Growth & Income / FACTSHEET L Alger Growth & Income Portfolio Managers Daniel C. Chung, CFA Gregory S. Adams, CFA Investment Goal Primarily invests in growth equity securities of U.S. companies identified through our fundamental research as paying a high dividend yield, having a history of strong and consistent dividend growth, or having the potential for capital appreciation and the ability to return cash to investors. Average Annual Total Returns (as of 6/30/16) 2Q16 Not Annualized YTD Not Annualized 1 Year 3 Years 5 Years 10 Years Since Inception (Incepted 1/1/87) Gross of Fees Return 2.26% 2.72% 2.92% 11.13% 12.26% 8.37% 9.77% Net of Fees Return 2.11% 2.41% 2.29% 10.47% 11.60% 7.76% 9.17% S&P 500 Index 2.46% 3.84% 4.00% 11.66% 12.10% 7.42% 10.05% Top 10 Holdings a (as of 6/30/16) Apple Inc. 3.43% Microsoft Corporation 3.30% Exxon Mobil Corporation 3.07% Altria Group, Inc. 2.65% JPMorgan Chase & Co. 2.56% Johnson & Johnson 2.46% Verizon Communications Inc. 2.41% Sector Allocations a (as of 6/30/16) Information Technology 18.02% Financials 16.28% Health Care 16.15% Consumer Staples 12.88% Consumer Discretionary 12.35% Industrials 11.58% Energy 6.78% General Electric Company 2.20% Telecommunication Services 3.84% Honeywell International Inc. 2.14% Materials 1.36% Bristol-Myers Squibb Company 2.14% Utilities 0.76% Source: FactSet a The information shown is for a representative account and is subject to change. Actual client account holdings and sector allocations may vary.
growth & Income 2/5 Market Environment The citizens of the United Kingdom voted in late June to withdraw the country from the European Union, which caused the S&P 500 index to quickly decline 4.07%. Soon afterward, a perception that markets had been oversold and expectations that central banks would provide stimulus supported investor sentiment and the index rallied 4.95% during the final days of the month. It was a difficult quarter for active growth managers with investors favoring defensive sectors such as Telecommunication Services, Utilities, and Consumer Staples. For the second quarter, the S&P 500 generated a 2.46% return. Strategy Review The Alger Growth & Income Strategy generated a 2.26% grossof-fees return for the second quarter of 2016 compared to the 2.46% return of its benchmark, the S&P 500 index. For the first six months of 2016, the Strategy generated a 2.72% gross-of-fees return compared to the 3.84% return of its benchmark. For the second quarter of 2016, the largest sector weightings were Information Technology and Financials. The largest sector overweight was Consumer Staples and the largest sector underweight was Information Technology. Relative outperformance in the Health Care and Industrials sectors was the most important contributor to performance while Consumer Discretionary and Information Technology were among sectors that detracted from results. Pfizer Inc. and Exxon Mobil Corporation were among top contributors to absolute performance. Pfizer offers pharmaceutical treatments for inflammation, neurosciences, metabolism, and oncology. The company reported a strong quarter that substantially beat consensus estimates. Pfizer s Lyrica pain medicine, ENBREL anti-inflammatory treatment, and Prevnar 13 Streptococcus pneumoniae vaccine supported the results. Management also raised its annual earnings guidance and said results may be supported by more favorable currency exchange rates. Exxon Mobil is a global energy producer and marketer. The shares contributed to performance as energy prices rallied significantly, thereby raising the prospect of better earnings. Investors were also attracted to the company s dividend. Also during the quarter, shares of tobacco company and cigarette manufacturer Altria Group, Inc. contributed to performance. Lower gasoline prices and a healthy job market have resulted in increased consumer spending, thereby allowing Altria to generate better-than-expected sales. With Altria generating persistent earnings growth that has been less influenced by global developments, the stock became more attractive as investors grew increasingly concerned over political instability following Britain s European Union referendum. Shares of Bristol-Myers Squibb Company also supported performance. Bristol-Myers is focused on discovering, developing, and delivering innovative medicines for treating cancer, cardiovascular diseases, hepatitis, HIV, and rheumatoid arthritis. Investors during the second quarter reacted favorably to encouraging fundamentals, with earnings results supported by strong revenues from the company s OPDIVO lung-cancer treatment and Eliquis anti-blood-clotting treatment. Apple Inc. and Microsoft Corporation, however, detracted from results. We believe the recent pricing of Apple shares reflects an incorrect view that the company is a commodity hardware producer. We believe, however, that Apple should be priced as an innovative company that provides software that is very sticky among its customers. The shares detracted from performance as investors have been disappointed with Apple s innovation and with uninspiring growth with the company s smartphones. We believe Apple's dividend and share repurchase program, however, can potentially mitigate risk while investors wait for the company s research and product development efforts to bear fruit. Software company Microsoft, meanwhile, is being reoriented toward cloud computing and a more profitable product mix. After several quarters of strong share performance, Microsoft stock detracted from performance as quarterly results modestly disappointed and investors initially reacted negatively to news that the company will acquire LinkedIn Corporation. We continue to believe that the company s migration to cloud services is a multi-year process that will yield attractive results and that LinkedIn will support revenue growth. Seagate Technology PLC and Delphi Automotive PLC also detracted from results. Seagate provides data storage products. Its stock underperformed after the company reported a year-over-year decline in revenues and disappointing earnings. The cannibalization of the personal computer market by mobile devices, sluggish macroeconomic conditions, and competition hurt sales. Delphi Automotive provides cables and other electrical products to a variety of industries and automobile components that improve safety, fuel efficiency, and conductivity. The shares detracted from portfolio performance as investors became concerned about the strength of automobile manufacturing and the sales cycle. These concerns were magnified in the wake of the U.K. vote to leave the European Union with the company generating substantial sales in Europe. In addition, approximately 20% of Delphi s European sales occur in the U.K. Going Forward We continue to have an optimistic outlook for equity investing and we believe this is an attractive time for active managers that focus on growth stocks in particular. As a result of investors favoring defensive stocks for most of 2016, growth stocks are trading at historically low valuations relative to value stocks. In addition, we maintain that corporate fundamentals are strong at a time when stock buybacks, dividend payments, and mergers and acquisitions are returning substantial amounts of capital to investors. The United States economy, meanwhile, is healthy with a strong job market, a recovering real estate sector, and low energy prices strengthening consumers potential spending power. As fundamental investors, we believe our portfolios are well positioned to benefit from a potential rally in growth stocks.
growth & Income 3/5 The information below is presented as supplemental to the performance disclosure. Characteristics b (as of 6/30/16) Alger Growth & Income S&P 500 Index Total Net Assets c $181.9 mil N/A Number of Equity Holdings 83 505 Average Market Cap $111.28 bil $39.35 bil Median Market Cap $59.69 bil $18.11 bil Weighted Avg. Market Cap $162.03 bil $137.59 bil P/E Ratio 16.38 16.91 Alpha (5 Year) 1.18 0.00 Beta (5 Year) 0.91 1.00 Capture Ratio (5 Year) 1.01 1.00 EPS Growth 1 Yr. Forecasted 6.23% 6.49% EPS Growth 3-5 Yrs. Forecasted 9.00% 9.18% b The information shown herein is for a representative account and is subject to change. c Includes Growth & Income assets which are not included in the composite shown herein. Top Contributors & Detractors b (for Quarter ended 6/30/16) Contributors Pfizer Inc. Exxon Mobil Corporation Bristol-Myers Squibb Company Johnson & Johnson Altria Group, Inc. Detractors Apple Inc. Microsoft Corporation Seagate Technology PLC Delphi Automotive PLC Blackstone Group L.P. Source: FactSet Contribution to Return and Attribution Analysis d (for 1-Year Period ended 6/30/16) Alger Growth & Income S&P 500 Index Attribution Analysis Average Weight (%) Contribution to Return (%) Average Weight (%) Contribution to Return (%) Total Effect (%) Consumer Discretionary 13.24% 0.38% 12.88% 0.53% -0.14% Consumer Staples 11.95% 2.10% 10.09% 1.87% 0.14% Energy 6.38% -0.27% 6.98% -0.24% 0.05% Financials 17.20% -1.86% 16.10% -1.03% -0.78% Health Care 14.81% 0.68% 14.88% -0.56% 1.17% Industrials 10.70% 0.71% 10.08% 0.76% -0.06% Information Technology 17.80% 0.54% 20.45% 1.14% -0.31% Materials 1.14% -0.21% 2.87% -0.07% -0.06% Telecommunication Services 3.26% 0.84% 2.53% 0.65% 0.16% Utilities 0.78% -0.20% 3.15% 0.92% -0.97% Source: Factset d The information shown is for a representative account and is subject to change. Actual client sector allocations may vary.
growth & Income 4/5 Schedule of Comparative Performance Statistics (as of 12/31/15) Gross of Fees Return (%) Net of Fees Return (%) S&P 500 (%) Internal Dispersion (%) Number of Accounts in Market Value of ($ Millions) Total Firm Assets in (%) Total Firm Assets ($ Millions) Annual Returns 1996 (from 1/1) 20.3 19.7 23.0 N/A 1 20.9 0.3 7,109.1 1997 37.2 36.3 33.4 N/A 1 47.5 0.6 7,722.8 1998 33.2 32.4 28.6 N/A 1 78.1 0.7 10,599.4 1999 43.3 42.5 21.0 N/A 2 172.1 1.0 17,440.5 2000 0.3-0.2-9.1 N/A 2 248.1 1.4 18,372.8 2001-14.1-14.6-11.9 N/A 2 216.0 1.6 13,619.8 2002-30.4-30.8-22.1 N/A 3 131.4 1.6 8,427.5 2003 30.8 30.1 28.7 N/A 3 156.4 1.4 10,873.6 2004 8.7 8.2 10.9 N/A 2 139.6 1.4 9,721.7 2005 4.8 4.3 4.9 N/A 2 243.9 2.6 9,228.7 2006 10.8 10.3 15.8 N/A 2 217.3 2.3 9,443.4 2007 10.9 10.4 5.5 N/A 1 62.3 0.4 15,350.2 2008-39.0-39.3-37.0 N/A 1 29.6 0.4 8,391.2 2009 33.3 32.6 26.5 N/A 1 34.5 0.3 12,054.8 2010 13.5 12.9 15.1 N/A 1 33.0 0.2 15,357.3 2011 8.7 8.1 2.1 N/A 2 100.6 0.7 14,919.3 2012 13.2 12.5 16.0 N/A 2 113.1 0.7 16,211.9 2013 30.9 30.1 32.4 N/A 3 202.3 1.0 20,424.3 2014 13.5 12.8 13.7 N/A 3 205.5 0.9 21,802.0 2015 2.3 1.7 1.4 N/A 3 187.6 0.9 21,718.2 3-Yr Std Dev (as of YE 2011 ) 17.8 N/A 18.7 3-Yr Std Dev (as of YE 2012 ) 14.2 N/A 15.1 3-Yr Std Dev (as of YE 2013 ) 10.7 N/A 11.9 3-Yr Std Dev (as of YE 2014 ) 8.4 N/A 9.0 3-Yr Std Dev (as of YE 2015 ) 10.1 N/A 10.5 Notes 1. Fred Alger Management, Inc., is a New York-based investment adviser that has been in the business of providing investment advice since 1964. 2. Fred Alger Management, Inc. claims compliance with the Global Investment Performance Standards (GIPS ) and has prepared and presented this report in compliance with the GIPS standards. Fred Alger Management, Inc. has been independently veri fied for the period from January 1, 1988 through December 31, 2015. Verfication assesses whether (1) the firm has complied with all the composite construction requirements of the GIPS standards on a firm-wide basis and (2) the firm's policies and procedures are designed to calculate and present performance in compliance with the GIPS standards. The Alger Growth & Income has been examined for the period from January 1, 2009 through December 31, 2015. The verification and examination reports are available upon request. Past performance is not an indi cation or a guarantee of future results. 3. The Alger Growth & Income is composed of accounts which invest primarily in U.S. equity securities of companies that, in the opinion of the portfolio s management, offer opportunities for capital appreciation and/or dividend income. The strategy will typically invest in companies that exhibit one or more of the following qualities: pays a high dividend yield, has a history of strong and consistent dividend growth, or has the potential for capital appreciation and the ability to return cash to investors. Typically, at least 65% of the holdings will be in companies that pay dividends. The strategy focuses on growing companies that, at time of purchase, have a market capitalization equal to or greater than the market capitalization of companies included in the S&P 500 Index. 4. All returns assume reinvestment of dividends and are gross for withholding taxes where applicable. Performance for periods less than one year is not annualized. 5. The is calculated in U.S. dollars. 6. Gross of fees performance is shown prior to the deduction of management fees and after the deduction of trading expenses. Net of fees performance reflects the deduction of actual management fees and trading expenses. Additional information regarding the policies for valuing portfolios, calculating performance and preparing compliant presentations are available upon request. 7. Fred Alger Management, Inc. s standard fee offered to separately managed institutional Growth & Income clients is as follows:.55% on the first $25 million of assets under management;.50% on the next $25 million of assets under management;.45% on the next $50 million of assets under management;.375% on the next $150 million of assets under management; and.30% on assets over $250 million. Actual fees may differ. 8. For the years prior to 1996, an account was excluded from the Accounts for a quarter if a capital contribution greater than 20% of the account s total market value at the time the contribution had been received, or a capital withdrawal greater than 10% of the account s total market value at the time of the withdrawal had been made. 9. A list of composite descriptions is available upon request. 10. The was created 1/1/87. 11. The three-year annualized ex-post standard deviation measures the variability of the composite (using gross returns) and the benchmark over the preceding 36-month period. Internal Dispersion Internal dispersion is a measure of the dispersion of individual component portfolio returns around the aggregate composite return. Internal dispersion is calculated through the use of an asset-weighted standard deviation for the accounts included in the for the entire year. Where there are fewer than five accounts, dispersion is not meaningful. At end of period. The S&P 500 Index is an unmanaged index generally representative of the U.S. stock market without regard to company size. Investors cannot invest directly in any index. Index performance does not reflect deductions for fees, expenses or taxes. Benchmark returns are not covered by the report of independent verifiers. Any views and opinions expressed herein are not meant to provide investment advice and there is no guarantee that they will come to pass.
growth & Income 5/5 About Our Firm Fred Alger Management, Inc. is widely recognized as a pioneer of growth-style investment management. We have been an independent, privately owned firm since our inception in 1964. For more than 50 years, we have had three leaders with one vision: maintaining the legacy and continuity of the Alger Investment Philosophy. We strive to deliver consistently superior investment results for our clients. Investment management is our only business. We believe our independence enables us to remain true to our investment beliefs. Portfolio holdings may change and stocks of companies noted may or may not be held by one or more Alger portfolios from time to time. Investors should not consider references to individual securities as an endorsement or recommendation to purchase or sell such securities. Transactions in such securities may be made which seemingly contradict the references to them for a variety of reasons, including but not limited to, liquidity to meet redemptions or overall portfolio rebalancing. The Fund s P/E Ratio and Market Caps (which come from FactSet) are as of the current period. P/E Ratio was calculated using a weighted harmonic average. EPS Growth rates were calculated using a weighted median. Using alternative calculation methodologies for these statistics might produce materially different results than those shown. Perfor m ance Characteristics are taken from FactSet, an independent source which we believe to be reliable. Fred Alger Management, Inc., however, makes no representation that it is complete or accurate. Alpha measures the difference between a portfolio s actual returns and its expected performance, given its level of risk (as measured by beta); a positive alpha means that the portfolio has per formed better than its beta would predict. Beta measures a portfolio s sensitivity to market movements in relationship to a particular index. A portfolio with a beta of 1.00 would be expected to have returns equal to such index. Capture Ratio is Upside Capture divided by Downside Capture. Upside Capture Ratio measures a portfolio s performance in up markets relative to the market (benchmark) itself. It is calculated by taking the security s upside capture return and dividing it by the benchmark s upside capture return. Downside Capture Ratio measures a portfolio s performance in down markets. A down-market is defined as those periods (months or quarters) in which market return is less than 0. In essence, it tells you what percentage of the down-market was captured by the portfolio. For example, if the ratio is 110%, the portfolio has captured 110% of the down-market and therefore underperformed the market on the downside. Investors should not consider references to individual securities, if any, as an endorsement or recommendation to purchase or sell such security. Transactions in such securities may be made that seemingly contradict the references to them for a variety of reasons, including, but not limited to, liquidity to meet redemptions or overall portfolio rebalancing. Holdings are subject to change. Fred Alger Management, Inc. uses The Global Industry Classification Standard (GICS ) for categorizing companies into sectors and industries. GICS is designed to meet the needs of the investment community for a classification system that reflects a company s primary business model as determined by its financial performance. GICS was developed by and is the exclusive property and a service mark of MSCI Inc. ( MSCI ) and Standard & Poor s, a division of The McGraw- Hill Companies, Inc. ( S&P ) and is licensed for use by Fred Alger Management, Inc. Neither MSCI, S&P nor any third party involved in making or compiling the GICS or any GICS classifications makes any express or implied warranties or representations with respect to such standard or classification (or the results to be obtained by the use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability and fitness for a particular purpose with respect to any of such standard or classification. Without limiting any of the foregoing, in no event shall MSCI, S&P, any of their affiliates or any third party involved in making or compiling the GICS or any GICS classifications have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages. As of 6/30/2016, the following stocks represented the noted percentages of Alger Growth & Income Strategy assets: LinkedIn Corporation, 0.00%; Pfizer Inc., 2.12%; Exxon Mobil Corporation, 3.07%; Bristol-Myers Squibb Company, 2.14%; Johnson & Johnson, 2.46%; Altria Group, Inc., 2.65%; Apple Inc., 3.43%; Microsoft Corporation, 3.30%; Seagate Technology PLC, 0.00%; Delphi Automotive PLC, 0.95%; and Blackstone Group L.P., 1.22%. Fred Alger Management, Inc. 360 Park Avenue South, New York, NY 10010 / 800.223.3810 / www.alger.com 7.15.16 GICOM2Q2016