-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KV3xLo3pZSuJ52W23l62wJdpKTssgwKnS1HV7I/DA9aCsKDq2sq0dTADwmuKFEtL tLdFsagUrWO8U7jEyDOkrw== 0000930413-97-000694.txt : 19971231 0000930413-97-000694.hdr.sgml : 19971231 ACCESSION NUMBER: 0000930413-97-000694 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19971031 FILED AS OF DATE: 19971230 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALGER FUND CENTRAL INDEX KEY: 0000003521 STANDARD INDUSTRIAL CLASSIFICATION: [] FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: N-30D SEC ACT: SEC FILE NUMBER: 811-01355 FILM NUMBER: 97746660 BUSINESS ADDRESS: STREET 1: 75 MAIDEN LN CITY: NEW YORK STATE: NY ZIP: 10038 BUSINESS PHONE: 2128068800 N-30D 1 ANNUAL REPORT FELLOW SHAREHOLDERS: DECEMBER 3, 1997 A YEAR-TO-DATE REVIEW While the fiscal year ended October 31, 1997 resulted in strong performance returns for all of the major stock market indices, the road was not a smooth one. Thus far, the calendar year can be divided into two parts. The first part took place from January all the way through the 27th of October. This period was generally very positive for the market, but was punctuated by several sharp downward corrections (e.g., March--April and August--September). The main focus of investors during this period was the same as it had been since March of 1996--whether or not the Fed would raise rates. Against this background, it is important to understand that most economists have consistently misunderstood the nature of the market and the economy. While it is true that the economy was strong for the first three quarters of 1997, dropping the unemployment rate to a twenty-four year low of 4.7%, there was no resulting increase in inflation as most observers had been expecting. In fact, inflation dropped throughout the year until it finally attained a level which is the lowest in thirty-two years. The broadest measure of this low inflation is the implicit price deflator, which fell to a 1.4% annual rate in the third quarter. This occurred despite a 4.9% increase in GDP in the first quarter, a 3.3% increase in the second quarter and a 3.3% (revised) increase in the third quarter. Because of the concern about a possible build-up in inflationary pressures, investors and economists have been primarily concerned with the level of economic activity. As recently as October 8th, for example, the market was still focusing on excess strength in the economy. That day, comments from Alan Greenspan hit both the stock and bond markets hard. In his comments, Greenspan rebutted the developing theory that there was a new economic paradigm which allowed for rapid economic expansion without inflation due to improved productivity. On that day, just over two months ago, the long-bond traded at 6.37% in response to his comments. A week later, the PPI, which had been negative for six months, shot up .5% in September, further aggravating the situation. As it had for eighteen months, Wall Street was nervously awaiting the Federal Open-Market Committee meeting in November and many expected a rate increase. Then, on October 27th, the market underwent a gigantic change with the Dow falling 554 points to 7161, the largest point drop in the history of the market. This drop was occasioned by a collapse of the Hong Kong market which in turn had been precipitated by weaknesses in currency markets of other Asian countries. By November 19th, the stock market had recovered most of its loss and closed at 7725, higher than its close of October 24th, the Friday before the big slide. Recently the Dow re-penetrated 8000. It is fair to say, however, that most of the rebound has been denominated by blue-chip stocks and utilities, which has caused the S&P 500 to outdistance other market indices as well as growth stocks in general. The fabric of the market is now very different than it was prior to the events of late October. The differences are as follows: 1. It seems fairly obvious that the Federal Reserve will not raise rates. It declined to do so in November, and most probably will refrain from doing so in the near future. This is because turmoil in the currency markets, especially in Asia, has taken center stage. Consequently, raising rates would exacerbate the trade imbalance by leading to a stronger dollar and further hurt weak Asian countries. 2. There is a rapidly emerging viewpoint that the problem with the economy is not potential inflation, but potential deflation. This is a result of pressures brought to bear on the American economy by the stronger dollar, as well as weakness in Asian economies forcing them into competitive exporting. The other side of the coin is, of course, that our own exports will doubtlessly suffer. To put things in perspective, exports from the United States account for 11% of our GDP, with 2% aimed at the affected countries of Japan, Korea, Malaysia, Thailand, Philippines and Indonesia. Presumably, our exports to these countries could fall as much as 20% which would mean a reduction in GDP of 1/2 of 1%. Obviously, this is a very crude number, but it gives an indication of the effect. 3. The debt market has reacted to the turmoil in Asia, creating an offsetting impulse in the market. The long-bond has now fallen to a yield of 6.01%, down from 6.91% six months ago. This has caused a considerable flattening of the yield curve. Ninety-day T-bills are actually higher than they were six months ago and are trading at 5.24%, or only 77 basis points lower than the long-bond. This flattening of the yield curve suggests that three things can happen: 1) The price on the long-bond will drop to reassert a more normal relationship. 2) The Fed will lower interest rates to avert an economic slowdown. 3) The economy will probably slow, causing the entire structure of the yield curve to fall, ultimately leading the Fed to lower interest rates, perhaps after the yield curve inverts. I believe that given the possibility of a slowing economy, number one is unlikely, number two is remote at present, and number three is quite likely, perhaps in 1998. 4. In terms of valuation, the increase in the bond market has made stocks much more attractive. Presently, the earnings yield on the S&P 500 is 80% of the yield on the long-bond, which is higher than the fifteen year average. On our short-term model, the Dow is fully valued but not over valued. On balance, I would say valuation looks good. One possibility is that p/e ratios will get to 20 times 1998 EPS next year, driven by low inflation and low interest rates. As our bottom-up forecast of Dow earnings is $486 per share, this suggests a Dow of 9720. Let's all hope! Furthermore, while growth stocks have rallied somewhat this year, at 1.4 times the market multiple they are still at historically low p/e levels. This is a function of the significant drop in interest rates. Since quality growth stocks have typically traded at 1.5 to 2 times the market multiple, we believe that there is considerable room for further multiple expansion in the months ahead. PORTFOLIO MATTERS ALGER SMALL CAPITALIZATION PORTFOLIO The Portfolio's total return for the year was 12.85% versus a return of 21.17% for the Russell 2000 Growth Index. The Portfolio's return was unfavorable relative to the comparative index, due in large part to its relative underweighting throughout the year in a few select industries, including financial services and retail. While financial and retail companies did not, in our opinion, offer the most exciting growth opportunities in 1997, stocks in these industries, particularly those with predominantly U.S. exposure, held up very well during what has been an extremely turbulent small cap market. Additionally, while our comparative index includes growth stocks, the growth stocks which we typically hold in the Portfolio tend to be faster growing and, as a result, are more volatile during periods of economic uncertainty. For most of 1997, investors have been primarily concerned that the economy was growing too quickly, unemployment levels were too low, and inflation was just around the corner. It was presumed that these concerns would lead to a series of increases in Federal Reserve driven rates. In general, when the market is apprehensive about the economic future, it is not willing to pay high p/e multiples for small cap growth stocks. As a consequence, very fast growing small cap companies experienced a severe multiple compression. This is evidenced in the Small Capitalization Portfolio which, at October 31, had a p/e multiple of only 26.2 despite a 1 year estimated EPS growth rate of 42%. The result is that we are entering fiscal year 1998 with a Portfolio comprising very attractive valuations relative to the broad market. ALGER GROWTH PORTFOLIO For the year ended October 31, 1997, the Alger Growth Portfolio's total return was 24.94% compared to 32.11% for the S&P 500. As stated previously, for most of 1997 the worries impacting both the bond and stock markets have been that the economy was growing too quickly, unemployment levels were too low, and inflation was just around the corner. While the level of economic activity in 1997 has been stronger than we anticipated, inflation continues to be moderate to non-existent. However, the economic uncertainty which prevailed throughout most of the year resulted in defensive positioning of investors. As a result, there was a "flight to quality" with investors favoring blue-chip type stocks with predictable earnings over traditional growth stocks with more explosive earnings potential. Stocks of companies which are expected to increase their earnings at a faster rate, which are the types of stocks in which this Portfolio typically invests, did not fare as well. ALGER MIDCAP GROWTH PORTFOLIO For the year ended October 31, 1997, the Alger MidCap Growth Portfolio's total return was 21.37% compared to 32.67% for the S&P MidCap 400 Index. Many of the same factors which affected the Small Capitalization and Growth Portfolios were in evidence for the MidCap Growth Portfolio. Most notable, in addition to the general underperformance of the growth style relative to the major averages, was the Portfolio's relative underweighting in the financial service and retail industries. While the relative performance was disappointing, the Portfolio is currently well diversified and boasts very attractive valuations relative to the market based on 1998 estimates. ALGER BALANCED PORTFOLIO The Alger Balanced Portfolio's total return for the twelve-month period ended October 31, 1997, was 19.25%, comparing unfavorably to the S&P 500 which returned 32.11% but favorably to the Lehman Brothers Gov't/Corp. Bond Index which returned 8.80%. Throughout the year, the Portfolio maintained a ratio of approximately 55-65% common stocks and 35-45% debt securities. The total return suffered as a result of the lackluster performance, for reasons discussed previously, in the more aggressive equity portion of the portfolio. ALGER CAPITAL APPRECIATION PORTFOLIO For the year ended October 31, 1997, the Alger Capital Appreciation Portfolio's total return was 21.00%, compared to 32.11% for the S&P 500. The shortfall relative the S&P 500 is mainly stylistic in nature. This Portfolio employs an "allcap" (small, medium and large capitalizations) portfolio management strategy. Exposure to small cap growth stocks in the first half of the year negatively impacted the Portfolio's return relative to the larger averages, specifically the S&P 500. Additionally, as was the case with the other Portfolios, the past year proved difficult for traditional growth stocks in general. Given the possibility of a slowing economy and low inflation in the coming year, we expect that growth stocks, which are currently selling at low multiples, will do very well. LOOKING AHEAD How can we summarize? I believe that the problems in southeast Asia have a deflationary component and will result in some slowing of our economy over the next few years. On the other hand, I believe our economy seems to be in sufficiently good shape due to low unemployment levels and high productivity to withstand some slowing. I believe the fourth quarter will be slower than the third, with growth of possibly 2.5%. Evidence that the economy is starting to slow is beginning to appear. The most obvious data point is the National Association of Purchasing Managers Index released several days ago. It fell to 54.4 in November from 56 in October. While this is still positive, it is well below July's peak of 58.6. Auto sales have also been slow and retail sales are not that robust, dropping 1.8% in the first week of November. However, those who are predicting a dire slowdown may be sorely disappointed. The lower interest rates are spurring real estate activity, leading housing starts to an eight month high in October. Consumer confidence also remains strong despite the problems in Asia. This is hardly surprising since most Americans have a very localized view of the world and probably will not be concerned about Asia until they see some actual effects on their own economic conditions. This, plus the low inflation should keep the Federal Reserve from raising rates for some time. Moreover, an overall pattern of lower interest rates could result by year-end. I believe there is a strong chance that the yield on the long-bond will fall below 6% by year-end. Because of the slowing economy, I believe earnings will increase next year, but modestly. P/E ratios, however, could reach very high levels because of the lack of inflation and lower interest rates. Thus, I am still bullish on stocks, especially domestic growth stocks. Respectfully submitted, /s/ David D. Alger ------------------ David D. Alger President TABLE OF CONTENTS Alger Growth Portfolio: Portfolio Highlights................................................... 5 Schedule of Investments................................................ 6 Financial Highlights................................................... 8 Alger Small Capitalization Portfolio: Portfolio Highlights................................................... 9 Schedule of Investments................................................10 Financial Highlights...................................................13 Alger Balanced Portfolio: Portfolio Highlights...................................................14 Schedule of Investments................................................15 Financial Highlights...................................................17 Alger MidCap Growth Portfolio: Portfolio Highlights...................................................18 Schedule of Investments................................................19 Financial Highlights...................................................21 Alger Capital Appreciation Portfolio: Portfolio Highlights...................................................22 Schedule of Investments................................................23 Financial Highlights...................................................25 Alger Money Market Portfolio: Schedule of Investments................................................26 Financial Highlights...................................................28 Statements of Assets and Liabilities..........................................29 Statements of Operations .....................................................30 Statement of Cash Flows (Alger Capital Appreciation Portfolio)................31 Statements of Changes in Net Assets...........................................32 Notes to Financial Statements ................................................33 Report of Independent Public Accountants......................................39 -5- - -------------------------------------------------------------------------------- ALGER GROWTH PORTFOLIO PORTFOLIO HIGHLIGHTS THROUGH OCTOBER 31, 1997 (UNAUDITED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- HYPOTHETICAL $10,000 INVESTMENT IN CLASS B SHARES - 10 YEARS ENDED 10/31/97 - -------------------------------------------------------------------------------- [CHART] [The following table represents a graph in the printed piece] Alger Growth S&P 500 11/1/87 10000 10000 10773 11479 10/31/89 13680 14511 13134 13426 10/31/91 19148 17923 20998 19711 10/31/93 27125 22655 28230 23531 10/31/95 38895 29755 42039 36924 10/31/97 52613 48783 ENDING VALUE ALGER GROWTH B: $52,613 ENDING VALUE S&P 500 INDEX: $48,782 The chart above illustrates the growth in value of a hypothetical $10,000 investment made in the Alger Growth Class B shares and the S&P 500 Index for the ten years ended October 31, 1997. Figures for both the Alger Growth Class B shares and the S&P 500 Index, an unmanaged index of common stocks, include reinvestment of dividends. Performance for the Alger Growth Class A and Class C shares will vary from the results shown above due to differences in expenses and sales charges those classes bear. PERFORMANCE COMPARISON AS OF 10/31/97+ AVERAGE ANNUAL TOTAL RETURNS 1 5 10 SINCE YEAR YEARS YEARS INCEPTION --------------------------------------------- CLASS A (INCEPTION 1/1/97) * * * 17.34% S&P 500 Index * * * 25.31% - -------------------------------------------------------------------------------- CLASS B (INCEPTION 11/11/86) 19.94% 19.93% 18.06% 16.01% S&P 500 Index 32.11% 19.87% 17.17% 16.08% - -------------------------------------------------------------------------------- CLASS C (INCEPTION 8/1/97) * * * (4.97)% S&P 500 Index * * * (3.76)% THE PORTFOLIO'S AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE PRICE AND REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL WILL FLUCTUATE AND THE PORTFOLIO'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. + RETURNS REFLECT MAXIMUM INITIAL SALES CHARGES ON CLASS A SHARES AND APPLICABLE CONTINGENT DEFERRED SALES CHARGES ON CLASS B AND CLASS C SHARES. -6- THE ALGER FUND ALGER GROWTH PORTFOLIO SCHEDULE OF INVESTMENTS October 31, 1997 COMMON STOCKS--91.5% SHARES VALUE ------ ----- AEROSPACE--4.0% AMR Corp.*..................................... 78,200 $ 9,105,452 Gulfstream Aerospace Corp.*.................... 54,000 1,566,000 Sundstrand Corp................................ 65,400 3,556,125 ------------ 14,227,577 ------------ APPAREL--.5% Tommy Hilfiger Corporation*.................... 41,500 1,641,865 ------------ APPLIANCES & TOOLS--3.1% Sunbeam Corp................................... 247,500 11,214,968 ------------ BIO-TECHNOLOGY--.4% BioChem Pharma Inc.*........................... 60,000 1,503,780 ------------ BROADCASTING--2.6% Westinghouse Electric Corp..................... 353,000 9,332,613 ------------ CHEMICALS--.6% Du Pont E.I. De Nemours & Co................... 36,800 2,093,000 ------------ COMMUNICATIONS--2.9% America Online Inc.*........................... 57,000 4,389,000 WorldCom Inc.*................................. 178,900 6,015,513 ------------ 10,404,513 ------------ COMMUNICATION EQUIPMENT--7.1% Bay Networks Inc.*............................. 151,300 4,784,862 CIENA Corporation*............................. 109,200 6,006,000 Cisco Systems, Inc.*........................... 136,100 11,164,419 Tellabs, Inc.*................................. 65,400 3,531,600 ------------ 25,486,881 ------------ COMPUTER RELATED & BUSINESS EQUIPMENT--5.4% Compaq Computer Corporation*................... 169,100 10,780,125 Electronics For Imaging Inc.*.................. 73,700 3,445,475 International Business Machines Corp........... 53,100 5,207,145 ------------ 19,432,745 ------------ COMPUTER SOFTWARE--5.6% HBO & Company.................................. 94,500 4,110,750 Microsoft Corporation*......................... 55,000 7,150,000 Oracle Corp.*.................................. 150,150 5,372,516 Parametric Technology Corporation*............. 77,200 3,406,450 ------------ 20,039,716 ------------ CONGLOMERATE--3.3% General Electric Co............................ 22,700 1,465,580 Tyco International Ltd......................... 269,294 10,165,849 ------------ 11,631,429 ------------ CONSUMER PRODUCTS--2.8% CUC International Inc.*........................ 226,400 6,678,800 Fortune Brands Inc............................. 52,000 1,719,276 Newell Co...................................... 42,000 1,611,750 ------------ 10,009,826 ------------ ENERGY & ENERGY SERVICES--4.6% Diamond Offshore Drilling Inc.................. 94,000 5,851,500 Nabors Industries Inc.*........................ 92,000 3,783,500 Schlumberger Ltd............................... 76,100 6,658,750 ------------ 16,293,750 ------------ FINANCIAL SERVICES--9.2% Banc One Corp.................................. 36,142 1,883,901 Bank of New York Inc........................... 100,000 4,706,300 Citicorp ...................................... 23,800 2,976,499 First Union Corp............................... 53,600 2,629,777 Federal Home Loan Mortgage Corporation........................ 94,100 3,564,038 Household International Inc.................... 15,800 1,789,350 Money Store Inc. (The)......................... 106,300 3,016,263 Morgan Stanley, Dean Witter, Discover & Co............................... 142,900 7,002,100 Paine Webber Group Inc......................... 43,300 1,913,340 Schwab (Charles) Corporation (The)........................... 95,100 3,245,287 ------------ 32,726,855 ------------ FOODS & BEVERAGES--.9% PepsiCo., Inc.................................. 88,600 3,261,632 ------------ HEALTH CARE--1.9% Bergen Brunswig Corp. Cl. A.................... 20,500 821,292 Guidant Corp................................... 61,000 3,507,500 McKesson Corp.................................. 22,500 2,414,543 ------------ 6,743,335 ------------ INSURANCE--1.7% American International Group, Inc.............. 60,550 6,179,915 ------------ LEISURE & ENTERTAINMENT--3.4% Carnival Corporation Cl. A..................... 157,000 7,614,500 International Game Technology.................. 151,800 3,880,463 Mirage Resorts, Incorporated*.................. 30,000 750,000 ------------ 12,244,963 ------------ MEDICAL SERVICES--2.3% AmeriSource Health Corp Cl. A*................. 30,500 1,810,937 Cardinal Health, Inc........................... 62,000 4,603,500 PhyCor, Inc.*.................................. 84,200 1,941,905 ------------ 8,356,342 ------------ -7- THE ALGER FUND ALGER GROWTH PORTFOLIO SCHEDULE OF INVESTMENTS (continued) October 31, 1997 COMMON STOCKS--(cont'd) SHARES VALUE ------ ----- OIL & GAS--2.6% Global Marine Inc*............................. 90,000 $ 2,801,250 Halliburton Co................................. 108,400 6,463,350 ------------ 9,264,600 ------------ PHARMACEUTICALS--10.2% Bristol Myers Squibb Co........................ 103,000 9,038,250 Eli Lilly & Company............................ 99,200 6,634,000 Merck & Co., Inc............................... 37,900 3,382,575 Pfizer Inc..................................... 40,200 2,844,150 Schering-Plough Corporation.................... 148,400 8,319,749 Warner-Lambert Co.............................. 44,500 6,371,866 ------------ 36,590,590 ------------ POLLUTION CONTROL--1.3% USA Waste Services, Inc.*...................... 122,900 4,547,300 ------------ RETAILING--6.0% General Nutrition Companies, Inc.*............. 60,100 1,893,150 Home Depot, Inc................................ 179,050 9,959,656 Staples Inc.*.................................. 54,500 1,430,625 Wal-Mart Stores Inc............................ 232,800 8,177,100 ------------ 21,460,531 ------------ SEMICONDUCTORS--6.7% Adaptec, Inc.*................................. 48,000 2,325,024 Altera Corporation*............................ 164,000 7,277,500 Linear Technology Corporation.................. 123,300 7,752,488 Maxim Integrated Products, Inc.*............... 51,500 3,411,875 Texas Instruments, Incorporated................ 31,400 3,350,003 ------------ 24,116,890 ------------ SEMICONDUCTOR CAPITAL EQUIPMENT--.9% Applied Materials Inc.*........................ 51,500 1,718,813 Teradyne, Inc.*................................ 35,600 1,332,793 ------------ 3,051,606 ------------ TOYS--.5% Mattel Inc..................................... 45,700 1,776,587 ------------ TRANSPORTATION--1.0% Burlington Northern Santa Fe Co................ 19,400 1,843,000 Textron Inc.................................... 29,200 1,688,140 ------------ 3,531,140 ------------ Total Common Stocks (Cost $265,910,578)......................... 327,164,949 ------------ SHORT-TERM CORPORATE PRINCIPAL NOTES--11.8% AMOUNT --------- Bell Atlantic Network Funding Co., 5.60%, 11/14/97.............................. $ 6,650,000 6,636,552 Cooperative Association of Tractor Dealers Inc., 5.57%, 11/6/97............................... 2,800,000 2,797,834 Ford Motor Credit Company, 5.60%, 11/13/97.............................. 9,000,000 8,983,200 France Telecom., 5.51%, 11/5/97............................... 350,000 349,786 GTE Funding Inc., 5.56%, 11/6/97............................... 1,040,000 1,039,197 McDonald's Corp., 5.57%, 11/5/97............................... 10,000,000 9,993,811 Omnibus Funding Corp. (Series C), 5.53%, 11/4/97(a)............................ 3,550,000 3,548,364 Triple-A One Plus Funding Corp., 5.55%, 11/5/97(a)............................ 2,000,000 1,998,767 USAA Capital Corporation, 5.55%, 11/6/97............................... 6,700,000 6,694,835 ------------ Total Short-Term Corporate Notes (Cost $42,042,346).......................... 42,042,346 ------------ Total Investments (Cost $307,952,924)(b)...................... 103.3% 369,207,295 Liabilities in Excess of Other Assets ..................... (3.3) (11,717,322) ------------ Net Assets..................................... 100.0% $357,489,973 ===== ============ -8- THE ALGER FUND ALGER GROWTH PORTFOLIO Financial Highlights For a share outstanding throughout the period
CLASS C CLASS A (v)(vii) (vi)(vii) CLASS B(i) ------------ ---------- ------------------------------------------------------------------- THREE MONTHS TEN MONTHS ENDED ENDED YEAR ENDED OCTOBER 31, OCTOBER 31, OCTOBER 31, ------------------------------------------------------------------- 1997 1997 1997 1996 1995 1994 1993 ------------ ---------- ---- ---- ---- ---- ---- Net asset value, beginning of period ......................... $ 11.98 $ 9.40 $ 9.49 $ 9.38 $ 6.97 $ 7.43 $ 5.76 ------- -------- -------- -------- -------- -------- ------- Net investment income (loss) ...... (.02) (.02) (.13) (.08)(ii) (.02) (.07)(ii) (.02) Net realized and unrealized gain (loss) on investments ........... (.46) 2.20 2.44 .78 2.59 .35 1.70 ------- -------- -------- -------- -------- -------- ------- Total from investment operations .. (.48) 2.18 2.31 .70 2.57 .28 1.68 Distributions from net realized gains .................. -- -- (.30) (.59) (.16) (.74) (.01) ------- -------- -------- -------- -------- -------- ------- Net asset value, end of period .... $ 11.50 $ 11.58 $ 11.50 $ 9.49 $ 9.38 $ 6.97 $ 7.43 ======= ======== ======== ======== ======== ======== ======= Total Return (iii) ................ (4.0)% 23.2% 24.9% 8.1% 37.8% 4.1% 29.2% ======= ======== ======== ======== ======== ======== ======= Ratios and Supplemental Data: Net assets, end of period (000's omitted) .............. $ 199 $ 52,307 $304,984 $266,207 $154,284 $ 76,390 $37,988 ======= ======== ======== ======== ======== ======== ======= Ratio of expenses to average net assets ................... 2.02% 1.30% 2.08% 2.08%(iv) 2.09%(iv) 2.20%(iv) 2.20%(iv) ======= ======== ======== ======== ======== ======== ======= Ratio of net investment income (loss) to average net assets . (1.43)% (.39)% (1.13)% (.84)% (1.03)% (1.01)% (1.16)% ======= ======== ======== ======== ======== ======== ======= Portfolio Turnover Rate ......... 128.26% 128.26% 128.26% 94.91% 118.16% 103.86% 108.54% ======= ======== ======== ======== ======== ======== ======= Average Commission Rate Paid .... $ .0699 $ .0699 $ .0699 $ .0715 ======= ======== ======== ========
(i) Per share data has been adjusted to reflect the effect of a 3 for 1 stock split which occurred September 27, 1995. (ii) Amount was computed based on average shares outstanding during the year. (iii) Does not reflect the effect of any sales charges. (iv) Reflects total expenses, including custody fees offset by earnings credits resulting from balances left on deposit. The expense ratios net of earnings credits would have been 2.07% for both years ended October 31, 1996 and 1995, respectively. Expense ratios for the years ended prior to October 31, 1995, have been reduced to reflect the effect of fees offset by earnings credits, if any. (v) Initially offered August 1, 1997. (vi) Initially offered January 1, 1997. (vii) Ratios have been annualized; total return has not been annualized. See Notes to Financial Statements. -9- - -------------------------------------------------------------------------------- ALGER SMALL CAPITALIZATION PORTFOLIO PORTFOLIO HIGHLIGHTS THROUGH OCTOBER 31, 1997 (UNAUDITED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- HYPOTHETICAL $10,000 INVESTMENT IN CLASS B SHARES - 10 YEARS ENDED 10/31/97 - -------------------------------------------------------------------------------- [CHART] {The following table represents a graph in the printed piece] Alger Russell Small Cap 2000 Growth 11/1/87 10000 10000 11933 12312 10/31/89 19700 14617 18305 10766 10/31/91 29972 17930 30999 17866 10/31/93 38993 22809 38585 22601 10/31/95 56393 27249 58181 30879 10/31/97 65655 37418 ENDING VALUE ALGER SMALL CAPITALIZATION B: $65,655 ENDING VALUE RUSSELL 2000 GROWTH INDEX: $37,418 The chart above illustrates the growth in value of a hypothetical $10,000 investment made in the Alger Small Capitalization Class B shares and the Russell 2000 Growth Index for the ten years ended October 31, 1997. Figures for both the Alger Small Capitalization Class B shares and the Russell 2000 Growth Index, an unmanaged index of common stocks, include reinvestment of dividends. Performance for the Alger Small Capitalization Class A and Class C shares will vary from the results shown above due to differences in expenses and sales charges those classes bear. PERFORMANCE COMPARISON AS OF 10/31/97+ AVERAGE ANNUAL TOTAL RETURNS 1 5 10 SINCE YEAR YEARS YEARS INCEPTION ---------------------------------------- CLASS A (INCEPTION 1/1/97) * * * 7.04% Russell 2000 Growth Index * * * 15.64% - ------------------------------------------------------------------------------- CLASS B (INCEPTION 11/11/86) 8.11% 15.97% 20.71% 17.57% Russell 2000 Growth Index 21.17% 15.93% 14.11% 10.96% - ------------------------------------------------------------------------------- CLASS C (INCEPTION 8/1/97) * * * (1.86)% Russell 2000 Growth Index * * * 4.55% THE PORTFOLIO'S AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE PRICE AND REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL WILL FLUCTUATE AND THE PORTFOLIO'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. + RETURNS REFLECT MAXIMUM INITIAL SALES CHARGES ON CLASS A SHARES AND APPLICABLE CONTINGENT DEFERRED SALES CHARGES ON CLASS B AND CLASS C SHARES. -10- THE ALGER FUND ALGER SMALL CAPITALIZATION PORTFOLIO SCHEDULE OF INVESTMENTS October 31, 1997 COMMON STOCKS--92.0% SHARES VALUE ------ ----- AEROSPACE--2.6% Aviall Inc.* ................................. 115,000 $ 1,538,125 BE Aerospace Inc.* ........................... 100,000 2,812,500 Continental Airlines Inc. Cl. B* ............. 94,000 4,065,500 Thiokol Corporation .......................... 20,000 1,831,260 Wyman Gordon Co.* ............................ 223,200 5,384,700 ------------ 15,632,085 ------------ ALUMINUM--.1% Kaiser Aluminum Corp.* ....................... 55,000 690,965 ------------ APPAREL--4.9% Brylane Inc.* ................................ 67,000 2,910,346 Jones Apparel Group Inc.* .................... 162,300 8,257,013 Mens Wearhouse Inc.* ......................... 58,100 2,251,375 St. John Knits Inc. .......................... 165,500 6,651,114 Tommy Hilfiger Corporation* .................. 149,300 5,906,756 Warnaco Group Inc. Cl. A ..................... 88,000 2,486,000 Wolverine Worldwide Inc. ..................... 50,000 1,100,000 ------------ 29,562,604 ------------ APPLIANCES & TOOLS--1.9% Sunbeam Corp. ................................ 257,800 11,681,691 ------------ AUTOMOTIVE--.3% Navistar International Corp.* ................ 89,700 2,079,964 ------------ AUTOMOTIVE EQUIPMENT & SERVICES--.4% Avis Rent A Car Inc.* ........................ 90,500 2,483,139 ------------ BIO-TECHNOLOGY--3.2% BioChem Pharma Inc.* ......................... 162,600 4,075,244 DEKALB Genetics Corp. Cl. B .................. 121,800 4,369,575 Genset ADR* .................................. 94,400 1,793,600 INCYTE Pharmaceuticals, Inc.* ................ 74,000 5,957,000 Interpore International Inc.* ................ 60,000 562,500 MedImmune Inc.* .............................. 60,000 2,392,500 ------------ 19,150,419 ------------ BUILDING & CONSTRUCTION--.4% Morrison Knudsen Corp.* ...................... 220,000 2,585,000 ------------ BUSINESS SERVICES--1.4% Pierce Leahy Corp.* .......................... 97,500 2,730,000 United Stationers Inc.* ...................... 65,000 2,632,500 WPP Group ADR ................................ 70,000 3,228,750 ------------ 8,591,250 ------------ COMMUNICATIONS--3.2% America Online Inc.* ......................... 59,100 4,550,700 Cox Radio, Inc. Cl. A.* ...................... 40,000 1,362,520 Emmis Broadcasting Corp. Cl. A.* ............. 25,000 1,106,250 Jacor Communications Inc.* ................... 151,000 6,323,125 Outdoor Systems, Inc.* ....................... 100,000 3,075,000 Universal Outdoor Holdings Inc.* ............. 77,900 3,291,275 ------------ 19,708,870 ------------ COMMUNICATION EQUIPMENT--5.2% Advanced Fibre Communications Inc.* ....................... 254,800 7,405,252 Bay Networks Inc.* ........................... 280,400 8,867,650 CIENA Corporation* ........................... 164,400 9,042,000 Tellabs, Inc.* ............................... 120,800 6,523,200 ------------ 31,838,102 ------------ COMPUTER RELATED & BUSINESS EQUIPMENT--3.5% Aavid Thermal Technologies Inc.* ........................ 45,500 1,353,625 Electronics For Imaging Inc.* ................ 330,000 15,427,500 Essex International Inc.* .................... 118,100 3,912,063 Pameco Corp. Cl. A.* ......................... 12,200 207,400 ------------ 20,900,588 ------------ COMPUTER SERVICES--4.9% Aris Corp.* .................................. 55,500 1,311,187 CKS Group Inc.* .............................. 92,000 3,335,000 Cambridge Technology Partners Inc.* ............................ 90,500 3,303,250 Keane Inc.* .................................. 84,500 2,503,313 QuickResponse Service Inc.* .................. 148,800 4,836,000 Sterling Commerce, Inc.* ..................... 120,400 3,995,835 Sungard Data Systems* ........................ 137,600 3,250,800 Technology Solutions Co.* .................... 162,500 5,118,750 Transaction Network Services Inc.* ............................ 95,000 1,579,375 Whittman-Hart, Inc.* ......................... 16,400 475,600 ------------ 29,709,110 ------------ COMPUTER SOFTWARE--6.9% CBT Group PLC ADS* ........................... 112,300 8,619,025 Citrix Systems, Inc.* ........................ 124,000 9,106,311 HBO & Company ................................ 140,000 6,090,000 Peregrine Systems Inc.* ...................... 100,000 1,550,000 Radiant Systems Inc.* ........................ 77,500 1,404,688 Saville Systems PLC ADR* ..................... 121,000 7,229,750 Structural Dynamics Research Corp.* ........................... 239,500 4,580,438 Systems & Computer Technology Corp.* ......................... 70,000 3,018,750 ------------ 41,598,962 ------------ COMPUTER TECHNOLOGY--.1% Digital Microwave Corp.* ..................... 23,500 846,000 ------------ -11- THE ALGER FUND ALGER SMALL CAPITALIZATION PORTFOLIO SCHEDULE OF INVESTMENTS (continued) October 31, 1997 COMMON STOCKS--(cont'd) SHARES VALUE ------ ----- CONSUMER PRODUCTS--.8% Coleman Co. Inc.* ............................ 124,500 $ 1,859,781 Helen of Troy Ltd.* .......................... 186,100 3,093,913 ------------ 4,953,694 ------------ ENERGY & ENERGY SERVICES--4.3% Camco International Inc. ..................... 90,200 6,516,950 Diamond Offshore Drilling Inc. ............... 123,400 7,681,650 Hanover Compressor Co.* ...................... 69,500 1,502,938 Hvide Marine Inc. Cl. A* ..................... 95,900 3,164,700 Noble Drilling Corp.* ........................ 100,000 3,556,300 Smith International Inc.* .................... 20,000 1,525,000 UTI Energy Corp.* ............................ 25,000 1,115,625 Unifab International Inc.* ................... 41,000 1,312,000 ------------ 26,375,163 ------------ FINANCIAL SERVICES--5.8% CCB Financial Corp. .......................... 19,000 1,729,000 Colonial BancGroup Inc. ...................... 16,000 475,008 Commerce Bancshares Inc. ..................... 34,700 2,029,950 Compass Bancshares Inc. ...................... 67,500 2,543,940 E*TRADE Group, Inc.* ......................... 187,000 5,773,625 Mercantile Bankshares Corp. .................. 50,250 1,790,156 Money Store Inc. (The) ....................... 387,000 10,981,125 National Commerce Bancorp .................... 90,000 2,666,250 Provident Bankshares Corp. ................... 42,000 2,268,000 Sovereign Bancorp Inc. ....................... 172,000 3,053,000 Wilmington Trust Corp. ....................... 37,000 2,062,750 ------------ 35,372,804 ------------ FOODS & BEVERAGES--3.8% Earthgrains Company .......................... 141,300 5,810,963 Fine Host Corp.* ............................. 93,300 2,612,400 Flowers Industries Inc. ...................... 197,000 3,743,000 Interstate Bakeries Corp. .................... 67,200 4,292,400 JP Foodservice Inc.* ......................... 109,000 3,481,242 Morningstar Group Inc.* ...................... 80,000 3,420,000 ------------ 23,360,005 ------------ FREIGHT--.2% Expeditors International of Washington Inc. ........................ 28,000 1,029,000 ------------ HEALTH CARE--2.7% Bergen Brunswig Corp. Cl. A .................. 72,700 2,912,580 McKesson Corp. ............................... 65,000 6,975,345 Omnicare, Inc. ............................... 166,700 4,636,427 Osteotech Inc.* .............................. 25,000 500,000 Universal Health Services Inc. Cl.B.* ...................... 25,000 1,101,575 ------------ 16,125,927 ------------ INDUSTRIAL EQUIPMENT--.1% Cal Dive International, Inc.* ................ 25,000 781,250 ------------ INSURANCE--1.8% Enhance Financial Services Group Inc. ................................ 40,000 2,112,520 Executive Risk Inc. .......................... 48,500 3,194,938 USF&G Corp. .................................. 89,000 1,802,250 Vesta Insurance Group Inc. ................... 61,700 3,586,312 ------------ 10,696,020 ------------ LEISURE & ENTERTAINMENT--2.1% Cinar Films, Inc. Cl. B.* .................... 41,500 1,613,313 Family Golf Centers Inc.* .................... 183,000 4,895,250 International Game Technology ................ 236,800 6,053,318 ------------ 12,561,881 ------------ MANUFACTURING--.1% Ballantyne of Omaha Inc.* .................... 20,000 335,000 ------------ MEDICAL DEVICES--3.0% Biomet Inc. .................................. 205,000 5,112,290 EndoSonics Corp.* ............................ 52,000 598,000 ESC Medical Systems Ltd. ..................... 148,700 5,836,475 Mentor Corp. ................................. 69,200 2,521,510 Ocular Sciences Inc.* ........................ 75,000 1,650,000 Safeskin Corp.* .............................. 54,800 2,486,550 ------------ 18,204,825 ------------ MEDICAL SERVICES--2.8% ArQule Inc.* ................................. 17,500 376,250 Express Scripts Inc. Cl. A.* ................. 51,000 2,875,125 Hooper Holmes Inc. ........................... 136,600 2,014,850 Lincare Holdings Inc.* ....................... 50,000 2,681,250 Pediatrix Medical Group Inc.* ................ 47,000 1,985,750 PhyCor, Inc.* ................................ 175,087 4,038,030 Protocol Systems Inc.* ....................... 57,500 610,938 Quorum Health Group Inc.* .................... 90,000 2,182,500 ------------ 16,764,693 ------------ OIL & GAS--2.8% EVI Inc.* .................................... 68,800 4,416,134 Global Industries Ltd.* ...................... 100,000 2,012,500 Global Marine Inc.* .......................... 115,000 3,579,375 Varco International Inc.* .................... 112,000 6,825,056 ------------ 16,833,065 ------------ PAPER PACKAGING & FOREST PRODUCTS--.8% Sealed Air Corp.* ............................ 99,400 5,125,362 ------------ PHARMACEUTICALS--2.4% Dura Pharmaceuticals, Inc.* .................. 130,000 6,288,750 Elan Corp PLC-ADR* ........................... 169,000 8,428,875 ------------ 14,717,625 ------------ -12- THE ALGER FUND ALGER SMALL CAPITALIZATION PORTFOLIO SCHEDULE OF INVESTMENTS (continued) October 31, 1997 COMMON STOCKS--(cont'd) SHARES VALUE ------ ----- POLLUTION CONTROL--2.9% American Disposal Services Inc.* ............. 59,000 $ 2,079,750 USA Waste Services, Inc.* .................... 422,725 15,640,825 ------------ 17,720,575 ------------ PUBLISHING--.2% Big Flowers Press Holdings Inc.* ............. 60,000 1,320,000 ------------ RESTAURANTS & LODGING--.3% Foodmaker Inc.* .............................. 129,000 2,120,502 ------------ RETAILING--6.3% BJS Wholesale Club Inc.* ..................... 122,500 3,529,592 Bed Bath & Beyond Inc.* ...................... 116,900 3,711,575 Borders Group Inc.* .......................... 188,600 4,891,907 CompUSA Inc.* ................................ 60,000 1,965,000 Dress Barn Inc.* ............................. 46,300 1,174,862 Family Dollar Stores Inc. .................... 98,400 2,312,400 General Nutrition Companies, Inc.* ........... 101,000 3,181,500 Genesco Inc.* ................................ 59,500 754,936 Michaels Stores Inc.* ........................ 136,800 4,112,618 Payless ShoeSource Inc.* ..................... 20,000 1,115,000 Proffitt's Inc.* ............................. 160,000 4,590,080 Quiksilver Inc.* ............................. 17,500 538,125 Stage Stores, Inc.* .......................... 82,800 3,022,200 WestPoint Stevens Inc.* ...................... 77,800 3,189,800 ------------ 38,089,595 ------------ SEMICONDUCTORS--6.9% Adaptec, Inc.* ............................... 26,200 1,269,075 Altera Corporation* .......................... 252,000 11,182,500 Linear Technology Corporation ................ 217,300 13,662,738 Maxim Integrated Products,lnc.* .............. 158,400 10,494,000 Microchip Technology Incorporated* ............................. 122,300 4,876,713 Texas Instruments, Incorporated .............................. 3,000 320,064 ------------ 41,805,090 ------------ SUPERMARKETS--1.5% Dominick's Supermarkets, Inc.* ............... 20,000 730,000 Fred Meyer, Inc.* ............................ 141,600 4,044,521 Whole Foods Market Inc.* ..................... 108,000 4,239,000 ------------ 9,013,521 ------------ TRANSPORTATION--1.4% Coach USA Inc.* .............................. 208,200 6,193,950 KnightsbridgeTankers Ltd.* ................... 75,000 2,250,000 ------------ 8,443,950 ------------ Total Common Stocks (Cost $429,051,368) ....................... 558,808,296 ------------ Short-Term Principal Corporate Notes--1.3% Amount ------------ Florida Power & Light Company, 5.54%, 11/12/97 ............................ $ 1,900,000 1,896,784 USAA Capital Corporation, 5.55%, 11/6/97 ............................. 5,800,000 5,795,529 ------------ Total Short-Term Corporate Notes (Cost $7,692,313) ......................... 7,692,313 ------------ Total Investments (Cost $436,743,681)(a) .................... 93.3% 566,500,609 Other Assets in Excess of Liabilities ............................ 6.7 40,484,229 ----- ------------ Net Assets ................................... 100.0% $606,984,838 ===== ============ * Non-income producing security. (a) At October 31, 1997, the net unrealized appreciation on investments, based on cost for federal income tax purposes of $436,743,681, amounted to $129,756,928 which consisted of aggregate gross unrealized appreciation of $134,740,925 and aggregate gross unrealized depreciation of $4,983,997. See Notes to Financial Statements. -13- THE ALGER FUND ALGER SMALL CAPITALIZATION PORTFOLIO Financial Highlights For a share outstanding throughout the period
CLASS C CLASS A (iv)(vi) (v)(vi) CLASS B(i) ------------ ---------- ------------------------------------------------------------ THREE MONTHS TEN MONTHS ENDED ENDED YEAR ENDED OCTOBER 31, OCTOBER 31, OCTOBER 31, ------------------------------------------------------------ 1997 1997 1997 1996 1995 1994 1993 ------------ ---------- ---- ---- ---- ---- ---- Net asset value, beginning of period ......................... $ 10.38 $ 9.21 $ 10.86 $ 11.13 $ 7.62 $ 8.65 $ 6.88 ------- ------- -------- -------- -------- -------- -------- Net investment income (loss) ...... (.03) (.04) (.11) (.09) (.13) (.09) (.08) Net realized and unrealized gain (loss) on investments .......... (.06) 1.18 1.28 .42 3.64 (.02) 1.85 ------- ------- -------- -------- -------- -------- -------- Total from investment operations .. (.09) 1.14 1.17 .33 3.51 (.11) 1.77 Distributions from net realized gains .......................... -- -- (1.74) (.60) -- (.92) -- ------- ------- -------- -------- -------- -------- -------- Net asset value, end of period .... $ 10.29 $ 10.35 $ 10.29 $ 10.86 $ 11.13 $ 7.62 $ 8.65 ======= ======= ======== ======== ======== ======== ======== Total Return (ii) ................. (.9)% 12.4% 12.9% 3.2% 46.2% (1.1%) 25.8% ======= ======= ======== ======== ======== ======== ======== Ratios and Supplemental Data: Net assets, end of period (000's omitted) .............. $ 338 $25,996 $580,651 $553,872 $463,718 $294,890 $300,108 ======= ======= ======== ======== ======== ======== ======== Ratio of expenses to average net assets ................... 2.09% 1.38% 2.14% 2.13%(iii) 2.11%(iii) 2.18%(iii) 2.13%(iii) ======= ======= ======== ======== ======== ======== ======== Ratio of net investment income (loss) to average net assets . (1.71)% (.93)% (1.67)% (1.59%) (1.75)% (1.51)% (1.52)% ======= ======= ======== ======== ======== ======== ======== Portfolio Turnover Rate ......... 120.27% 120.27% 120.27% 153.35% 97.37% 131.86% 148.49% ======= ======= ======== ======== ======== ======== ======== Average Commission Rate Paid .... $ .0652 $ .0652 $ .0652 $ .0611 ======= ======= ======== ======== ======== ======== ========
(i) Per share data has been adjusted to reflect the effect of a 3 for 1 stock split which occurred September 27, 1995. (ii) Does not reflect the effect of any sales charges. (iii) Reflects total expenses, including custody fees offset by earnings credits resulting from balances left on deposit. The expense ratios net of earnings credits would have been the same for the years ended October 31, 1996 and 1995, respectively. Expense ratios for the years ended prior to October 31, 1995, have been reduced to reflect the effect of fees offset by earnings credits, if any. (iv) Initially offered August 1, 1997. (v) Initially offered January 1, 1997. (vi) Ratios have been annualized; total return has not been annualized. See Notes to Financial Statements. -14- - -------------------------------------------------------------------------------- ALGER BALANCED PORTFOLIO PORTFOLIO HIGHLIGHTS THROUGH OCTOBER 31, 1997 (UNAUDITED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- HYPOTHETICAL $10,000 INVESTMENT IN CLASS B SHARES FROM 6/1/92 TO 10/31/97 - -------------------------------------------------------------------------------- [CHART] [The table below represents a graph in the printed piece] Lehman Alger Gov't/Corp. Balanced S&P 500 Bond Index 6/1/92 10000 10000 10000 9950 10198 10479 10/31/93 11180 11723 11911 10736 12176 11358 10/31/95 13700 15396 13193 14558 19104 13905 10/31/97 17259 25241 15130 ENDING VALUE S&P 500 INDEX: $25,241 ENDING VALUE ALGER BALANCED B: $17,259 ENDING VALUE LEHMAN BROTHERS GOV'T/CORP. BOND INDEX: $15,130 The chart above illustrates the growth in value of a hypothetical $10,000 investment made in Alger Balanced Class B shares, the S&P 500 Index, and the Lehman Brothers Government/Corporate Bond Index on June 1, 1992, the inception date of the Alger Balanced Portfolio, through October 31, 1997. Figures for the Alger 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 for the Alger Balanced Class A and Class C shares will vary from the results shown above due to differences in expenses and sales charges those classes bear. PERFORMANCE COMPARISON AS OF 10/31/97+ AVERAGE ANNUAL TOTAL RETURNS 1 5 SINCE YEAR YEARS INCEPTION - -------------------------------------------------------------------------------- CLASS A (INCEPTION 1/1/97) * * 12.88% S&P 500 Index * * 25.31% Lehman Gov't/Corp. Bond Index * * 8.04% - -------------------------------------------------------------------------------- CLASS B (INCEPTION 6/1/92) 14.25% 11.51% 10.60% S&P 500 Index 32.11% 19.87% 18.63% Lehman Gov't/Corp. Bond Index 8.80% 7.62% 7.94% - -------------------------------------------------------------------------------- CLASS C (INCEPTION 8/1/97) * * (3.29)% S&P 500 Index * * (3.76)% Lehman Gov't/Corp. Bond Index * * 2.04% THE PORTFOLIO'S AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE PRICE AND REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL WILL FLUCTUATE AND THE PORTFOLIO'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. + RETURNS REFLECT MAXIMUM INITIAL SALES CHARGES ON CLASS A SHARES AND APPLICABLE CONTINGENT DEFERRED SALES CHARGES ON CLASS B AND CLASS C SHARES. -15- THE ALGER FUND ALGER BALANCED PORTFOLIO SCHEDULE OF INVESTMENTS October 31, 1997 COMMON STOCKS--61.1% SHARES VALUE ------ ----- AEROSPACE--2.7% AMR Corp.* ................................... 1,600 $ 186,300 Gulfstream Aerospace Corp.* .................. 1,700 49,300 Sundstrand Corp. ............................. 2,100 114,188 ----------- 349,788 ----------- APPLIANCES & TOOLS--1.4% Sunbeam Corp. ................................ 4,000 181,252 ----------- BROADCASTING--1.8% Westinghouse Electric Corp. .................. 9,000 237,942 ----------- CHEMICALS--.4% Du Pont E.I. De Nemours & Co. ................ 900 51,187 ----------- COMMUNICATIONS--1.4% America Online Inc.* ......................... 1,100 84,700 WorldCom Inc.* ............................... 3,100 104,237 ----------- 188,937 ----------- COMMUNICATION EQUIPMENT--4.4% Bay Networks Inc.* ........................... 3,800 120,175 CIENA Corporation* ........................... 1,900 104,500 Cisco Systems, Inc.* ......................... 3,400 278,905 Tellabs, Inc.* ............................... 1,500 81,000 ----------- 584,580 ----------- COMPUTER RELATED & BUSINESS EQUIPMENT--3.0% Compaq Computer Corporation* ................. 4,000 255,000 International Business Machines Corp. ........ 1,400 137,287 ----------- 392,287 ----------- COMPUTER SOFTWARE--3.7% HBO & Company ................................ 3,100 134,850 Microsoft Corporation* ....................... 1,400 182,000 Oracle Corp.* ................................ 2,550 91,242 Parametric Technology Corporation* ........... 1,900 83,838 ----------- 491,930 ----------- CONGLOMERATE--2.2% General Electric Co. ......................... 600 38,738 Tyco International Ltd. ...................... 6,546 247,112 ----------- 285,850 ----------- CONSUMER PRODUCTS--1.3% CUC International Inc.* ...................... 3,000 88,500 Fortune Brands Inc. .......................... 1,300 42,982 Newell Co. ................................... 1,200 46,050 ----------- 177,532 ----------- ENERGY & ENERGY SERVICES--2.6% Diamond Offshore Drilling Inc. ............... 1,500 93,375 Nabors Industries Inc.* ...................... 2,300 94,587 Schlumberger Ltd. ............................ 1,800 157,500 ----------- 345,462 ----------- FINANCIAL SERVICES--8.0% Banc One Corp. ............................... 1,800 93,825 Bank of New York Inc. ........................ 2,400 112,951 Citicorp ..................................... 500 62,535 First Union Corp. ............................ 1,300 63,782 Federal Home Loan Mortgage Corporation ...................... 3,700 140,138 Household International Inc. ................. 400 45,300 Money Store Inc. (The) ....................... 6,000 170,250 Morgan Stanley, Dean Witter, Discover & Co. ............................ 3,635 178,115 Paine Webber Group Inc. ...................... 2,300 101,632 Schwab (Charles) Corporation (The) ........... 2,250 76,780 ----------- 1,045,308 ----------- FOODS & BEVERAGES--.7% PepsiCo., Inc. ............................... 2,400 88,350 ----------- HEALTH CARE--2.0% Guidant Corp. ................................ 1,600 92,000 McKesson Corp. ............................... 1,600 171,700 ----------- 263,700 ----------- INSURANCE--1.8% American International Group, Inc. ........... 1,550 158,197 MGIC Investment Corp. ........................ 1,200 72,376 ----------- 230,573 ----------- LEISURE & ENTERTAINMENT--2.3% Carnival Corporation Cl. A ................... 4,200 203,700 International Game Technology ................ 4,000 102,252 ----------- 305,952 ----------- MEDICAL SERVICES--.4% PhyCor, Inc.* ................................ 2,000 46,126 ----------- OIL & GAS--3.2% EVI Inc.* .................................... 1,200 77,026 Halliburton Co. .............................. 5,800 345,825 ----------- 422,851 ----------- PHARMACEUTICALS--6.8% Bristol Myers Squibb Co. ..................... 2,500 219,375 Eli Lilly & Company .......................... 2,400 160,500 Merck & Co., lnc ............................. 1,000 89,250 Pfizer Inc. .................................. 1,000 70,750 Schering-Plough Corporation .................. 3,800 213,039 Warner-Lambert Co. ........................... 1,000 143,188 ----------- 896,102 ----------- POLLUTION CONTROL--.8% USA Waste Services, Inc.* .................... 3,000 111,000 ----------- RETAILING--4.1% Home Depot, Inc. ............................. 4,500 250,313 Staples Inc.* ................................ 1,700 44,625 Wal-Mart Stores Inc. ......................... 6,800 238,850 ----------- 533,788 ----------- -16- THE ALGER FUND ALGER BALANCED PORTFOLIO SCHEDULE OF INVESTMENTS (continued) October 31, 1997 COMMON STOCKS--(cont'd) SHARES VALUE ------ ----- SEMICONDUCTORS--3.9% Adaptec, Inc.* ............................... 1,000 $ 48,438 Altera Corporation* .......................... 3,500 155,313 Linear Technology Corporation ................ 2,400 150,900 Maxim Integrated Products, Inc.* ............. 1,200 79,500 Texas Instruments Incorporated ............... 800 85,350 ----------- 519,501 ----------- SEMICONDUCTOR CAPITAL EQUIPMENT--.6% Applied Materials Inc.* ...................... 1,300 43,388 Teradyne, Inc.* .............................. 900 33,694 ----------- 77,082 ----------- TOYS--.6% Mattel Inc. .................................. 2,000 77,750 ----------- TRANSPORTATION--1.0% Burlington Northern Santa Fe Co. ............. 1,000 95,000 Textron Inc. ................................. 700 40,469 ----------- 135,469 ----------- Total Common Stocks (Cost $6,449,339) ......................... 8,040,299 ----------- Principal Corporate Bonds--13.5% Amount ----------- AUTOMOTIVE--4.3% Ford Motor B.V., 9.50%, 6/1/10 ............................. $ 300,000 364,953 General Motors Acceptance Corp., 7.125%, 6/1/99 ............................ 200,000 203,040 ----------- 567,993 ----------- CONGLOMERATE--2.3% GE Capital Corp., 7.25%, 6/5/12 ............................. 300,000 301,149 ----------- ELECTRIC & GAS COMPANIES--2.2% Cincinnati Gas & Electric Co., 7.20%, 10/1/23 ............................ 100,000 101,891 Pacific Gas & Electric Co., 7.25%, 3/1/26 ............................. 182,000 186,863 ----------- 288,754 ----------- FINANCIAL SERVICES--3.1% BankAmerica Corp., 6.625%, 10/15/07 .......................... 200,000 199,960 Citicorp., 7.125%, 6/1/03 ............................ 200,000 207,550 ----------- 407,510 ----------- POLLUTION CONTROL--1.6% Waste Management Inc., 8.25%,11/15/99 ............................ 200,000 208,224 ----------- Principal Amount Value ---------- ----------- Total Corporate Bonds (Cost $1,800,102) ......................... 1,773,630 ----------- U.S. Government & Agency Obligations--10.4% U.S. Treasury Notes, 6.375%,1/15/00 ............................ $ 100,000 101,438 U.S. Treasury Notes, 7.50%, 5/15/02 ............................ 100,000 106,797 U.S. Treasury Notes, 6.25%, 2/15/03 ............................ 250,000 254,960 Federal Home Loan Bank Corp., 7.58%, 7/9/12 ............................. 200,000 199,960 Federal Home Loan Mortgage Corp., 6.50%, 6/10/03 ............................ 150,000 148,992 Federal Home Loan Mortgage Corp., 7.00%, 3/6/07 ............................. 200,000 198,844 Federal National Mortgage Assoc., 8.50%, 2/1/05 ............................. 100,000 105,328 Federal National Mortgage Assoc., 7.49%, 5/22/07 ............................ 250,000 256,250 ----------- Total U.S. Government & Agency Obligations (Cost $1,367,008) ............. 1,372,569 ----------- Short-Term Investments--16.2% Short-Term Corporate Notes--9.5% AT&T Corp., 5.55%, 11/6/97 ............................ 400,000 399,692 Cooperative Association of Tractor Dealers Inc., 5.57%, 11/6/97 ............................ 300,000 299,768 France Telecom., 5.51%, 11/5/97 ............................ 350,000 349,786 Mitsui & Co. (USA) Inc., 5.51%, 11/6/97 ............................ 200,000 199,847 ----------- Total Short-Term Corporate Notes (Cost $1,249,093) ......................... 1,249,093 ----------- Short-Term U.S. Government Obligations--6.7% U.S. Treasury Bills, 4.95%, 1/29/98 ............................ 450,000 444,612 4.97%, 4/30/98 ............................ 450,000 438,775 ----------- Total Short-Term U.S. Goverment Obligations (Cost $883,310) ............... 883,387 ----------- Total Short-Term Investments (Cost $2,132,403) ......................... 2,132,480 ----------- Total Investments (Cost $11,748,852)(a) ..................... 101.2% 13,318,978 Liabilities in Excess of Other Assets ........ (1.2) (159,424) ----- ----------- Net Assets ................................... 100.0% $13,159,554 ===== =========== * Non-income producing security. (a) At October 31, 1997, the net unrealized appreciation on investments, based on cost for federal income tax purposes of $11,748,852 amounted to $1,570,126 which consisted of aggregate gross unrealized appreciation of $1,711,827 and aggregate gross unrealized depreciation of $141,701. See Notes to Financial Statements. -17- THE ALGER FUND ALGER BALANCED PORTFOLIO Financial Highlights For a share outstanding throughout the period
CLASS C CLASS A (iii)(vi) (iii)(vii) CLASS B ------------ ----------- ------------------------------------------------------------ THREE MONTHS TEN MONTHS ENDED ENDED YEAR ENDED OCTOBER 31, OCTOBER 31, OCTOBER 31, ------------------------------------------------------------ 1997 1997 1997 1996 1995 1994 1993 ------------ ----------- ---- ---- ---- ---- ---- Net asset value, beginning of period ............................ $ 16.88 $ 13.99 $ 14.21 $ 13.59 $10.65 $11.18 $ 9.95 ------- ------- ------- ------- ------ ------ ------- Net investment income (loss ......... (.01) .05 -- .12 (.02)(i) (.05) (.01) Net realized and unrealized gain (loss) on investments ............. (.38) 2.54 2.67 .72 2.96 (.39) 1.24 ------- ------- ------- ------- ------ ------ ------- Total from investment operations .... (.39) 2.59 2.67 .84 2.94 (.44) 1.23 Dividends from net investment income ............................ -- -- (.06) (.01) -- -- -- Distributions from net realized gains ............................. -- -- (.34) (.21) -- (.09) -- ------- ------- ------- ------- ------ ------ ------- Total distributions ................. -- -- (.40) (.22) -- (.09) -- ------- ------- ------- ------- ------ ------ ------- Net asset value, end of period ...... $ 16.49 $ 16.58 $ 16.48 $ 14.21 $13.59 $10.65 $ 11.18 ======= ======= ======= ======= ====== ====== ======= Total Return (ii) ................... (2.31)% 18.5% 19.3% 6.3% 27.6% (4.0%) 12.4% ======= ======= ======= ======= ====== ====== ======= Ratios and Supplemental Data: Net assets, end of period (000's omitted) ................ $ 48 $ 459 $12,653 $13,492 $6,214 $3,073 $ 3,125 ======= ======= ======= ======= ====== ====== ======= Ratio of expenses to average net assets ..................... 2.77% 2.10% 2.89% 2.70%(iv) 3.34%(iv) 3.18%(iv) 3.82%(iv) ======= ======= ======= ======= ====== ====== ======= Decrease reflected in above expense ratios due to expense reimbursements (v) ..... -- -- -- -- .24% -- .75% ======= ======= ======= ======= ====== ====== ======= Ratio of net investment income (loss) to average net assets ... (.84)% .72% .04% .47% (.13)% (.41)% (.97)% ======= ======= ======= ======= ====== ====== ======= Portfolio Turnover Rate ........... 109.26% 109.26% 109.26% 85.51% 84.06% 84.88% 115.17% ======= ======= ======= ======= ====== ====== ======= Average Commission Rate Paid ...... $ .0709 $ .0709 $ .0709 $ .0700 ======= ======= ======= =======
(i) Amount was computed based on average shares outstanding during the period. (ii) Does not reflect the effect of any sales charges. (iii) Ratios have been annualized; total return has not been annualized. (iv) Reflects total expenses, including custody fees offset by earnings credits resulting from balances left on deposit. The expense ratios net of earnings credits would have been 2.69% and 3.25% for the years ended October 31, 1996 and 1995, respectively. Expense ratios for the periods ended prior to October 31, 1995, have been reduced to reflect the effect of fees offset by earnings credits, if any. (v) Represents expense reimbursements made pursuant to applicable state expense limits. (vi) Initially offered August 1, 1997. (vii) Initially offered January 1, 1997. See Notes to Financial Statements. -18- - -------------------------------------------------------------------------------- ALGER MIDCAP GROWTH PORTFOLIO PORTFOLIO HIGHLIGHTS THROUGH OCTOBER 31, 1997 (UNAUDITED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- HYPOTHETICAL $10,000 INVESTMENT IN CLASS B SHARES FROM 5/24/93 TO 10/31/97 - -------------------------------------------------------------------------------- [CHART] [The following table represents a graph in the printed piece] Alger MidCap Growth S&P 400 5/24/93 10000 10000 10/31/93 12480 10714 13062 10969 10/31/95 19373 13295 20618 15600 10/31/97 24824 20694 ENDING VALUE ALGER MIDCAP GROWTH B: $24,824 ENDING VALUE S&P MIDCAP 400 INDEX: $20,694 The chart above illustrates the growth in value of a hypothetical $10,000 investment made in Alger MidCap Growth Class B shares and the S&P MidCap 400 Index on May 24, 1993, the inception date of the Alger MidCap Growth Portfolio, through October 31, 1997. Figures for both the Alger MidCap Growth Class B shares and the S&P MidCap 400 Index, an unmanaged index of common stocks, include reinvestment of dividends. Performance for the Alger MidCap Growth Class A and Class C shares will vary from the results shown above due to differences in expenses and sales charges those classes bear. PERFORMANCE COMPARISON AS OF 10/31/97+ AVERAGE ANNUAL TOTAL RETURNS SINCE 1 YEAR INCEPTION ---------------------------- CLASS A (INCEPTION 1/1/97) * 13.07% S&P MidCap 400 Index * 25.45% - ------------------------------------------------------------ CLASS B (INCEPTION 5/24/93) 16.37% 22.72% S&P MidCap 400 Index 32.67% 17.79% - ------------------------------------------------------------ CLASS C (INCEPTION 8/1/97) * (1.70)% S&P MidCap 400 Index * 1.03% THE PORTFOLIO'S AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE PRICE AND REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL WILL FLUCTUATE AND THE PORTFOLIO'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. + RETURNS REFLECT MAXIMUM INITIAL SALES CHARGES ON CLASS A SHARES AND APPLICABLE CONTINGENT DEFERRED SALES CHARGES ON CLASS B AND CLASS C SHARES. -19- THE ALGER FUND ALGER MIDCAP GROWTH PORTFOLIO SCHEDULE OF INVESTMENTS October 31, 1997 COMMON STOCKS--95.8% SHARES VALUE ------ ----- AEROSPACE--5.2% AMR Corp.* ............................... 23,700 $ 2,759,580 BE Aerospace Inc.* ....................... 25,400 714,375 Continental Airlines Inc. Cl. B* ......... 23,100 999,075 Gulfstream Aerospace Corp.* .............. 85,000 2,465,000 Sundstrand Corp. ......................... 38,200 2,077,125 ------------ 9,015,155 ------------ APPAREL--2.3% Nautica Enterprises Inc.* ................ 31,800 846,675 Tommy Hilfiger Corporation* .............. 79,200 3,133,390 ------------ 3,980,065 ------------ APPLIANCES & TOOLS--3.3% Sunbeam Corp. ............................ 125,900 5,704,906 ------------ BIO-TECHNOLOGY--1.5% BioChem Pharma Inc.* ..................... 106,200 2,661,690 ------------ BUSINESS SERVICES--1.1% Paychex, Inc. ............................ 49,000 1,868,125 ------------ COMMUNICATION EQUIPMENT-- 5.0% Advanced Fibre Communications Inc.* ...... 35,000 1,017,205 Bay Networks Inc.* ....................... 48,800 1,543,300 CIENA Corporation* ....................... 48,800 2,684,000 Cisco Systems, Inc.* ..................... 22,500 1,845,698 Tellabs, Inc.* ........................... 26,300 1,420,200 ------------ 8,510,403 ------------ COMPUTER RELATED & BUSINESS EQUIPMENT--2.4% Electronics For Imaging Inc.* ............ 87,200 4,076,600 ------------ COMPUTER SERVICES--.7% Sterling Commerce, lnc.* ................. 34,500 1,144,986 ------------ COMPUTER SOFTWARE--5.7% Citrix Systems, Inc.* .................... 13,000 954,694 HBO & Company ............................ 101,400 4,410,900 Parametric Technology Corporation* ....... 82,300 3,631,488 Systems & Computer Technology Corp.* ..................... 20,000 862,500 ------------ 9,859,582 ------------ CONGLOMERATE--1.4% Tyco International Ltd. .................. 65,020 2,454,505 ------------ CONSUMER PRODUCTS--2.8% CUC International Inc.* .................. 134,500 3,967,750 Fortune Brands Inc. ...................... 28,000 925,764 ------------ 4,893,514 ------------ ENERGY & ENERGY SERVICES--5.3% Diamond Offshore Drilling Inc. ........... 49,900 3,106,275 Nabors Industries Inc.* .................. 84,500 3,475,063 Santa Fe International Corp. ............. 20,000 983,760 Smith International Inc.* ................ 20,000 1,525,000 ------------ 9,090,098 ------------ FINANCIAL SERVICES--6.9% E*TRADE Group, Inc.* ..................... 49,000 1,512,875 Money Store Inc. (The) ................... 182,100 5,167,088 Paine Webber Group Inc. .................. 44,700 1,975,204 Sovereign Bancorp Inc. ................... 56,000 994,000 Star Banc Corp. .......................... 18,400 902,759 SunAmerica Inc. .......................... 36,000 1,293,768 ------------ 11,845,694 ------------ HEALTH CARE--6.0% Bergen Brunswig Corp. Cl. A .............. 47,500 1,902,993 Guidant Corp. ............................ 48,500 2,788,750 McKesson Corp. ........................... 37,800 4,056,431 Omnicare, Inc. ........................... 60,000 1,668,780 ------------ 10,416,954 ------------ INSURANCE--2.7% MGIC Investment Corp. .................... 76,000 4,583,788 ------------ LEISURE & ENTERTAINMENT--5.4% Carnival Corporation Cl. A ............... 49,100 2,381,350 International Game Technology ............ 204,800 5,235,302 Mirage Resorts, Incorporated* ............ 64,600 1,615,000 ------------ 9,231,652 ------------ MEDICAL DEVICES--2.9% Biomatrix Inc.* .......................... 20,000 692,500 Biomet Inc. .............................. 83,700 2,087,310 Mentor Corp. ............................. 25,000 910,950 Safeskin Corp.* .......................... 30,200 1,370,325 ------------ 5,061,085 ------------ MEDICAL SERVICES--6.7% AmeriSource Health Corp. Cl. A* .......... 59,300 3,520,938 Cardinal Health, lnc ..................... 57,900 4,299,075 PhyCor, Inc.* ............................ 43,800 1,010,159 Quorum Health Group Inc.* ................ 112,150 2,719,638 ------------ 11,549,810 ------------ -20- THE ALGER FUND ALGER MIDCAP GROWTH PORTFOLIO SCHEDULE OF INVESTMENTS (continued) October 31, 1997 COMMON STOCKS--(cont'd) SHARES VALUE ------ ----- OIL & GAS--4.1% EVI Inc.* ................................ 22,400 $ 1,437,810 Global Industries Ltd.* .................. 50,000 1,006,250 Global Marine Inc.* ...................... 80,000 2,490,000 Halliburton Co. .......................... 34,000 2,027,250 ------------ 6,961,310 ------------ PHARMACEUTICALS--1.2% Elan Corp PLC-ADR* ....................... 41,000 2,044,875 ------------ POLLUTION CONTROL--2.4% Allied Waste Industries Inc.* ............ 50,000 1,018,750 USA Waste Services, Inc.* ................ 84,100 3,111,700 ------------ 4,130,450 ------------ RETAILING--8.5% BJS Wholesale Club Inc.* ................. 31,700 913,372 Borders Group Inc.* ...................... 81,000 2,100,978 CompUSA Inc.* ............................ 103,600 3,392,900 General Nutrition Companies, Inc.* ....... 171,400 5,399,100 Rite Aid Corp. ........................... 33,700 2,000,938 Staples Inc.* ............................ 34,000 892,500 ------------ 14,699,788 ------------ SEMICONDUCTORS--9.5% Adaptec, Inc.* ........................... 28,900 1,399,858 Altera Corporation* ...................... 113,100 5,018,813 Linear Technology Corporation ............ 86,200 5,419,825 Maxim Integrated Products, Inc.* ......... 44,400 2,941,500 Texas Instruments, Incorporated .......... 13,900 1,482,963 ------------ 16,262,959 ------------ SEMICONDUCTOR CAPITAL EQUIPMENT--1.5% Applied Materials Inc.* .................. 25,500 851,063 Teradyne, Inc.* .......................... 47,900 1,793,280 ------------ 2,644,343 ------------ TOYS--.8% Mattel Inc. .............................. 34,000 1,321,750 ------------ TRANSPORTATION--.5% Coach USA Inc.* .......................... 26,300 782,425 ------------ Total Common Stocks (Cost $140,636,559) ................... 164,796,512 ------------ PRINCIPAL SHORT-TERM CORPORATE NOTES--4.6% AMOUNT ------------- Ford Motor Credit Company, 5.60%, 11/13/97 ....................... $ 220,000 219,589 McDonald's Corp., 5.57%, 11/5/97 ........................ 5,150,000 5,146,813 USAA Capital Corporation, 5.55%, 11/6/97 ........................ 2,500,000 2,498,073 ------------ Total Short-Term Corporate Notes (Cost $7,864,475 ) .................... 7,864,475 ------------ Total Investments (Cost $148,501,034)(a) ................ 100.4% 172,660,987 Liabilities in Excess of Other Assets .... (.4) (666,004) ----- ------------ Net Assets ............................... 100.0% $171,994,983 ===== ============ * Non-income producing security. (a) At October 31, 1997, the net unrealized appreciation on investments, based on cost for federal income tax purposes of $148,501,034, amounted to $24,159,953 which consisted of aggregate gross unrealized appreciation of $27,121,135 and aggregate gross unrealized depreciation of $2,961,182. See Notes to Financial Statements. -21- THE ALGER FUND ALGER MIDCAP GROWTH PORTFOLIO Financial Highlights For a share outstanding throughout the period
CLASS C CLASS A (i)(vi) (i)(vii) CLASS B ------------ ---------- ---------------------------------------------------------------- FROM MAY 24, 1993 THREE MONTHS TEN MONTHS (COMMENCEMENT ENDED ENDED YEAR ENDED OCTOBER 31, OF OPERATIONS) TO OCTOBER 31, OCTOBER 31, -------------------------------------------- OCTOBER 31, 1997 1997 1997 1996 1995 1994 1993(i) ---------- ----------- ---- ---- ---- ---- ------- Net asset value, beginning of period ............................ $ 22.49 $ 18.92 $ 18.87 $ 18.94 $ 12.77 $ 12.48 $ 10.00 ------- ------- -------- -------- ------- ------- ------- Net investment income (loss) ......... (.03) (.10) (.29) (.25)(ii) (.08) (.11) (.09) Net realized and unrealized gain (loss) on investments ............. (.13) 3.64 4.23 1.35 6.25 .68 2.57 ------- ------- -------- -------- ------- ------- ------- Total from investment operations ..... (.16) 3.54 3.94 1.10 6.17 .57 2.48 Distributions from net realized gains ............................. -- -- (.48) (1.17) -- (.28) -- ------- ------- -------- -------- ------- ------- ------- Net asset value, end of period ....... $ 22.33 $ 22.46 $ 22.33 $ 18.87 $ 18.94 $ 12.77 $ 12.48 ======= ======= ======== ======== ======= ======= ======= Total Return (iii) ................... (.7)% 18.7% 21.4% 6.4% 48.3% 4.7% 24.8% ======= ======= ======== ======== ======= ======= ======= Ratios and Supplemental Data: Net assets, end of period (000's omitted) ................. $ 84 $ 5,436 $166,475 $125,686 $54,016 $18,516 $ 3,836 ======= ======= ======== ======== ======= ======= ======= Ratio of expenses to average net assets ...................... 1.97% 1.40% 2.19% 2.27%(iv) 2.39%(iv) 3.20%(iv) 3.73%(iv) ======= ======= ======== ======== ======= ======= ======= Decrease reflected in above expense ratios due to expense reimbursements (v) ...... -- -- -- -- -- .07% .80% ======= ======= ======== ======== ======= ======= ======= Ratio of net investment income (loss) to average net assets .... (1.55)% (.83)% (1.58)% (1.33)% (1.71)% (2.32)% (2.86)% ======= ======= ======== ======== ======= ======= ======= Portfolio Turnover Rate ............ 160.09% 160.09% 160.09% 113.95% 121.60% 127.40% 57.64% ======= ======= ======== ======== ======= ======= ======= Average Commission Rate Paid ....... $ .0680 $ .0680 $ .0680 $ .0690 ======= ======= ======== ========
(i) Ratios have been annualized; total return has not been annualized. (ii) Amount was computed based on average shares outstanding during the period. (iii) Does not reflect the effect of any sales charges. (iv) Reflects total expenses, including custody fees offset by earnings credits resulting from balances left on deposit. The expense ratios net of earnings credits would have been 2.26% and 2.34% for the years ended October 31, 1996 and 1995, respectively. Expense ratios for the periods ended prior to October 31, 1995, have been reduced to reflect the effect of fees offset by earnings credits, if any. (v) Represents expense reimbursements made pursuant to applicable state expense limits. (vi) Initially offered August 1, 1997. (vii) Initially offered January 1, 1997. See Notes to Financial Statements. -22- - -------------------------------------------------------------------------------- ALGER CAPITAL APPRECIATION PORTFOLIO PORTFOLIO HIGHLIGHTS THROUGH OCTOBER 31, 1997 (UNAUDITED) - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- HYPOTHETICAL $10,000 INVESTMENT IN CLASS B SHARES FROM 11/1/93 TO 10/31/97 - -------------------------------------------------------------------------------- [CHART] [The table below represents a graph in the printed piece] Alger Cap App S&P 500 11/1/93 10000 10000 11110 10386 10/31/95 18620 13133 22246 16297 10/31/97 26718 21531 ENDING VALUE ALGER CAPITAL APPRECIATION B: $26,718 ENDING VALUE S&P 500 INDEX: $21,531 The chart above illustrates the growth in value of a hypothetical $10,000 investment made in Alger Capital Appreciation Class B shares and the S&P 500 Index on November 1, 1993, the inception date of the Alger Capital Appreciation Portfolio, through October 31, 1997. Figures for the Alger Capital Appreciation Class B shares and the S&P 500 Index, an unmanaged index of common stocks, include reinvestment of dividends. Performance for Alger Capital Appreciation Class A and Class C shares will vary from the results shown above due to differences in expenses and sales charges those classes bear. PERFORMANCE COMPARISON AS OF 10/31/97+ AVERAGE ANNUAL TOTAL RETURNS SINCE 1 YEAR INCEPTION - ---------------------------------------------------------------- CLASS A (INCEPTION 1/1/97) * 15.46% S&P 500 Index * 25.31% - ---------------------------------------------------------------- CLASS B (INCEPTION 11/1/93) 16.00% 27.85% S&P 500 Index 32.11% 21.13% - ---------------------------------------------------------------- CLASS C (INCEPTION 8/1/97) * (6.97)% S&P 500 Index * (3.76)% THE PORTFOLIO'S AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE PRICE AND REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL WILL FLUCTUATE AND THE PORTFOLIO'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. + RETURNS REFLECT MAXIMUM INITIAL SALES CHARGES ON CLASS A SHARES AND APPLICABLE CONTINGENT DEFERRED SALES CHARGES ON CLASS B AND CLASS C SHARES. -23- THE ALGER FUND ALGER CAPITAL APPRECIATION PORTFOLIO SCHEDULE OF INVESTMENTS October 31, 1997 COMMON STOCKS--94.9% SHARES VALUE ------ ----- AEROSPACE--1.4% Sundstrand Corp. ......................... 49,700 $ 2,702,438 Wyman Gordon Co.* ........................ 25,000 603,125 ------------ 3,305,563 ------------ APPAREL--1.0% Nautica Enterprises Inc.* ................ 25,000 665,625 Tommy Hilfiger Corporation* .............. 41,500 1,641,865 ------------ 2,307,490 ------------ APPLIANCES & TOOLS--1.2% Sunbeam Corp. ............................ 60,200 2,727,843 ------------ AUTOMOTIVE EQUIPMENT & SERVICES--.6% Avis Rent A Car Inc.* .................... 50,000 1,371,900 ------------ BIO-TECHNOLOGY--.1% BioChem Pharma Inc.* ..................... 10,000 250,630 ------------ BROADCASTING--2.0% Westinghouse Electric Corp. .............. 173,600 4,589,636 ------------ CHEMICALS--.6% Du Pont E.I. De Nemours & Co. ............ 23,000 1,308,125 ------------ COMMUNICATIONS--3.4% America Online Inc.* ..................... 41,200 3,172,400 Jacor Communications Inc.* ............... 58,000 2,428,750 WorldCom Inc.* ........................... 62,700 2,108,288 ------------ 7,709,438 ------------ COMMUNICATION EQUIPMENT--8.4% Advanced Fibre Communications Inc.* ...... 95,000 2,760,985 Bay Networks Inc.* ....................... 145,600 4,604,600 CIENA Corporation* ....................... 62,500 3,437,500 Cisco Systems, Inc.* ..................... 73,000 5,988,262 Tellabs, Inc.* ........................... 43,900 2,370,600 ------------ 19,161,947 ------------ COMPUTER RELATED & BUSINESS EQUIPMENT--6.4% Compaq Computer Corporation* ............. 84,700 5,399,625 Electronics For Imaging Inc.* ............ 121,500 5,680,125 International Business Machines Corp. .... 31,500 3,088,985 Quantum Corp.* ........................... 15,000 474,375 ------------ 14,643,110 ------------ COMPUTER SERVICES--1.2% Sterling Commerce, Inc.* ................. 56,500 1,875,122 Transaction Network Services Inc.* ....... 51,900 862,837 ------------ 2,737,959 ------------ COMPUTER SOFTWARE--8.2% Citrix Systems, Inc.* .................... 35,300 2,592,361 J. D. Edwards & Co.* ..................... 60,000 2,040,000 HBO & Company ............................ 64,100 2,788,350 Microsoft Corporation* ................... 54,700 7,111,000 Oracle Corp.* ............................ 34,500 1,234,445 Saville Systems PLC ADR* ................. 50,000 2,987,500 ------------ 18,753,656 ------------ CONGLOMERATE--3.2% General Electric Co. ..................... 14,200 916,795 Tyco International Ltd. .................. 168,434 6,358,384 ------------ 7,275,179 ------------ ENERGY & ENERGY SERVICES--4.8% Diamond Offshore Drilling Inc. ........... 91,300 5,683,425 Nabors Industries Inc.* .................. 29,500 1,213,188 Schlumberger Ltd. ........................ 46,600 4,077,500 ------------ 10,974,113 ------------ FINANCIAL SERVICES--10.8% Bank of New York Inc. .................... 50,000 2,353,150 Citicorp ................................. 13,300 1,663,338 E*TRADE Group, Inc.* ..................... 52,700 1,627,113 First Union Corp. ........................ 33,900 1,663,236 Federal Home Loan Mortgage Corporation .................. 59,500 2,253,563 Household International Inc. ............. 32,100 3,635,325 Money Store Inc. (The) ................... 92,200 2,616,175 Morgan Stanley, Dean Witter, Discover & Co. ........................ 81,180 3,977,820 Schwab (Charles) Corporation (The) ....... 144,000 4,914,000 ------------ 24,703,720 ------------ FOOD & BEVERAGES--.5% PepsiCo., Inc. ........................... 30,000 1,104,390 ------------ HEALTH CARE--3.9% Guidant Corp. ............................ 109,800 6,313,500 McKesson Corp. ........................... 24,500 2,629,169 ------------ 8,942,669 ------------ INSURANCE--2.1% American International Group, Inc. ....... 47,100 4,807,167 ------------ LEISURE & ENTERTAINMENT--1.2% International Game Technology ............ 111,000 2,837,492 ------------ MEDICAL DEVICES--.8% ESC Medical Systems Ltd. ................. 45,000 1,766,250 ------------ -24- THE ALGER FUND ALGER CAPITAL APPRECIATION PORTFOLIO SCHEDULE OF INVESTMENTS (continued) October 31, 1997 COMMON STOCKS--(cont'd) SHARES VALUE ------ ----- MEDICAL SERVICES--.2% PhyCor, Inc.* ............................ 22,100 $ 509,692 ------------ OIL & GAS--2.9% Halliburton Co. .......................... 111,000 6,618,375 ------------ PHARMACEUTICALS--13.6% Bristol Myers Squibb Co. ................. 68,200 5,984,550 Elan Corp PLC-ADR* ....................... 64,400 3,211,950 Eli Lilly & Company ...................... 62,200 4,159,625 Merck & Co., Inc. ........................ 23,700 2,115,225 Pfizer Inc. .............................. 54,200 3,834,650 Schering-Plough Corporation .............. 97,000 5,438,110 Warner-Lambert Co. ....................... 45,300 6,486,416 ------------ 31,230,526 ------------ POLLUTION CONTROL--2.1% USA Waste Services, Inc.* ................ 128,500 4,754,500 ------------ RETAILING--5.3% Home Depot, Inc. ......................... 102,450 5,698,780 Nordstrom Inc. ........................... 20,700 1,267,875 Staples Inc.* ............................ 54,200 1,422,750 Wal-Mart Stores Inc. ..................... 109,500 3,846,188 ------------ 12,235,593 ------------ SEMICONDUCTORS--7.4% Altera Corporation* ...................... 130,900 5,808,688 Linear Technology Corporation ............ 90,900 5,715,337 Maxim Integrated Products, Inc.* ......... 48,300 3,199,875 Texas Instruments, Incorporated .......... 22,000 2,347,136 ------------ 17,071,036 ------------ SEMICONDUCTOR CAPITAL EQUIPMENT--1.6% Applied Materials Inc.* .................. 33,300 1,111,388 Teradyne, Inc.* .......................... 71,300 2,669,329 ------------ 3,780,717 ------------ Total Common Stocks (Cost $187,275,834) ................... 217,478,716 ------------ PRINCIPAL SHORT-TERM CORPORATE NOTES--4.6% AMOUNT ------------- Ford Motor Credit Company, 5.60%, 11/13/97 ....................... $ 2,850,000 2,844,680 McDonald's Corp., 5.57%, 11/5/97 ........................ 7,750,000 7,745,204 ------------ Total Short-Term Corporate Notes (Cost $10,589,884) .................... 10,589,884 ------------ Total Investments (Cost $197,865,718) (a) ............... 99.5% 228,068,600 Other Assets In Excess of Liabilities ........................ .5 1,029,378 ----- ------------ Net Assets ............................... 100.0% $229,097,978 ===== ============ * Non-income producing security. (a) At October 31, 1997, the net unrealized appreciation on investments, based on cost for federal income tax purposes of $197,865,718, amounted to $30,202,882 which consisted of aggregate gross unrealized appreciation of $33,500,596 and aggregate gross unrealized depreciation of $3,297,714. See Notes to Financial Statements. -25- THE ALGER FUND ALGER CAPITAL APPRECIATION PORTFOLIO (i) Financial Highlights For a share outstanding throughout the period
CLASS C(vi)(viii) CLASS A(vii)(viii) CLASS B -------------- -------------- -------------------------------------------------------- THREE MONTHS TEN MONTHS ENDED ENDED YEAR ENDED OCTOBER 31, OCTOBER 31, OCTOBER 31, -------------------------------------------------------- 1997 1997 1997 1996 1995 1994 ------------ -------------- ---- ---- ---- ---- Net asset value, beginning of period ..................... $ 27.67 $ 21.59 $ 21.62 $ 18.62 $ 11.11 $ 10.00 Net investment income (loss) .... (.05) (.09) (.33) (.34)(ii) (0.47)(ii) (0.47) Net realized and unrealized gain (loss)on investments ..... (1.62) 4.67 4.85 3.88 7.98 1.58 Total from investment operations (1.67) 4.58 4.52 3.54 7.51 1.11 Distributions from net realized gains ............ -- -- (.14) (.54) -- -- Net asset value, end of period .. $ 26.00 $ 26.17 $ 26.00 $ 21.62 $ 18.62 $ 11.11 Total Return (iii) .............. (6.0)% 21.2% 21.0% 19.5% 67.6% 11.1% Ratios and Supplemental Data: Net assets, end of period (000's omitted) ................ $ 631 $ 15,572 $ 212,895 $ 150,258 $ 33,640 $ 2,369 Ratio of expenses excluding interest to average net assets ...... 2.18% 1.45% 2.27% 2.44% 3.26% 4.13% Ratio of expenses including interest to average net assets ...... 2.25% 1.53% 2.38% 2.46%(iv) 3.54%(iv) 5.53%(iv) Decrease reflected in above expense ratios due to expense reimbursements (v) . -- -- -- -- -- 0.85% Ratio of net investment income (loss) to average net assets (1.80)% (.85)% (1.72)% (1.61%) (3.02%) (5.12%) Portfolio Turnover Rate ....... 157.63% 157.63% 157.63% 162.37% 197.65% 231.99% Average Commission Rate Paid .. $ .0702 $ .0702 $ .0702 .0647 Amount of debt outstanding at end of period ........... -- -- -- $7,700,000 -- $ 651,000 Average amount of debt outstanding during the period .......... $2,940,097 $2,940,097 $2,940,097 $ 239,966 $ 293,153 $ 406,864 Average daily number of portfolio shares outstanding during the period ................. 7,739,199 7,739,199 7,739,199 4,852,286 543,270 191,676 Average amount of debt per share during the period .......... $ 0.38 $ 0.38 $ 0.38 0.05 $ 0.54 $ 2.12
(i) Prior to March 27, 1995, the Alger Capital Appreciation Portfolio was the Alger Leveraged AllCap Portfolio. (ii) Amount was computed based on average shares outstanding during the year. (iii) Does not reflect the effect of any sales charges. (iv) Reflects total expenses, including custody fees offset by earnings credits resulting from balances left on deposit. The expense ratios net of earnings credits would have been 2.45% and 3.43% for the years ended October 31, 1996 and 1995, respectively. The expense ratio for the year ended October 31, 1994, has been reduced to reflect the effect of fees offset by earnings credits. (v) Represents expense reimbursements made pursuant to applicable state expense limits. (vi) Initially offered August 1, 1997. (vii) Initially offered January 1, 1997. (viii) Ratios have been annualized; total return has not been annualized. See Notes to Financial Statements. -26- THE ALGER FUND ALGER MONEY MARKET PORTFOLIO SCHEDULE OF INVESTMENTS SHORT-TERM CORPORATE PRINCIPAL NOTES--121.6% AMOUNT VALUE ----------- ----- AGRICULTURE--3.3% Cargill, Incorporated, 5.47%, 12/12/97 ......................... $6,000,000 $ 5,962,622 ------------ AUTOMOTIVE EQUIPMENT & SERVICES--13.0% Ford Motor Credit Company, 5.47%, 12/31/97 ......................... 6,000,000 5,945,300 General Motors Acceptance Corp., 5.50%, 11/4/97 .......................... 8,000,000 7,996,333 Toyota Motor Credit Corporation, 5.48%, 11/14/97 ......................... 9,300,000 9,281,596 ------------ 23,223,229 ------------ BANKS--4.5% Banco Mercantile Del Norte, 5.51%, 11/18/97 ......................... 8,000,000 7,979,184 ------------ BROKERAGE--3.3% Merrill Lynch & Co., Inc., 5.62%, 11/3/97 .......................... 6,000,000 5,998,127 ------------ BUSINESS & COMPUTER SERVICES--5.2% United Parcel Service of America, 5.50%, 11/18/97 ......................... 9,400,000 9,375,586 ------------ COMMUNICATIONS--5.6% Ameritech Corporation, 5.45%, 11/24/97 ......................... 8,000,000 7,972,144 France Telecom., 5.50%, 11/14/97 ......................... 2,000,000 1,996,028 ------------ 9,968,172 ------------ ELECTRONICS--7.8% Emerson Electric Co., 5.46%, 12/12/97 ......................... 2,000,000 1,987,563 Hitachi America, Ltd., 5.61%, 11/12/97 ......................... 6,000,000 5,989,715 Mitsui & Co. (USA) Inc., 5.51%, 11/6/97 .......................... 6,000,000 5,995,408 ------------ 13,972,686 ------------ ENERGY & ENERGY SERVICES--4.5% Petrofina Delaware, Incorporated, 5.51%, 11/12/97 ......................... 8,000,000 7,986,531 ------------ FINANCE--18.4% Corporacion Andina de Fomento, 5.52%, 11/7/97 .......................... $6,000,000 5,994,480 Countrywide Home Loans Inc. 5.60%, 1/5/98 ........................... 6,250,000 6,186,806 IBM Credit Corporation, 5.46%,12/12/97 .......................... 6,000,000 5,962,690 IMI Funding Corporation (USA), 5.53%, 11/12/97 ......................... 2,750,000 2,745,353 Industrial Funding Corp., 5.61%, 12/18/97 ......................... 6,250,000 6,204,225 USAA Capital Corporation 5.51%, 11/5/97 .......................... 6,000,000 5,996,327 ------------ 33,089,881 ------------ FOODS & BEVERAGES--4.7% Coca-Cola Company, The, 5.39%, 11/20/97 ......................... 8,500,000 8,475,820 ------------ INSURANCE--6.7% Aetna Services Inc., 5.61%, 11/7/97 .......................... 6,000,000 5,994,490 A.I. Credit Corporation, 5.67%, 11/3/97 .......................... 6,000,000 5,998,110 ------------ 11,992,600 ------------ LEASING--3.4% International Lease Finance Corporation, 5.54%, 1/8/98 ........................... 6,250,000 6,184,597 ------------ MACHINERY & EQUIPMENT--1.8% Cooperative Association of Tractor Dealers Inc., 5.53%, 11/3/97 .......................... 3,150,000 3,149,032 ------------ MORTGAGE COMPANIES--4.5% Reliastar Mortgage Corp., 5.51%, 11/13/97 ......................... 8,100,000 8,085,123 ------------ REAL ESTATE--5.0% Halifax Building Society, 5.45%, 11/13/97 ......................... 9,000,000 8,983,650 ------------ THE ALGER FUND -27- ALGER MONEY MARKET PORTFOLIO SCHEDULE OF INVESTMENTS (continued) SHORT-TERM CORPORATE PRINCIPAL NOTES--(CONT.) AMOUNT VALUE ----------- ----- RETAIL-FOOD CHAINS--2.9% Southland Corporation 5.53%, 11/5/97 .......................... $5,200,000 $ 5,196,805 ------------ TELECOMMUNICATIONS--2.4% AT&T Corp., 5.55%, 11/6/97 .......................... 4,300,000 4,296,685 ------------ TELEPHONES--3.3% BellSouth Telecommunications Inc., 5.48%, 11/4/97 .......................... 6,000,000 5,997,260 ------------ TRADING COMPANY--3.4% Mitsubishi International Corporation, 5.65%, 11/3/97 .......................... 6,000,000 5,998,117 ------------ UTILITIES--17.9% Consolidated Natural Gas Company, 5.48%, 11/7/97 .......................... 6,000,000 5,994,520 Delmarva Power & Light Company, 5.60%, 11/21/97 ......................... $6,000,000 5,981,333 GTE Corporation, 5.60%, 11/26/97 ......................... 6,250,000 6,225,695 National Power PLC, 5.62%, 11/7/97 .......................... 8,000,000 7,992,640 New England Power Company, 5.60%, 11/10/97 ......................... 6,000,000 5,991,600 ------------ 32,185,788 ------------ Total Investments (Cost $218,101,495) (a).................. 121.6% 218,101,495 Liabilities in Excess of Others Assets............................ (21.6) (38,694,244) ----- ----------- Net Assets.................................. 100.0% $179,407,251 ===== ============ (a) At October 31, 1997, the cost of investments for federal income tax purposes was the same as the cost for financial reporting purposes See Notes to Financial Statements. THE ALGER FUND -28- ALGER MONEY MARKET PORTFOLIO Financial Highlights For a share outstanding throughout the year
YEAR ENDED OCTOBER 31, ---------------------------------------------------------------------------- 1997 1996 1995 1994 1993 ---- ---- ---- ---- ---- Net asset value, beginning of year........... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 Net investment income........................ .0479 .0521 .0573 .0374 .0304 Dividends from net investment income.................................... (.0479) (.0521) (.0573) (.0374) (.0304) Net asset value, end of year................. $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 Total Return................................. 4.9% 5.3% 5.9% 3.8% 3.1% Ratios and Supplemental Data: Net assets, end of year (000's omitted)......................... $179,407 $285,702 $185,822 $163,170 $126,567 Ratio of expenses to average net assets.............................. .81% .41%(i) .29%(i) .27%(i) .41%(i) Decrease reflected in above expense ratios due to expense reimbursements and management fee waivers................................. --% .38% .50% .50% .50% Ratio of net investment income to average net assets................... 4.76% 5.18% 5.73% 3.78% 3.04%
(i) Reflects total expenses (net of expense reimbursements and management fee waivers), including custody fees offset by earnings credits resulting from balances left on deposit. The expense ratios net of earnings credits would have been .40% and .27% for the years ended October 31, 1996 and 1995, respectively. Expense ratios for the years ended prior to October 31, 1995, have been reduced to reflect the effect of fees offset by earnings credits, if any. See Notes to Financial Statements. THE ALGER FUND -29- STATEMENTS OF ASSETS AND LIABILITIES (in thousands, except per share amounts) October 31, 1997
SMALL CAPITAL CAPITAL- MIDCAP APPRE- MONEY GROWTH IZATION BALANCED GROWTH CIATION MARKET ASSETS: PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO --------- --------- --------- --------- --------- --------- Investments in securities, at value (identified cost*)-see accompany- ing schedules of investments ...................... $ 369,207 $ 566,501 $ 13,319 $ 172,661 $ 228,069 $ 218,101 Cash ................................................. 104 70 65 47 59 325 Receivable for investment securities sold ............ 14,839 11,494 343 4,141 7,513 -- Receivable for shares of beneficial interest sold .................................... 2,737 30,851 19 2,238 6,862 594 Dividends and interest receivable ........................................ 64 155 79 21 44 -- Prepaid expenses and other assets .................... 34 43 11 20 37 11 --------- --------- --------- --------- --------- --------- Total Assets ..................................... 386,985 609,114 13,836 179,128 242,584 219,031 --------- --------- --------- --------- --------- --------- LIABILITIES: Payable for investment securities purchased .............................. 28,454 -- 613 6,607 12,629 -- Payable for shares of beneficial interest redeemed ................................. 236 761 13 122 230 39,296 Interest payable ..................................... -- -- -- -- 87 -- Accrued investment management fees ................... 241 458 9 125 173 82 Accrued distribution fees ............................ 205 386 8 113 143 -- Accrued shareholder servicing fees ................... 80 135 3 39 51 -- Dividends payable-Note 2(c) .......................... -- -- -- -- -- 39 Accrued expenses ..................................... 279 389 30 127 173 207 --------- --------- --------- --------- --------- --------- Total Liabilities ................................ 29,495 2,129 676 7,133 13,486 39,624 --------- --------- --------- --------- --------- --------- NET ASSETS ........................................... $ 357,490 $ 606,985 $ 13,160 $ 171,995 $ 229,098 $ 179,407 ========= ========= ========= ========= ========= ========= Net Assets Consist of: Paid-in capital ................................... $ 253,685 $ 471,504 $ 9,792 $ 130,062 $ 184,978 $ 179,487 Undistributed net investment income (accumulated loss) ....................... (7,662) (35,019) (55) (4,426) (5,158) -- Undistributed net realized gain (accumulated loss) ......................... 50,213 40,743 1,853 22,199 19,075 (80) Net unrealized appreciation ........................ 61,254 129,757 1,570 24,160 30,203 -- --------- --------- --------- --------- --------- --------- NET ASSETS ........................................... $ 357,490 $ 606,985 $ 13,160 $ 171,995 $ 229,098 $ 179,407 ========= ========= ========= ========= ========= ========= Class A Net Asset Value Per Share .......................... $ 11.58 $ 10.35 $ 16.58 $ 22.46 $ 26.17 -- ========= ========= ========= ========= ========= ========= Offering Price Per Share ........................... $ 12.16 $ 10.87 $ 17.41 $ 23.58 $ 27,48 -- ========= ========= ========= ========= ========= ========= Class B Net Asset Value and Offering Price Per Share ....... $ 11.50 $ 10.29 $ 16.48 $ 22.33 $ 26.00 $ 1.00 ========= ========= ========= ========= ========= ========= Class C Net Asset Value and Offering Price Per Share ....... $ 11.50 $ 10.29 $ 16.49 $ 22.33 $ 26.00 -- ========= ========= ========= ========= ========= ========= Shares of beneficial interest outstanding-Note 6 Class A ............................................ 4,516 2,511 28 242 595 -- ========= ========= ========= ========= ========= ========= Class B ............................................ 26,510 56,448 768 7,454 8,189 179,487 ========= ========= ========= ========= ========= ========= Class C ............................................ 17 33 3 4 24 -- ========= ========= ========= ========= ========= ========= *Identified cost ..................................... $ 307,953 $ 436,744 $ 11,749 $ 148,501 $ 197,866 $ 218,101 ========= ========= ========= ========= ========= ========= See Notes to Financial Statements.
THE ALGER FUND -30- STATEMENTS OF OPERATIONS (in thousands) For the year ended October 31, 1997
SMALL CAPITAL CAPITAL- MIDCAP APPRE- MONEY GROWTH IZATION BALANCED GROWTH CIATION MARKET INVESTMENT INCOME: PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO --------- --------- --------- --------- --------- --------- Income: Dividends ........................................... $ 2,179 $ 1,177 $ 60 $ 439 $ 1,091 $ -- Interest ............................................ 836 1,449 314 514 140 12,304 -------- -------- -------- -------- -------- -------- Total Income ........................................ 3,015 2,626 374 953 1,231 12,304 Expenses: Management fees-Note 3(a) ........................... 2,396 4,715 96 1,236 1,587 1,104 Distribution fees-Note 3(b): Class B ........................................... 2,190 4,083 95 1,137 1,353 -- Class C ........................................... -- -- -- -- 1 -- Shareholder servicing fees-Note 3(f) ................ 799 1,387 32 386 467 -- Interest on line of credit utilized-Note 5 .......... -- -- -- -- 192 -- Custodian fees ...................................... 54 98 10 35 36 41 Transfer agent fees and expenses-Note 3(e) ............................... 755 1,222 55 393 633 520 Professional fees ................................... 32 34 19 28 19 11 Trustees' fees ...................................... 5 5 5 5 5 5 Registration fees ................................... 97 125 49 82 59 89 Miscellaneous ....................................... 86 146 7 63 33 28 -------- -------- -------- -------- -------- -------- Total Expenses ...................................... 6,414 11,815 368 3,365 4,385 1,798 -------- -------- -------- -------- -------- -------- NET INVESTMENT INCOME (LOSS) ...................................... (3,399) (9,189) 6 (2,412) (3,154) 10,506 -------- -------- -------- -------- -------- -------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized gain (loss) on investments ............... 48,794 28,698 1,856 21,535 17,357 (16) Net change in unrealized appreciation on investments ...................................... 21,432 42,118 316 10,912 18,233 -- -------- -------- -------- -------- -------- -------- Net realized and unrealized gain (loss) on investments .......................... 70,226 70,816 2,172 32,447 35,590 (16) -------- -------- -------- -------- -------- -------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .......................... $ 66,827 $ 61,627 $ 2,178 $ 30,035 $ 32,436 $ 10,490 -------- -------- -------- -------- -------- --------
THE ALGER FUND -31- ALGER CAPITAL APPRECIATION PORTFOLIO STATEMENT OF CASH FLOWS (in thousands) For the year ended October 31, 1997 Increase (decrease) in cash: Cash flows from operating activities: Dividends received ............................................ $ 1,073 Interest received ............................................. 140 Interest paid ................................................. (117) Operating expenses paid ....................................... (4,070) Purchase of investment securities ............................. (308,958) Purchase of short-term securities, net ........................ (10,591) Proceeds from disposition of investment securities ............ 289,114 Other ......................................................... (35) --------- Net cash used in operating activities ..................... (33,444) --------- Cash flows from financing activities: Dividends paid ............................................. (970) Proceeds from shares sold and dividends reinvested ............ 388,484 Payments on shares redeemed ................................... (346,392) Decrease in bank loan payable ................................. (7,700) --------- Net cash provided by financing activities .............. 33,422 --------- Net decrease in cash .............................................. (22) Cash--beginning of year ........................................... 81 --------- Cash--end of year ................................................. $ 59 ========= Reconciliation of net increase in net assets to net cash used in operating activities: Net increase in net assets resulting from operations ....... $ 32,436 Increase in investments .................................... (32,623) Increase in interest and dividends receivable .............. (18) Increase in receivable for investment securities sold ...... (3,274) Increase in payable for investment securities purchased .... 5,461 Net realized gain .......................................... (17,357) Net increase in unrealized appreciation .................... (18,233) Increase in accrued expenses and other liabilities ......... 198 Net increase in other assets ............................... (34) --------- Net cash used in operating activities .................. $ (33,444) ========= See Notes to Financial Statements. THE ALGER FUND -32- STATEMENTS OF CHANGES IN NET ASSETS (in thousands) For the year ended October 31, 1997
SMALL CAPITAL CAPITAL- MIDCAP APPRE- MONEY GROWTH IZATION BALANCED GROWTH CIATION MARKET PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO --------- --------- --------- --------- --------- --------- Net investment income (loss) ................... $ (3,399) $ (9,189) $ 6 $ (2,412) $ (3,154) $ 10,506 Net realized gain (loss) on investments .............................. 48,794 28,698 1,856 21,535 17,357 (16) Net change in unrealized appreciation on investments ................. 21,432 42,118 316 10,912 18,233 -- --------- --------- --------- --------- --------- --------- Net increase in net assets resulting from operations ............... 66,827 61,627 2,178 30,035 32,436 10,490 Dividends to shareholders-Class B: Net investment income ........................ -- -- (50) -- -- (10,506) Net realized gains ........................... (8,740) (93,115) (288) (3,458) (970) -- Additional paid-in capital ..................... -- 578 -- -- -- -- Net increase (decrease)from shares of beneficial interest transactions-Note 6: Class A ...................................... 45,431 23,494 417 4,665 14,238 -- Class B ...................................... (12,447) 60,181 (2,639) 14,976 32,464 (106,279) Class C ...................................... 212 348 50 91 672 -- --------- --------- --------- --------- --------- --------- Total increase (decrease) ................ 91,283 53,113 (332) 46,309 78,840 (106,295) Net Assets: Beginning of year ........................... 266,207 553,872 13,492 125,686 150,258 285,702 --------- --------- --------- --------- --------- --------- End of year .................................. 357,490 606,985 13,160 171,995 229,098 179,407 Undistributed net investment income (accumulated loss) ................... $ (7,662) $ (35,019) $ (55) $ (4,426) $ (5,158) $ -- ========= ========= ========= ========= ========= =========
THE ALGER FUND STATEMENTS OF CHANGES IN NET ASSETS (in thousands) For the year ended October 31, 1996
SMALL CAPITAL CAPITAL- MIDCAP APPRE- MONEY GROWTH IZATION BALANCED GROWTH CIATION MARKET PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO --------- --------- --------- --------- --------- --------- Net investment income (loss) ................... $ (1,857) $ (8,359) $ 51 $ (1,197) $ (1,631) $ 12,586 Net realized gain (loss) on investments .............................. 8,966 94,157 280 3,375 2,538 (14) Net change in unrealized appreciation on investments ................. 10,513 (69,790) 399 3,534 10,813 -- --------- --------- --------- --------- --------- --------- Net increase in net assets resulting from operations ............... 17,622 16,008 730 5,712 11,720 12,572 Dividends to shareholders: Net investment income ........................ -- -- (7) -- -- (12,586) Net realized gains ........................... (10,925) (26,253) (125) (3,809) (1,331) -- Net increase from shares of beneficial interest transactions-Note 6 ................ 105,226 100,399 6,680 69,767 106,229 99,894 --------- --------- --------- --------- --------- --------- Total increase ........................... 111,923 90,154 7,278 71,670 116,618 99,880 Net Assets: Beginning of year ........................... 154,284 463,718 6,214 54,016 33,640 185,822 --------- --------- --------- --------- --------- --------- End of year ................................. $ 266,207 $ 553,872 $ 13,492 $ 125,686 $ 150,258 $ 285,702 ========= ========= ========= ========= ========= ========= Undistributed net investment income (accumulated loss) ................... $ (4,263) $ (25,830) $ (11) $ (2,014) $ (2,004) $ -- ========= ========= ========= ========= ========= ========= See Notes to Financial Statements.
THE ALGER FUND -33- NOTES TO FINANCIAL STATEMENTS NOTE 1- General: The Alger Fund (the "Fund") is a diversified, open-end registered investment company organized as an unincorporated business trust under the laws of the Commonwealth of Massachusetts. The Fund operates as a series company currently issuing an unlimited number of shares of beneficial interest in six portfolios--Growth Portfolio, Small Capitalization Portfolio, Balanced Portfolio, MidCap Growth Portfolio, Capital Appreciation Portfolio and Money Market Portfolio (the "Portfolios"). The Growth Portfolio, Small Capitalization Portfolio, MidCap Growth Portfolio and Capital Appreciation Portfolio normally invest primarily in equity securities and each has an investment objective of long-term capital appreciation. The 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. Each Portfolio, other than the Money Market Portfolio, offers Class A, Class B and Class C shares. Class A and Class C shares were first offered on January 1, 1997 and August 1, 1997, respectively. Class A shares are generally subject to an initial sales charge while Class B and Class C shares are generally subject to a deferred sales charge. Class B and Class C shares held for eight and twelve years, respectively, after the end of the calendar month in which the order to purchase was accepted, convert to Class A shares. The conversion is completed without the imposition of any sales charges or other fees. Each class has identical rights to assets and earnings except that only Class B and Class C shares have plans of distribution and bear the related expenses. NOTE 2- Significant Accounting Policies: (a) INVESTMENT VALUATION: Investments of the Portfolios, other than the Money Market Portfolio, are valued on each day the New York Stock Exchange (the "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 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 at fair value, as determined in good faith pursuant to procedures established by the Board of Trustees. The investments of the Money Market Portfolio, and short-term securities held by the other Portfolios having a remaining maturity of sixty days or less, are valued at amortized cost which approximates market value. (b) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are recorded on a trade date basis. Realized gains and losses from securities 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) DIVIDENDS TO SHAREHOLDERS: Dividends payable to shareholders are recorded on the ex-dividend date. The Money Market Portfolio declares dividends daily from net investment income; such dividends are paid monthly. The dividends from net investment income of the other Portfolios are declared and paid annually. With respect to all Portfolios, dividends from net realized gains, offset by any loss carryforward, are declared and paid annually after the end of the fiscal year in which earned. Each class is treated separately in determining the amounts of dividends of investment income and distributions of capital gains payable to holders of its shares. (d) FEDERAL INCOME TAXES: It is each Portfolio's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income to its share- THE ALGER FUND -34- NOTES TO FINANCIAL STATEMENTS (Continued) holders. Provided a Portfolio maintains such compliance, no federal income tax provision is required. Each Portfolio is treated as a separate entity for the purpose of determining such compliance. At October 31, 1997, the net capital loss carryforwards of the Money Market Portfolio which may be used to offset future net realized gains were approximately $78,000, and expire between 1998 and 2005. (e) ALLOCATION METHODS: 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. Income, realized and unrealized gains and losses, and expenses of each Portfolio, other than the Money Market Portfolio, are allocated among the Portfolio's classes based on relative net assets, with the exception of distribution fees which are only applicable to Class B and Class C shares. (f) 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 Investment Management Agreements (the "Agreements") with Fred Alger Management, Inc. ("Alger Management"), are payable monthly and are computed based on the value of the average daily net assets of each Portfolio at the following annual rates: Growth Portfolio............................................ .75% Small Capitalization Portfolio.............................. .85 Balanced Portfolio.......................................... .75 MidCap Growth Portfolio..................................... .80 Capital Appreciation Portfolio.............................. .85 Money Market Portfolio...................................... .50 (b) DISTRIBUTION FEES: Class B Shares--The Fund has adopted an Amended and Restated Plan of Distribution (the "Plan") pursuant to which Class B shares of each Portfolio, other than the Money Market Portfolio, reimburse Fred Alger & Company, Incorporated, the Fund's distributor (the "Distributor"), for costs and expenses incurred by the Distributor in connection with advertising and marketing Class B shares of the Fund's Portfolios. The distribution fee is not to exceed an annual rate of .75% of the respective average daily net assets of the Class B shares of the designated Portfolios. If in any month, the costs incurred by the Distributor relating to the Class B shares are in excess of the distribution fees charged to the Portfolios, the excess may be carried forward, with interest, and sought to be reimbursed in future periods. As of October 31, 1997, such excess carried forward was approximately $7,605,000, $16,444,000, $225,000, $3,218,000 and $2,124,000 for Class B shares of the Growth Portfolio, the Small Capitalization Portfolio, the Balanced Portfolio, the MidCap Growth Portfolio, and the Capital Appreciation Portfolio, respectively. Contingent deferred sales charges imposed on redemptions of Class B shares will reduce the amount of distribution expenses for which reimbursement may be sought. See Note 3(c) below. Class C Shares--The Fund has adopted a Distribution Plan pursuant to which Class C shares of each Portfolio, other than the Money Market Portfolio, pay the Distributor a fee at the annual rate of .75% of the respective average daily net assets of the Class C shares of the designated Portfolios to compensate the Distributor for its activities and expenses in distributing the Class C shares. The fees charged may be more or less than the expenses incurred by the Distributor. The Distributor has entered into arrangements with broker/dealers for the sale of Class B shares and Class C shares of certain of the Fund's Portfolios. In connec- THE ALGER FUND -35- NOTES TO FINANCIAL STATEMENTS (Continued) tion with these arrangements, the Distributor has agreed to make payments to these broker/dealers with respect to the Class B shares and Class C shares sold. (c) SALES CHARGES: The purchases and sales of shares of the Fund, other than the Money Market Portfolio, may be subject to initial sales charges or contingent deferred sales charges. For the year ended October 31, 1997, the initial sales charges and contingent deferred sales charges retained by the Distributor were approximately $108,000 and $3,914,000, respectively. The contingent deferred sales charges are used by the Distributor to offset distribution expenses previously incurred. Sales charges do not represent expenses of the Fund. (d) BROKERAGE COMMISSIONS: During the year ended October 31, 1997, the Growth Portfolio, the Small Capitalization Portfolio, the Balanced Portfolio, the MidCap Growth Portfolio and the Capital Appreciation Portfolio paid the Distributor commissions of $796,176, $1,107,011, $21,482, $436,141 and $514,917, respectively, in connection with securities transactions. (e) TRANSFER AGENT FEES AND EXPENSES: Alger Shareholder Services, Inc. ("Alger Services"), an affiliate of Alger Management, serves as transfer agent for the Fund. During the year ended October 31, 1997, the Growth Portfolio, the Small Capitalization Portfolio, the Balanced Portfolio, the MidCap Growth Portfolio, the Capital Appreciation Portfolio and the Money Market Portfolio incurred fees of $496,410, $888,000, $45,175, $308,175, $515,700 and $368,220, respectively, for services provided by Alger Services. In addition, during the year ended October 31, 1997, the Growth Portfolio, the Small Capitalization Portfolio, the Balanced Portfolio, the MidCap Growth Portfolio, the Capital Appreciation Portfolio and the Money Market Portfolio reimbursed Alger Services $258,800, $333,800, $10,265, $85,200, $116,800 and $151,820, respectively, for transfer agent related expenses paid by Alger Services on behalf of the Portfolios. (f) SHAREHOLDER SERVICING FEES: The Fund has entered into a shareholder servicing agreement with the Distributor whereby the Distributor provides each Portfolio, other than the Money Market Portfolio, with ongoing servicing of shareholder accounts. As compensation for such services, each designated Portfolio pays the Distributor a monthly fee at an annual rate equal to .25% of the Portfolios' average daily net assets. (g) OTHER TRANSACTIONS WITH AFFILIATES: During the year ended October 31, 1997, Alger Management contributed additional paid-in capital of approximately $577,653 to the Small Capitalization Portfolio for the purpose of correcting an error. NOTE 4- Securities Transactions: The following summarizes the securities transactions by the Fund, other than short-term securities, for the year ended October 31, 1997 (in thousands): Purchases Sales --------- ----- Growth Portfolio ......................... $392,283 $385,253 Small Capitalization Portfolio .............................. 629,143 668,489 Balanced Portfolio ....................... 12,730 14,418 MidCap Growth Portfolio .............................. 248,627 233,252 Capital Appreciation Portfolio .............................. 314,419 292,384 NOTE 5- Lines of Credit: The Capital Appreciation Portfolio has lines of credit with banks whereby it may borrow up to 1/3 of the value of its assets, as defined, up to a maximum of $45,000,000. Such borrowings have variable interest rates and are payable on demand. For the year ended October 31, 1997, the Portfolio had borrowings which averaged $2,940,097 at a weighted average interest rate of 6.43%. THE ALGER FUND -36- NOTES TO FINANCIAL STATEMENTS (Continued) NOTE 6- Share Capital: The Fund has an unlimited number of authorized shares of beneficial interest of $.001 par value which are presently divided into six series. Each series, other than the Money Market Portfolio, is divided into three separate classes. During the year ended October 31, 1997, transactions of shares of beneficial interest were as follows:
FOR THE YEAR ENDED FOR THE YEAR ENDED OCTOBER 31, 1997 OCTOBER 31, 1996 SHARES AMOUNT SHARES AMOUNT ------ ------ ------ ------ Alger Growth Portfolio Class A:* Shares sold ............................ 5,044,972 $ 51,947,397 -- -- Shares converted from Class B .......... 2,227,219 22,695,978 -- -- ------------- --------------- ------------- --------------- 7,272,191 74,643,375 -- -- Shares redeemed ........................ (2,756,124) (29,211,908) -- -- ------------- --------------- ------------- --------------- Net increase ........................... 4,516,067 $ 45,431,467 -- -- ============= =============== ============= =============== Class B: Shares sold ............................ 19,936,199 $ 209,548,326 20,439,840 $ 185,976,149 Dividends reinvested ................... 887,671 8,477,253 1,233,917 10,587,010 ------------- --------------- ------------- --------------- 20,823,870 218,025,579 21,673,757 196,563,159 Shares converted to Class A ............ (2,233,829) (22,695,978) -- Shares redeemed ........................ (20,141,745) (207,776,866) (10,053,996) (91,337,193) ------------- --------------- ------------- --------------- Net increase (decrease) ................ (1,551,704) $ (12,447,265) 11,619,761 $ 105,225,966 ============= =============== ============= =============== Class C:** Shares sold ............................ 22,512 $ 273,258 -- -- Shares redeemed ........................ (5,189) (61,432) -- -- ------------- --------------- ------------- --------------- Net increase ........................... 17,323 $ 211,826 -- -- ============= =============== ============= =============== Alger Small Capitalization Portfolio Class A:* Shares sold............................. 7,681,584 $ 75,848,391 -- -- Shares converted from Class B........... 1,829,173 17,139,109 ------------- --------------- ------------- --------------- 9,510,757 92,987,500 -- -- Shares redeemed......................... (6,999,709) (69,493,610) -- -- ------------- --------------- ------------- --------------- Net increase............................ 2,511,048 $ 23,493,890 -- -- ============= =============== ============= =============== Class B: Shares sold............................. 106,288,557 $ 1,038,455,771 65,877,346 $ 715,329,513 Dividends reinvested.................... 9,868,408 89,901,198 2,431,612 25,264,448 ------------- --------------- ------------- --------------- 116,156,965 1,128,356,969 68,308,958 740,593,961 Shares converted to Class A............. (1,835,958) (17,139,109) -- -- Shares redeemed......................... (108,877,400) (1,051,036,361) (58,979,523) (640,194,617) ------------- --------------- ------------- --------------- Net increase............................ 5,443,607 $ 60,181,499 9,329,435 $ 100,399,344 ============= =============== ============= =============== Class C:** Shares sold............................. 42,583 $ 451,031 -- -- Shares redeemed......................... (9,782) (102,933) -- -- ------------- --------------- ------------- --------------- Net increase............................ 32,801 $ 348,098 -- -- ============= =============== ============= ===============
THE ALGER FUND -37- NOTES TO FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED FOR THE YEAR ENDED OCTOBER 31, 1997 OCTOBER 31, 1996 SHARES AMOUNT SHARES AMOUNT ------ ------ ------ ------ Alger Balanced Portfolio Class A:* Shares sold ............................ 19,407 $ 305,198 -- -- Shares converted from Class B .......... 13,383 192,101 -- -- ------------- --------------- ------------- --------------- 32,790 497,299 -- -- Shares redeemed ........................ (5,110) (80,451) -- -- ------------- --------------- ------------- --------------- Net increase ........................... 27,680 $ 416,848 -- -- ============= =============== ============= =============== Class B: Shares sold ............................ 626,022 $ 9,511,649 1,054,356 $ 14,459,376 Dividends reinvested ................... 23,152 328,056 9,599 129,105 ------------- --------------- ------------- --------------- 649,174 9,839,705 1,063,955 14,588,481 Shares converted to Class A ............ (13,405) (192,101) -- -- Shares redeemed ........................ (817,576) (12,286,748) (571,454) (7,908,926) ------------- --------------- ------------- --------------- Net increase (decrease) ................ (181,807) $ (2,639,144) 492,501 $ 6,679,555 ============= =============== ============= =============== Class C:** Shares sold ............................ 3,179 $ 54,326 -- -- Shares redeemed ........................ (259) (4,321) -- -- ------------- --------------- ------------- --------------- Net increase ........................... 2,920 $ 50,005 -- -- ============= =============== ============= =============== Alger MidCapGrowth Portfolio Class A:* Shares sold ............................ 1,533,288 $ 31,807,270 -- -- Shares converted from Class B .......... 148,365 2,732,385 -- -- 1,681,653 34,539,655 -- -- Shares redeemed ........................ (1,439,653) (29,874,723) -- -- ------------- --------------- ------------- --------------- Net increase ........................... 242,000 $ 4,664,932 -- -- ============= =============== ============= =============== Class B: Shares sold ............................ 6,111,087 $ 124,416,537 5,967,864 $ 109,772,851 Dividends reinvested ................... 176,660 3,335,332 208,813 3,587,405 ------------- --------------- ------------- --------------- 6,287,747 127,751,869 6,176,677 113,360,256 Shares converted to Class A ............ (148,651) (2,732,385) -- -- Shares redeemed ........................ (5,345,132) (110,043,722) (2,369,463) (43,593,307) ------------- --------------- ------------- --------------- Net increase ........................... 793,964 $ 14,975,762 3,807,214 $ 69,766,949 ============= =============== ============= =============== Class C:** Shares sold ............................ 5,118 $ 120,922 -- -- Shares redeemed ........................ (1,348) (29,837) -- -- ------------- --------------- ------------- --------------- Net increase ........................... 3,770 $ 91,085 -- -- ============= =============== ============= ===============
THE ALGER FUND -38- NOTES TO FINANCIAL STATEMENTS (Continued)
FOR THE YEAR ENDED FOR THE YEAR ENDED OCTOBER 31, 1997 OCTOBER 31, 1996 SHARES AMOUNT SHARES AMOUNT ------ ------ ------ ------ Alger Capital Appreciation Portfolio Class A:* Shares sold ............................ 3,241,124 $ 82,052,318 -- -- Shares converted from Class B .......... 233,151 5,186,684 -- -- ------------- --------------- ------------- --------------- 3,474,275 87,239,002 -- -- Shares redeemed ........................ (2,879,210) (73,001,214) -- -- ------------- --------------- ------------- --------------- Net increase ........................... 595,065 $ 14,237,788 -- -- ============= =============== ============= =============== Class B: Shares sold ............................ 12,410,336 $ 304,603,104 9,017,193 $ 187,170,688 Dividends reinvested ................... 43,004 941,804 69,287 1,293,585 ------------- --------------- ------------- --------------- 12,453,340 305,544,908 9,086,480 188,464,273 Shares converted to Class A ............ (233,764) (5,186,684) -- -- Shares redeemed ........................ (10,979,223) (267,894,646) (3,944,113) (82,235,369) ------------- --------------- ------------- --------------- Net increase ........................... 1,240,353 $ 32,463,578 5,142,367 $ 106,228,904 ============= =============== ============= =============== Class C:** Shares sold ............................ 36,710 $ 1,019,125 -- -- Shares redeemed ........................ (12,451) (346,883) -- -- ------------- --------------- ------------- --------------- Net increase ........................... 24,259 $ 672,242 -- -- ============= =============== ============= =============== Alger Money Market Portfolio Shares sold ............................ 1,583,643,437 $ 1,583,643,437 903,938,157 $ 903,938,157 Dividends reinvested ................... 9,418,392 9,418,392 11,911,938 11,911,938 ------------- --------------- ------------- --------------- 1,593,061,829 1,593,061,829 915,850,095 915,850,095 Shares redeemed ........................ (1,699,340,499) (1,699,340,499) (815,956,070) (815,956,070) ------------- --------------- ------------- --------------- Net increase (decrease) ................ (106,278,670) $ (106,278,670) 99,894,025 $ 99,894,025 ============= =============== ============= ===============
- ------------------- * Initially offered January 1, 1997. ** Initially offered August 1, 1997. REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS -39- To the Shareholders and Board of Trustees of The Alger Fund: We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of The Alger Fund (a Massachusetts business trust comprising, respectively, the Growth Portfolio, Small Capitalization Portfolio, Balanced Portfolio, MidCap Growth Portfolio, Capital Appreciation Portfolio and Money Market Portfolio) as of October 31, 1997, and the related statements of operations and cash flows for the year then ended, the statements of changes in net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 1997, 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 Fund as of October 31, 1997, 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 December 3, 1997 ================================================================================ THE | Meeting the challenge ALGER | of investing FUND | Alger Growth Portfolio Alger Small Capitalization Portfolio Alger Balanced Portfolio Alger MidCap Growth Portfolio Alger Capital Appreciation Portfolio Alger Money Market Portfolio | ANNUAL | REPORT | October 31, 1997 | ================================================================================ The Alger Fund 75 Maiden Lane New York, N.Y. 10038 (800) 992-3863 - -------------------------------------------------------------------------------- Board of Trustees Fred M. Alger, Chairman David D. Alger Arthur M. Dubow Stephen E. O'Neil Nathan E. Saint-Amand John T. Sargent - -------------------------------------------------------------------------------- Investment Manager Fred Alger Management, Inc. 75 Maiden Lane New York, N.Y. 10038 - -------------------------------------------------------------------------------- Distributor Fred Alger & Company, Incorporated 30 Montgomery Street Jersey City, N.J. 07302 - -------------------------------------------------------------------------------- Transfer Agent Alger Shareholder Services, Inc. 30 Montgomery Street Jersey City, N.J. 07302 - -------------------------------------------------------------------------------- Independent Public Accountants Arthur Andersen LLP 1345 Avenue of the Americas New York, N.Y. 10105 - -------------------------------------------------------------------------------- This report is submitted for the general information of the shareholders of The Alger Fund. It is not authorized for distribution to prospective investors unless accompanied by an effective Prospectus for the Fund, which contains information concerning the Fund's investment policies, fees and expenses as well as other pertinent information. REP 107 -----END PRIVACY-ENHANCED MESSAGE-----