 1998,
the American Leveraged AllCap Portfolio had borrowings which averaged $246,101
at a weighted average interest rate of 8.42%.
NOTE 6--SHARE CAPITAL:
The Fund has an unlimited number of authorized shares of beneficial interest of
$.001 par value.
33
<PAGE>
THE ALGER AMERICAN FUND
NOTES TO FINANCIAL STATEMENTS (CONT'D)
DECEMBER 31, 1998
================================================================================
During the year ended December 31, 1998, transactions of shares of beneficial
interest were as follows:
SHARES AMOUNT
----- ------
American Growth
Portfolio:
Shares sold................ 22,276,285 $1,015,249,072
Dividends reinvested....... 4,809,435 201,563,406
---------- --------------
27,085,720 1,216,812,478
Shares redeemed............ (16,358,040) (747,664,534)
---------- --------------
Net increase............. 10,727,680 $ 469,147,944
========== ==============
SHARES AMOUNT
----- ------
American Small Capitalization
Portfolio:
Shares sold................ 33,401,217 $1,342,889,723
Dividends reinvested....... 3,247,801 131,568,417
---------- --------------
36,649,018 1,474,458,140
Shares redeemed............ (31,781,393) (1,295,599,983)
---------- --------------
Net increase............. 4,867,625 $ 178,858,157
========== ==============
SHARES AMOUNT
----- ------
American Income and Growth
Portfolio:
Shares sold................ 2,355,653 $ 27,413,251
Dividends reinvested....... 504,168 5,571,055
---------- --------------
2,859,821 32,984,306
Shares redeemed............ (1,236,899) (14,013,965)
---------- --------------
Net increase............. 1,622,922 $ 18,970,341
========== ==============
SHARES AMOUNT
----- ------
American Balanced
Portfolio:
Shares sold................ 781,832 $ 8,989,415
Dividends reinvested....... 146,968 1,604,892
---------- --------------
928,800 10,594,307
Shares redeemed............ (299,561) (3,427,528)
---------- --------------
Net increase............. 629,239 $ 7,166,779
========== ==============
SHARES AMOUNT
----- ------
American MidCap Growth
Portfolio:
Shares sold................ 14,298,667 $ 361,534,632
Dividends reinvested....... 1,688,763 41,830,666
---------- --------------
15,987,430 403,365,298
Shares redeemed............ (10,509,008) (265,646,851)
---------- --------------
Net increase............. 5,478,422 $ 137,718,447
========== ==============
SHARES AMOUNT
----- ------
American Leveraged AllCap
Portfolio:
Shares sold................ 1,353,912 $ 37,604,075
Dividends reinvested....... 107,618 2,731,336
---------- --------------
1,461,530 40,335,411
Shares redeemed............ (854,961) (22,793,456)
---------- --------------
Net increase............. 606,569 $ 17,541,955
========== ==============
During the year ended December 31, 1997, transactions of shares of beneficial
interest were as follows:
SHARES AMOUNT
----- ------
American Growth
Portfolio:
Shares sold................ 16,488,837 $ 655,951,502
Dividends reinvested....... 283,342 10,571,475
---------- --------------
16,772,179 666,522,977
Shares redeemed............ (20,559,387) (826,971,968)
---------- --------------
Net decrease............. (3,787,208) $ (160,448,991)
========== ==============
SHARES AMOUNT
----- ------
American Small Capitalization
Portfolio:
Shares sold................ 24,762,826 $1,038,991,957
Dividends reinvested....... 1,463,106 54,749,439
---------- --------------
26,225,932 1,093,741,396
Shares redeemed............ (39,348,743) (1,670,756,320)
---------- --------------
Net decrease............. (13,122,811) $ (577,014,924)
========== ==============
SHARES AMOUNT
--------- -----------
American Income and Growth
Portfolio:
Shares sold................ 2,857,584 $ 27,984,376
Dividends reinvested....... 142,001 1,312,090
---------- --------------
2,999,585 29,296,466
Shares redeemed............ (1,167,593) (11,324,470)
---------- --------------
Net increase............. 1,831,992 $ 17,971,996
========== ==============
SHARES AMOUNT
----- ------
American Balanced
Portfolio:
Shares sold................ 592,297 $ 6,003,090
Dividends reinvested....... 38,027 365,824
---------- --------------
630,324 6,368,914
Shares redeemed............ (220,624) (2,245,551)
---------- --------------
Net increase............. 409,700 $ 4,123,363
========== ==============
SHARES AMOUNT
----- ------
American MidCap Growth
Portfolio:
Shares sold................ 14,279,060 $ 328,791,802
Dividends reinvested....... 297,953 6,361,288
---------- --------------
14,577,013 335,153,090
Shares redeemed............ (14,668,073) (337,853,567)
---------- --------------
Net decrease............. (91,060) $ (2,700,477)
========== ==============
SHARES AMOUNT
----- ------
American Leveraged AllCap
Portfolio:
Shares sold................ 1,381,000 $ 30,139,481
Shares redeemed............ (876,756) (19,343,107)
---------- --------------
Net increase............. 504,244 $ 10,796,374
========== ==============
34
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE SHAREHOLDERS AND
BOARD OF TRUSTEES OF THE ALGER AMERICAN FUND
We have audited the accompanying statements of assets and liabilities of The
Alger American Fund (a Massachusetts business trust comprising, respectively,
the Alger American Growth Portfolio, Alger American Small Capitalization
Portfolio, Alger American Income and Growth Portfolio, Alger American Balanced
Portfolio, Alger American MidCap Growth Portfolio and Alger American Leveraged
AllCap Portfolio), including the schedules of investments, as of December 31,
1998, and the related statements of operations and cash flows for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the five years in
the period then ended. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements and financial highlights. Our procedures included confirmation of
securities owned as of December 31, 1998, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of each
of the respective portfolios constituting The Alger American Fund as of December
31, 1998, the results of their operations and cash flows for the year then
ended, the changes in their net assets for each of the two years in the period
then ended, and the financial highlights for each of the five years in the
period then ended, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
New York, New York
January 29, 1999
35
