-----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, PMrfgZa3hqxlZ+U8ilwEJM9DeSjE0NgQ/oOAZjV0+tTwg6ZFOhJJREi9Z+SLRFRZ AjIZGSFNqJNkrOtOrKKJ+g== 0000930413-03-000011.txt : 20030107 0000930413-03-000011.hdr.sgml : 20030107 20030107093132 ACCESSION NUMBER: 0000930413-03-000011 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20021031 FILED AS OF DATE: 20030107 EFFECTIVENESS DATE: 20030107 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALGER FUND CENTRAL INDEX KEY: 0000003521 STATE OF INCORPORATION: MA FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-01355 FILM NUMBER: 03505904 BUSINESS ADDRESS: STREET 1: 111 FIFTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10003 BUSINESS PHONE: 2128068800 MAIL ADDRESS: STREET 1: 30 MONTGOMERY STREET STREET 2: 13TH FLOOR CITY: JERSEY CITY STATE: NJ ZIP: 07302 N-30D 1 c25641_n30d.txt ANNUAL REPORT Dear Shareholders, December 9, 2002 THE YEAR IN REVIEW The year ended October 31, 2002, was not easy to navigate. A relentless series of difficult events undermined the performance of the stock markets throughout the 12 months, even as the economy began a slow recovery. However, signs of improving market conditions began to emerge at the end of this period and we believe stocks, at current prices, offer considerable potential. At the beginning of the fiscal year, the nation was reeling from the aftermath of the September 11th terrorist attacks. The shock of those attacks overwhelmed the nation, hurting the travel and insurance industries, as well as the financial services sector to some degree. Federal spending increased for homeland security and the war in Afghanistan, leading to a strain on the federal budget. By January, the headlines were filled with news of corporate and accounting scandals at large, once-respected companies, including Tyco, Enron, WorldCom and Global Crossing. Some of the troubles at these companies can be traced to the drop of the Nasdaq beginning in the year 2000, while others were the result of specific and unique events within each company. Together, the scandals left investors questioning the health of many corporations. Meanwhile, investors grappled with international unease brought about first by the U.S. war in Afghanistan and later by evidence of al Qaeda's continued presence throughout the world. By the fall, worries over the U.S.'s intentions in Iraq caused further unsettled feelings about the future. As this 12-month period began, the nation was already confronting a slow, shallow recession triggered partially by the meltdown in the once booming technology sector. With the exception of strong auto sales at the end of October 2001, retail sales in the latter half of the calendar year were weak, with year-over-year December sales increasing at the lowest rate since 1997. Also, unemployment rates began to move higher, industrial production continued to contract, and consumer confidence was low. However, the economy's health gradually regained strength as 2002 progressed. Low interest rates helped. Last December the Federal Reserve cut short-term interest rates to 1.75%, the lowest level in more than 40 years. The Fed's actions rippled into the economy in the form of lower mortgage rates and lower interest rates on credit cards and auto loans, giving a lift to consumer spending. Home sales, for instance, remained strong throughout most of the year. Overall, the economy was strong in 2002, growing at an annual rate of 2.5% as defined by the U.S. Gross Domestic Product (GDP). The unemployment rate was above 5.5% throughout the year, but it did not break 6%, which is unusual for a recession. Businesses, hit hard by accounting issues and declining stock prices, tended to be more conservative in their expenditures. But their conservatism had positive results: businesses were able to be much more productive with their existing workforce. Productivity, or the rate of output per hour worked, was up at an annual rate of 5.1% in the third quarter, continuing a trend that began in the fourth quarter of 2001. We credit this increase to the widespread use of information technologies, which is allowing businesses to operate more efficiently. For most of the fiscal year, the stock markets shrugged off any good news. The Dow Jones Industrial Average fell 6% in the 12 months ended October 31, to 8397, bouncing up some after hitting a five-year low of 7286 on October 9. The S&P 500 was down 15% for the period, while the Nasdaq Composite fell 21%. During some quarters, the markets performed worse than they had since 1972. Meanwhile, investors fled to the safety of U.S. Treasury securities, pushing the yield on the 10-year note down to 3.58% on October 9, the lowest level in 40 years; the yield rose to 3.91% by October 31, down from 4.22% a year earlier. Portfolio Matters Alger LargeCap Growth Portfolio The Alger LargeCap Growth Portfolio declined 25.06% during the 12 months ended October 31, 2002, while the Russell 1000 Growth Index fell 19.62%. The portfolio suffered from positions in a few select stocks as well as the broad market downturn. Capital One Financial, a leading credit card issuer, lost value amid accounting questions, at which time we liquidated the position; Concord EFS, which processes electronic payments, fell sharply after a disappointing earnings announcement, and Taiwan Semiconductor, a leading offshore manufacturer of computer chips, was hurt badly by weaker-than-expected spending on information technology. Our holdings in consumer staples and health care stocks fell in line with the market, but our consumer discretionary stocks outperformed the Russell 1000 Growth Index. In general, our health care holdings did well, with the exception of declines in Wyeth and Baxter, and we believe the sector will deliver long-term growth. Financial services had a rough year and our holdings were no exception. We've trimmed our position in the beleaguered information technology sector to 21% of the portfolio, but some areas continue to be weak. The market spared few industries this year: even defense stocks, which typically have good fundamentals, were down. Alger Small Capitalization Portfolio The Alger Small Capitalization Portfolio fell 20.24% for the year ended October 31, 2002, while the Russell 2000 Growth Index fell 21.56%. Across the board, growth stocks struggled to post gains even as the economy showed signs of recovery. Our health care holdings, representing approximately 20% of the portfolio at year end, should lead to strong long-term results, but the year was mixed, with uneven performance in biotechnology stocks, among others. Cross Country, a leading health care staffing company, did well in the second quarter, but stumbled in the third on concerns that hospitals would hire fewer nurses. Despite steady consumer spending, small cap consumer stocks generally had mixed performance. Stocks such as Michaels Stores, an arts-and-crafts retailer, saw double-digit gains in the third quarter, while Duane Reade, a national drug-store chain, dropped sharply. We have since sold our position in the stock. The performance of our financial services holdings as well as our industrial holdings was mixed this quarter. Our information technology holdings were reduced, but it was a tough year for most of these stocks. The portfolio fared better with holdings in innovative professional education companies, including Education Management Corporation, Corinthian Colleges and Career Education Corporation. Alger Balanced Portfolio For the year ended October 31, 2002, the Alger Balanced Portfolio fell 12.87%, while the Russell 1000 Growth Index fell 19.62% and the Lehman Brothers Government/Credit Bond Index rose 5.48%. About 60% of the portfolio is in large capitalization growth stocks, while 40% is in bonds. Health care stocks represent 28% of the portfolio, as we believe demographic trends favor the long-term growth prospects of health care companies. Although the first half the year was rough, biotechnology stocks such as IDEC Pharmaceuticals did well. The performance of our pharmaceutical holdings was mixed, with declines in Wyeth somewhat offsetting gains by Johnson & Johnson. Consumer discretionary stocks and consumer staples have a big position in the portfolio because of the strong role consumers are playing in the economy. Performance of these stocks has been uneven, although our holdings outperformed the stock market index. We have trimmed our position in information technology to under a fifth of the portfolio reflecting persistent weakness in this sector. Overall it was a tough 12 months. Our financial holdings suffered from accounting scandals, the decline in investment banking and general Wall Street malaise. Even good fundamentals did not prevent prices of our defense stocks from falling. Our fixed-income strategy was to take advantage of the high yields of corporate bonds relative to Treasury securities. Federal Reserve policies have kept the yield on the Treasury's 10-year note to historic low levels, causing the overall yield on the portfolio's holding to drop to about 4%. Alger MidCap Growth Portfolio For the 12 months ended October 31, 2002, the Alger MidCap Growth Portfolio declined 21.43%, while the Russell Midcap Growth Index fell 17.61%. Biotechnology companies were weak during the year, but we saw strong gains among medical equipment providers, such as Alcon, as well as service providers, like Universal Health Services. More than 25% of the portfolio is in the consumer discretionary sector, which has generally shown consistent earnings growth. Travel and leisure holdings have done better than retail stocks, which had more of a mixed year. The portfolio was hurt in the third quarter by its energy and financial holdings, sectors that underperformed. Fortunately, we were underweighted in industrial stocks, which have shown poor growth prospects. Technology companies did poorly all year, as demand for highly competitive products in all areas failed to emerge; we have reduced our exposure to this sector. Alger Capital Appreciation Portfolio The Alger Capital Appreciation Portfolio declined 24.75% for the 12 months ended October 31, 2002, while the Russell 3000 Growth Index fell 19.74%. Performance of biotechnology stocks has been mixed, yet we believe long-term prospects for health care companies are good. After struggling in the first half of the year, two of our biotech holdings, Gilead Sciences and IDEC Pharmaceuticals, posted double-digit returns in the third quarter. The economy's strength is coming largely from consumer spending, so we have overweighted the portfolio in consumer stocks. Performance of these stocks however, has been uneven, with some retailers and consumer service businesses doing better than others. Companies that make consumer staples fared worse, so we were fortunate to be underweighted in this sector. We have reduced our position in the once booming information technology sector as stocks of these companies continue to fall from weak earnings and thin demand for their highly competitive products. Although we were light on financial stocks and industrial stocks during the year, the portfolio still suffered from weakness in these sectors. It also was hurt by a slight overweighting in energy stocks. Alger Health Sciences Portfolio The Alger Health Sciences Portfolio fell 7.40% since its inception on May 1, 2002, while the Russell 3000 Growth Index fell 18.04% for the same period. Health care stocks have been relative outperformers in what has been a dismal period for the stock markets. The portfolio is fairly diversified, with the largest group of holdings in pharmaceuticals. Since the portfolio's inception, pharmaceuticals have done well with the exception of a big decline in Wyeth after a national study questioned the utility of the company's hormone replacement therapy. The portfolio was helped by the strong performance of hospital stocks, which are about 15% of the portfolio. Biotechnology stocks had more of a mixed year, with smaller biotechs outperforming larger holdings like Amgen and Gilead, which were relatively flat for the period. Although the price of Baxter's stock declined, medical technology and hospital supply stocks mostly did well. We believe health care will continue to be more insulated from economic worries than most other sectors, and that it will continue to benefit from demographic trends and innovative technologies. Alger SmallCap and MidCap Portfolio The Alger SmallCap and MidCap Portfolio declined 23.70% from its inception, May 8, 2002, to October 31, 2002, while the Russell 2500 Growth Index fell 25.31% for the same period. Persistent weakness in the stock market affected the performance of traditionally stronger stocks this year, even as the economy began to gain footing. The performance of our holdings was mixed for the period, with relative strength among health care equipment makers and biotechnology companies offsetting losses in pharmaceuticals and health care providers. On average, our health care holdings lost 2.17%. The portfolio's largest holdings remain in health care stocks as we believe demographic trends and innovative technologies will lead to good long-term performance for health care stocks. Information technology stocks continued to suffer from weak demand. Hardest hit were communications equipment companies and semiconductor manufacturers where our holdings lost 9.4% on average for the period. The market left few industries unscathed, including our industrial and financial holdings. Looking Ahead As we move into 2003, we believe the economy will grow at a steady 2% to 3% rate, similar to this past year. Strong post-Thanksgiving retail sales are a sign that consumers are willing to spend again, although housing sales are beginning to weaken. If there are surprises in the economy, they are likely to be surprises on the upside. The threat of further terrorism, as well as war with Iraq, looms, but we have lived amid such unsettling conditions before. In the `50s and `60s, our nation was under constant threat of nuclear attack, yet our economy continued to grow and the markets performed well. The year ahead is likely to be marked by continuing consolidation among corporations, particularly among technology companies. Consolidation is only natural following a period rich with innovation such as we had in the '90s. As this happens, we will look for some companies to assume market leadership. We enter 2003 with companies that have cleaner balance sheets and more reasonable earnings estimates. These factors should help restore investor confidence. The current level of stock prices offers many opportunities for the first time in a while. We base this belief on the relationship between stock prices, the earnings yield of stocks and interest rates of "risk-free" Treasury bonds. Currently, the earnings yield is about twice the bond yield, or 200%, compared with a more typical ratio of 75%. This means stocks offer a higher prospect of long-term returns than risk-free bonds. Whether or not the market is growing robustly, we believe there are substantial gains to be made over the long term with stocks at these prices. Respectfully submitted, /s/ Dan C. Chung Dan C. Chung Chief Investment Officer TABLE OF CONTENTS Alger LargeCap Growth Portfolio: Portfolio Highlights ................................. 7 Schedule of Investments .............................. 8 Financial Highlights ................................. 10 Alger Small Capitalization Portfolio: Portfolio Highlights ................................. 13 Schedule of Investments .............................. 14 Financial Highlights ................................. 16 Alger Balanced Portfolio: Portfolio Highlights ................................. 19 Schedule of Investments .............................. 20 Financial Highlights ................................. 24 Alger MidCap Growth Portfolio: Portfolio Highlights ................................. 27 Schedule of Investments .............................. 28 Financial Highlights ................................. 30 Alger Capital Appreciation Portfolio: Portfolio Highlights ................................. 33 Schedule of Investments .............................. 34 Financial Highlights ................................. 36 Alger Health Sciences Portfolio: Portfolio Highlights ................................. 39 Schedule of Investments .............................. 40 Financial Highlights ................................. 41 Alger SmallCap and MidCap Portfolio: Portfolio Highlights ................................. 43 Schedule of Investments .............................. 44 Financial Highlights ................................. 46 Alger Money Market Portfolio: Schedule of Investments .............................. 47 Financial Highlights ................................. 48 Statements of Assets and Liabilities ................................... 50 Statements of Operations ............................................... 52 Statements of Changes in Net Assets .................................... 54 Notes to Financial Statements .......................................... 56 Report of Independent Public Accountants ............................... 65 [This page intentionally left blank] -7- ALGER LARGECAP GROWTH PORTFOLIO PORTFOLIO HIGHLIGHTS THROUGH OCTOBER 31, 2002 (UNAUDITED) Prior to September 29, 2000 the Alger LargeCap Growth Portfolio was the Alger Growth Portfolio HYPOTHETICAL $10,000 INVESTMENT IN CLASS B SHARES - 10 YEARS ENDED 10/31/02 [The following data represent a line graph in the printed document.] ALGER LARGECAP RUSSELL 1000 GROWTH B GROWTH INDEX S&P 500 INDEX -------------- ------------ ------------- 11/1/92 10,000 10,000 10,000 10/31/93 12,917 10,729 11,496 10/31/94 13,444 11,306 11,940 10/31/95 18,522 14,614 15,097 10/31/96 20,019 17,836 18,734 10/31/97 25,055 23,269 24,751 10/31/98 30,420 29,001 30,197 10/31/99 42,699 38,933 37,947 10/31/00 46,119 42,565 40,260 10/31/01 33,469 25,567 30,232 10/31/02 25,305 20,552 25,668 The chart above illustrates the growth in value of a hypothetical $10,000 investment made in the Alger LargeCap Growth Class B shares, the Russell 1000 Growth Index and the S&P 500 Index for the ten years ended October 31, 2002. Figures for the Alger LargeCap Growth Class B shares, the Russell 1000 Growth Index (an unmanaged index of common stocks) and the S&P 500 Index (an unmanaged index of common stocks), include reinvestment of dividends. Performance for the Alger LargeCap 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. The Portfolio has changed its comparative index to the Russell 1000 Growth Index. Fund management believes this index more closely represents the stocks in which the Portfolio normally invests. PERFORMANCE COMPARISON AS OF 10/31/02+ AVERAGE ANNUAL TOTAL RETURNS 1 5 10 SINCE YEAR YEARS YEARS INCEPTION ------------------------------------------------ CLASS A (INCEPTION 1/1/97) (28.36%) (0.88%) * 2.86% Russell 1000 Growth Index (19.62%) (2.45%) * 1.54% S&P 500 Index (15.10%) 0.73% * 4.59% - -------------------------------------------------------------------------------- CLASS B (INCEPTION 11/11/86) (28.80%) (0.84%) 9.73% 10.81% Russell 1000 Growth Index (19.62%) (2.45%) 7.47% 9.93% S&P 500 Index (15.10%) 0.73% 9.89% 11.05% - -------------------------------------------------------------------------------- CLASS C (INCEPTION 8/1/97) (26.55%) (0.79%) * (1.52%) Russell 1000 Growth Index (19.62%) (2.45%) * (3.26%) S&P 500 Index (15.10%) 0.73% * (0.04%) - -------------------------------------------------------------------------------- THE PORTFOLIO'S AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE PRICE AND REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS. THE GRAPH AND TABLE ABOVE DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD HAVE PAID ON FUND DISTRIBUTIONS OR ON THE REDEMPTION OF FUND SHARES. INVESTMENT RETURN AND PRINCIPAL WILL FLUCTUATE AND THE PORTFOLIO'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. + RETURNS REFLECT MAXIMUM INITIAL SALES CHARGES ON CLASS A AND CLASS C SHARES AND APPLICABLE CONTINGENT DEFERRED SALES CHARGES ON CLASS B AND CLASS C SHARES. -8- THE ALGER FUND Alger LargeCap Growth Portfolio Schedule of Investments October 31, 2002 Common Stocks--110.7% Shares Value ------ ----- AEROSPACE & DEFENSE--4.0% General Dynamics Corporation ............... 55,440 $ 4,386,967 Lockheed Martin Corporation ................ 167,180 9,679,722 Northrop Grumman Corporation ............... 54,150 5,584,490 ----------- 19,651,179 ----------- AIR FREIGHT AND LOGISTICS--1.7% FedEx Corp. ................................ 155,420 8,266,790 ----------- AUTOMOTIVE--1.9% Harley-Davidson, Inc. ...................... 175,075 9,156,422 ----------- BANKS--3.8% Bank of America Corporation ................ 190,200 13,275,960 Fifth Third Bancorp ........................ 80,990 5,142,865 ----------- 18,418,825 ----------- BIOTECHNOLOGY--4.4% Amgen Inc.* ................................ 157,441 7,330,453 Biogen, Inc. * ............................. 73,400 2,693,046 IDEC Pharmaceuticals Corporation*+ ............................ 245,470 11,296,529 ----------- 21,320,028 ----------- BUILDING PRODUCTS--1.2% Masco Corporation .......................... 276,655 5,688,027 ----------- COMMERCIAL SERVICES & SUPPLIES--3.8% Concord EFS, Inc.* ......................... 734,805 10,493,015 First Data Corporation ..................... 231,910 8,102,935 ----------- 18,595,950 ----------- COMMUNICATION EQUIPMENT--2.3% Cisco Systems, Inc.* ....................... 1,015,120 11,349,042 ----------- COMPUTERS & PERIPHERALS--7.4% Dell Computer Corporation* ................. 403,865 11,554,578 EMC Corporation * .......................... 1,274,780 6,514,126 Lexmark International, Inc. Cl. A* ......... 130,260 7,740,049 Sun Microsystems, Inc.* .................... 3,541,550 10,486,530 ----------- 36,295,283 ----------- DIVERSIFIED FINANCIALS--4.4% Citigroup Inc. ............................. 459,970 16,995,892 SLM Corporation ............................ 44,350 4,556,519 ----------- 21,552,411 ----------- DIVERSIFIED TELE- COMMUNICATION SERVICES--.7% Verizon Communications Inc. ................ 94,705 3,576,061 ----------- Common Stocks--(cont.) Shares Value ------ ----- ENERGY EQUIPMENT & SERVICES--2.0% BJ Services Company* ....................... 131,700 $ 3,994,461 Nabors Industries Ltd.* .................... 170,505 5,962,560 ----------- 9,957,021 ----------- HEALTH CARE EQUIPMENT & SUPPLIES--6.1% Alcon, Inc.* ............................... 13,500 553,770 Baxter International Inc. .................. 109,370 2,736,437 Boston Scientific Corporation* ............. 312,070 11,743,194 Medtronic, Inc. ............................ 140,800 6,307,840 Stryker Corporation ........................ 138,300 8,726,730 ----------- 30,067,971 ----------- HEALTH CARE PROVIDERS & SERVICES--7.0% Anthem, Inc.* .............................. 136,500 8,599,500 HCA Inc. ................................... 269,085 11,702,507 Tenet Healthcare Corporation* .............. 207,737 5,972,439 UnitedHealth Group Incorporated ............ 86,625 7,878,544 ----------- 34,152,990 ----------- HOTELS, RESTAURANTS & LEISURE--1.4% Carnival Corporation Cl. A ................. 270,325 7,060,888 ----------- HOUSEHOLD PRODUCTS--3.1% Colgate-Palmolive Company .................. 127,120 6,989,058 Procter & Gamble Company (The) ............. 95,160 8,416,902 ----------- 15,405,960 ----------- INDUSTRIAL CONGLOMERATES--5.2% General Electric Company ................... 518,210 13,084,803 Tyco International Ltd. .................... 870,670 12,589,887 ----------- 25,674,690 ----------- INSURANCE--4.6% AFLAC Incorporated ......................... 89,700 2,730,468 American International Group, Inc. ......... 182,440 11,411,622 Chubb Corporation (The) .................... 144,974 8,177,983 ----------- 22,320,073 ----------- INTERNET & CATALOG RETAIL--3.4% Amazon.com, Inc.* .......................... 71,900 1,391,983 eBay Inc.*+ ................................ 241,080 15,245,899 ----------- 16,637,882 ----------- INTERNET SOFTWARE & SERVICES--.6% Yahoo! Inc. * .............................. 188,000 2,804,960 ----------- MEDIA--3.2% Viacom Inc. Cl. B* ......................... 354,065 15,794,840 ----------- -9- THE ALGER FUND Alger LargeCap Growth Portfolio Schedule of Investments (Continued) October 31, 2002 Common Stocks--(cont.) Shares Value ------ ----- MULTILINE RETAIL--4.9% Costco Wholesale Corporation* .............. 84,000 $ 2,850,120 Kohl's Corporation* ........................ 52,500 3,068,625 Sears, Roebuck and Co. ..................... 440 11,554 Wal-Mart Stores, Inc. ...................... 333,560 17,862,138 ----------- 23,792,437 ----------- OIL & GAS--1.1% Devon Energy Corporation ................... 105,745 5,340,123 ----------- PERSONAL PRODUCTS--1.2% Avon Products, Inc. ........................ 123,215 5,974,695 ----------- PHARMACEUTICALS--13.5% Abbott Laboratories ........................ 202,460 8,477,000 Johnson & Johnson .......................... 267,930 15,740,888 Pfizer Inc. ................................ 372,735 11,841,791 Pharmacia Corporation ...................... 273,255 11,749,965 Wyeth ...................................... 543,530 18,208,255 ----------- 66,017,899 ----------- ROAD & RAIL--.9% Union Pacific Corporation .................. 74,000 4,369,700 ----------- SEMICONDUCTOR EQUIPMENT & PRODUCTS--5.4% Applied Materials, Inc.* ................... 1,430 21,493 Intel Corporation .......................... 343,325 5,939,523 Linear Technology Corporation .............. 244,080 6,746,371 Taiwan Semiconductor Manufacturing Company Ltd. ADR* ........................ 1,723,550 13,478,161 ----------- 26,185,548 ----------- Common Stocks--(cont.) Shares Value ------ ----- SOFTWARE--5.7% Microsoft Corporation* ..................... 415,490 $ 22,216,250 Synopsys, Inc.* ............................ 74,500 2,819,825 VERITAS Software Corporation * ............. 174,550 2,661,888 ----------- 27,697,963 ----------- SPECIALTY RETAIL--5.8% Home Depot, Inc. (The) ..................... 379,075 10,947,686 Lowe's Companies, Inc. ..................... 178,515 7,449,431 TJX Companies, Inc. (The) .................. 486,930 9,991,804 ----------- 28,388,921 ----------- Total Common Stocks (Cost $565,968,594) ...................... 541,514,579 ----------- Short-Term Investments--3.6% Securities Lending Quality Trust (Cost $17,269,315)(b) .................... 17,269,315 17,269,315 ----------- Total Investments (Cost $583,237,909)(a) ................... 114.3% 558,783,894 Liabilities in Excess of Other Assets ...... (14.3) (69,697,778) ----- ----------- Net Assets ................................. 100.0% $489,086,116 ===== ============ * Non-income producing security. + Securities partially or fully on loan. (a) At October 31, 2002, the net unrealized depreciation on investments, based on cost for federal income tax purposes of $631,668,031, amounted to $72,884,137 which consisted of aggregate gross unrealized appreciation of $14,545,396 and aggregate gross unrealized depreciation of $87,429,533. (b) Represents investment of cash collateral received for securities on loan. See Notes to Financial Statements. -10- THE ALGER FUND Alger LargeCap Growth Portfolio (i) Financial Highlights For a share outstanding throughout the year Class A - -------
Year Ended October 31, ------------------------------------------------------------------------------- 2002 2001 2000 1999 1998 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of year ............ $ 9.47 $ 14.09 $ 15.47 $ 12.19 $ 11.58 ----------- ----------- ----------- ----------- ----------- Net investment income (loss) (ii) ............. (.04) (.04) (.05) (.07) (.03) Net realized and unrealized gain (loss) on investments .............................. (2.27) (3.64) 1.33 4.64 2.13 ----------- ----------- ----------- ----------- ----------- Total from investment operations .............. (2.31) (3.68) 1.28 4.57 2.10 Distributions from net realized gains ......... -- (.94) (2.66) (1.29) (1.49) ----------- ----------- ----------- ----------- ----------- Net asset value, end of year .................. $ 7.16 $ 9.47 $ 14.09 $ 15.47 $ 12.19 =========== =========== =========== =========== =========== Total Return (iii) ............................ (24.4%) (27.4%) 8.0% 40.4% 21.4% =========== =========== =========== =========== =========== Ratios and Supplemental Data: Net assets, end of year (000's omitted) ........................... $ 130,464 $ 230,637 $ 324,130 $ 228,896 $ 121,930 =========== =========== =========== =========== =========== Ratio of expenses to average net assets ................................ 1.36% 1.26% 1.20% 1.21% 1.25% =========== =========== =========== =========== =========== Ratio of net investment income (loss) to average net assets ..................... (.47%) (.35%) (.32%) (.50%) (.23%) =========== =========== =========== =========== =========== Portfolio Turnover Rate ..................... 213.97% 91.40% 96.13% 205.94% 146.64% =========== =========== =========== =========== ===========
(i) Prior to September 29, 2000 the Alger LargeCap Growth Portfolio was the Alger Growth Portfolio. (ii) Amount was computed based on average shares outstanding during the year. (iii) Does not reflect the effect of any sales charges. See Notes to Financial Statements. -11- THE ALGER FUND Alger LargeCap Growth Portfolio (i) Financial Highlights For a share outstanding throughout the year Class B - -------
Year Ended October 31, ------------------------------------------------------------------------------- 2002 2001 2000 1999 1998 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of year ............ $ 9.02 $ 13.58 $ 15.09 $ 12.00 $ 11.50 ----------- ----------- ----------- ----------- ----------- Net investment income (loss) (ii) ............. (.10) (.12) (.16) (.18) (.11) Net realized and unrealized gain (loss) on investments .............................. (2.16) (3.50) 1.31 4.56 2.10 ----------- ----------- ----------- ----------- ----------- Total from investment operations .............. (2.26) (3.62) 1.15 4.38 1.99 Distributions from net realized gains ......... -- (.94) (2.66) (1.29) (1.49) ----------- ----------- ----------- ----------- ----------- Net asset value, end of year .................. $ 6.76 $ 9.02 $ 13.58 $ 15.09 $ 12.00 =========== =========== =========== =========== =========== Total Return (iii) ............................ (25.1%) (28.1%) 7.2% 39.3% 20.5% =========== =========== =========== =========== =========== Ratios and Supplemental Data: Net assets, end of year (000's omitted) ........................... $ 323,809 $ 581,770 $ 902,091 $ 770,311 $ 390,885 =========== =========== =========== =========== =========== Ratio of expenses to average net assets ................................ 2.11% 2.01% 1.96% 1.96% 2.00% =========== =========== =========== =========== =========== Ratio of net investment income (loss) to average net assets ..................... (1.21%) (1.09%) (1.07%) (1.26%) (.98%) =========== =========== =========== =========== =========== Portfolio Turnover Rate ..................... 213.97% 91.40% 96.13% 205.94% 146.64% =========== =========== =========== =========== ===========
(i) Prior to September 29, 2000 the Alger LargeCap Growth Portfolio was the Alger Growth Portfolio. (ii) Amount was computed based on average shares outstanding during the year. (iii) Does not reflect the effect of any sales charges. See Notes to Financial Statements. -12- THE ALGER FUND Alger LargeCap Growth Portfolio (i) Financial Highlights For a share outstanding throughout the year Class C - -------
Year Ended October 31, ------------------------------------------------------------------------------- 2002 2001 2000 1999 1998 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of year ............ $ 9.02 $ 13.57 $ 15.08 $ 12.00 $ 11.50 ----------- ----------- ----------- ----------- ----------- Net investment income (loss) (ii) ............. (.10) (.12) (.16) (.18) (.11) Net realized and unrealized gain (loss) on investments .............................. (2.16) (3.49) 1.31 4.55 2.10 ----------- ----------- ----------- ----------- ----------- Total from investment operations .............. (2.26) (3.61) 1.15 4.37 1.99 Distributions from net realized gains ......... -- (.94) (2.66) (1.29) (1.49) ----------- ----------- ----------- ----------- ----------- Net asset value, end of year .................. $ 6.76 $ 9.02 $ 13.57 $ 15.08 $ 12.00 =========== =========== =========== =========== =========== Total Return (iii) ............................ (25.1%) (28.0%) 7.2% 39.2% 20.5% =========== =========== =========== =========== =========== Ratios and Supplemental Data: Net assets, end of year (000's omitted) ........................... $ 34,813 $ 48,918 $ 65,893 $ 31,500 $ 3,312 =========== =========== =========== =========== =========== Ratio of expenses to average net assets ................................ 2.11% 2.01% 1.95% 1.97% 2.00% =========== =========== =========== =========== =========== Ratio of net investment income (loss) to average net assets ..................... (1.22%) (1.10%) (1.08%) (1.30%) (.97%) =========== =========== =========== =========== =========== Portfolio Turnover Rate ..................... 213.97% 91.40% 96.13% 205.94% 146.64% =========== =========== =========== =========== ===========
(i) Prior to September 29, 2000 the Alger LargeCap Growth Portfolio was the Alger Growth Portfolio. (ii) Amount was computed based on average shares outstanding during the year. (iii) Does not reflect the effect of any sales charges. See Notes to Financial Statements. -13- ALGER SMALL CAPITALIZATION PORTFOLIO PORTFOLIO HIGHLIGHTS THROUGH OCTOBER 31, 2002 (UNAUDITED) HYPOTHETICAL $10,000 INVESTMENT IN CLASS B SHARES - 10 YEARS ENDED 10/31/02 [The following data represent a line graph in the printed document.] ALGER SMALL RUSSELL 2000 CAPITALIZATION B GROWTH INDEX ---------------- ------------ 11/1/92 10,000 10,000 10/31/93 12,579 12,767 10/31/94 12,447 12,650 10/31/95 18,192 15,252 10/31/96 18,769 17,284 10/31/97 21,180 20,944 10/31/98 18,880 17,624 10/31/99 24,722 22,786 10/31/00 24,623 26,468 10/31/01 13,437 18,128 10/31/02 10,818 14,219 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, 2002. 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 10/31/02+ AVERAGE ANNUAL TOTAL RETURNS 1 5 10 SINCE YEAR YEARS YEARS INCEPTION ------------------------------------------------- CLASS A (INCEPTION 1/1/97) (23.72%) (13.51%) * (9.92%) Russell 2000 Growth Index (21.56%) (7.45%) * (4.06%) - -------------------------------------------------------------------------------- CLASS B (INCEPTION 11/11/86) (24.23%) (13.41%) 0.79% 7.16% Russell 2000 Growth Index (21.56%) (7.45%) 3.58% 4.83% - -------------------------------------------------------------------------------- CLASS C (INCEPTION 8/1/97) (21.83%) (13.40%) * (12.94%) Russell 2000 Growth Index (21.56%) (7.45%) * (6.32%) THE PORTFOLIO'S AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE PRICE AND REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS. THE GRAPH AND TABLE ABOVE DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD HAVE PAID ON FUND DISTRIBUTIONS OR ON THE REDEMPTION OF FUND SHARES. INVESTMENT RETURN AND PRINCIPAL WILL FLUCTUATE AND THE PORTFOLIO'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. + RETURNS REFLECT MAXIMUM INITIAL SALES CHARGES ON CLASS A AND CLASS C SHARES AND APPLICABLE CONTINGENT DEFERRED SALES CHARGES ON CLASS B AND CLASS C SHARES. -14- THE ALGER FUND Alger Small Capitalization Portfolio Schedule of Investments October 31, 2002 Common Stocks--98.1% Shares Value ------ ----- AEROSPACE & DEFENSE--2.4% Alliant Techsystems Inc.* .................. 20,700 $1,245,105 Veridian Corporation* ...................... 79,900 1,914,404 ----------- 3,159,509 ----------- AIR FREIGHT & LOGISTICS--2.1% J.B. Hunt Transport Services, Inc.* ........ 51,200 1,417,728 Pacer International, Inc.* ................ 108,560 1,281,007 ----------- 2,698,735 ----------- AUTOMOTIVE--.7% Winnebago Industries, Inc. ................. 19,800 897,534 ----------- BANKS--3.9% City National Corporation .................. 39,850 1,803,213 Independence Community Bank Corp. .......... 46,250 1,187,238 UCBH Holdings, Inc. ........................ 49,300 2,065,177 ----------- 5,055,628 ----------- BEVERAGES--1.2% Constellation Brands, Inc. Cl. A* .......... 63,150 1,599,590 ----------- BIOTECHNOLOGY--4.7% Affymetrix Inc.* ........................... 27,600 720,360 Charles River Laboratories International, Inc.* ........ 49,690 1,826,108 Neurocrine Biosciences, Inc.* .............. 35,100 1,575,990 Transkaryotic Therapies, Inc.* ............. 47,800 556,392 Trimeris, Inc. * ........................... 26,850 1,420,365 ----------- 6,099,215 ----------- CHEMICALS--.1% Crompton Corporation ....................... 25,245 167,374 ----------- COMMERCIAL SERVICES & SUPPLIES--6.9% BISYS Group, Inc. (The)* ................... 102,160 1,828,664 Career Education Corporation* .............. 23,650 948,602 ChoicePoint Inc.* .......................... 34,816 1,318,134 Corinthian Colleges, Inc.* ................. 53,100 2,012,490 Education Management Corporation* .................. 43,300 1,589,110 Hewitt Associates, Inc. Cl. A* ............. 44,450 1,309,053 ----------- 9,006,053 ----------- COMMUNICATION EQUIPMENT--1.5% Advanced Fibre Communications, Inc.* .................... 46,900 758,795 Emulex Corporation* ........................ 69,450 1,246,628 ----------- 2,005,423 ----------- COMPUTERS & PERIPHERALS--1.0% Western Digital Corporation* ............... 221,250 1,369,538 ----------- DIVERSIFIED FINANCIALS--5.9% Affiliated Managers Group, Inc.* ........... 37,050 1,923,636 Doral Financial Corp. ...................... 70,950 1,863,146 Federal Agricultural Mortgage Corporation Cl. C (Farmer Mac)*+ ......... 33,300 1,041,291 Common Stocks--(cont.) Shares Value ------ ----- DIVERSIFIED FINANCIALS--(cont.) Investors Financial Services Corp. ......... 40,500 $ 1,242,135 LaBranche & Co Inc.* ....................... 62,030 1,675,430 ----------- 7,745,638 ----------- ELECTRICAL EQUIPMENT--1.2% AMETEK, Inc. ............................... 45,725 1,613,635 ----------- ELECTRONIC EQUIPMENT & INSTRUMENTS--2.3% Benchmark Electronics, Inc.* ............... 71,640 1,594,706 Technitrol, Inc. ........................... 92,250 1,349,618 ----------- 2,944,324 ----------- ENERGY EQUIPMENT & SERVICES--2.5% Cooper Cameron Corporation* ................ 34,450 1,606,059 Smith International, Inc.* ................. 51,800 1,619,268 ----------- 3,225,327 ----------- FOOD PRODUCTS--1.1% American Italian Pasta Company Cl. A* ................................... 42,800 1,474,460 ----------- HEALTH CARE EQUIPMENT & SUPPLIES--5.1% Advanced Neuromodulation Systems, Inc.* ........................... 6,160 187,818 Bio-Rad Laboratories, Inc. Cl. A* .......... 16,600 707,326 CTI Molecular Imaging, Inc.*+ .............. 53,450 1,206,901 Respironics, Inc.* ......................... 46,350 1,480,419 STERIS Corporation* ........................ 63,830 1,693,410 Wright Medical Group, Inc.* ................ 79,110 1,361,562 ----------- 6,637,436 ----------- HEALTH CARE PROVIDERS & SERVICES--7.2% Accredo Health, Incorporated* .............. 34,150 1,580,462 AMN Healthcare Services, Inc.* ............. 70,200 1,015,092 Covance Inc.* .............................. 75,930 1,691,720 LifePoint Hospitals, Inc.* ................. 29,350 920,122 MID Atlantic Medical Services, Inc.*40,000 . 1,456,000 Province Healthcare Company* ............... 40,000 522,000 Triad Hospitals, Inc.* ..................... 24,300 886,950 Unilab Corporation* ........................ 61,200 1,306,620 ----------- 9,378,966 ----------- HOTELS, RESTAURANTS & LEISURE--4.8% Alliance Gaming Corporation* ............... 96,200 1,612,312 Applebee's International, Inc. ............. 60,075 1,429,184 California Pizza Kitchen, Inc.* ............ 61,700 1,636,346 Station Casinos, Inc.* ..................... 90,090 1,620,719 ----------- 6,298,561 ----------- HOUSEHOLD DURABLES--.5% Yankee Candle Company, Inc. (The)*41,615 ... 713,697 ----------- INFORMATION TECHNOLOGY Consulting & Services--2.4% CACI International Inc. Cl. A* ............. 27,700 1,133,207 -15- THE ALGER FUND Alger Small Capitalization Portfolio Schedule of Investments (Continued) October 31, 2002 Common Stocks--(cont.) Shares Value ------ ----- INFORMATION TECHNOLOGY Consulting & Services--(cont.) Cognizant Technology Solutions Corporation Cl. A* ....................... 8,200 $ 542,594 Manhattan Associates, Inc.* ................ 66,250 1,489,300 ----------- 3,165,101 ----------- INSURANCE--4.7% Arch Capital Group Ltd.* ................... 53,400 1,495,734 HCC Insurance Holdings, Inc. ............... 56,200 1,378,586 RenaissanceRe Holdings Ltd. ................ 43,280 1,774,480 W. R. Berkley Corporation .................. 41,860 1,555,099 ----------- 6,203,899 ----------- LEISURE EQUIPMENT & PRODUCTS--.5% Action Performance Companies, Inc.* ......................... 33,350 688,343 ----------- MACHINERY--3.3% Actuant Corporation Cl. A* ................. 42,200 1,679,560 AGCO Corporation* .......................... 43,850 1,113,790 Pentair, Inc. .............................. 45,460 1,501,998 ----------- 4,295,348 ----------- MEDIA--2.6% Entercom Communications Corp.* ............. 18,300 900,726 Media General, Inc. Cl. A .................. 25,820 1,412,354 Radio One, Inc. Cl. A* ..................... 65,500 1,100,400 ----------- 3,413,480 ----------- OIL & GAS--2.6% Noble Energy, Inc. ......................... 47,600 1,732,164 Pogo Producing Company ..................... 46,850 1,688,942 ----------- 3,421,106 ----------- PHARMACEUTICALS--3.0% Angiotech Pharmaceuticals, Inc.* ........... 24,485 923,085 NPS Pharmaceuticals, Inc.* ................. 71,800 1,865,364 Scios Inc.* ................................ 39,950 1,152,957 ----------- 3,941,406 ----------- ROAD & RAIL--.5% Swift Transportation Co. Inc.* ............. 43,550 700,720 ----------- SEMICONDUCTOR EQUIPMENT & PRODUCTS--8.2% Cymer, Inc.* ............................... 31,900 801,328 Fairchild Semiconductor Corporation Cl. A* ....................... 108,950 1,296,505 Integrated Circuit Systems, Inc.* .......... 79,750 1,630,090 International Rectifier Corporation* ....... 74,300 1,283,161 Common Stocks--(cont.) Shares Value ------ ----- SEMICONDUCTOR EQUIPMENT & PRODUCTS--(cont.) Marvell Technology Group Ltd.* ............. 45,450 $ 736,745 Power Integrations, Inc.* .................. 102,880 1,814,803 RF Micro Devices, Inc.* .................... 73,050 620,121 Semtech Corporation* ....................... 87,550 1,237,082 Varian Semiconductor Equipment Associates, Inc.* ........................ 56,350 1,342,257 ------------ 10,762,092 ------------ SOFTWARE--7.0% Borland Software Corporation* .............. 139,500 1,873,485 Documentum, Inc.* .......................... 44,800 654,528 Fair, Isaac and Company, Incorporated ...... 44,100 1,696,527 J. D. Edwards & Company* ................... 84,550 1,002,763 NetIQ Corporation* ......................... 45,450 641,300 Rational Software Corporation* ............. 200,350 1,326,317 Synopsys, Inc.* ............................ 39,225 1,484,665 THQ Inc. * ................................. 37,950 548,757 ------------ 9,228,342 ------------ SPECIALTY RETAIL--7.3% Advance Auto Parts, Inc.* .................. 28,550 1,528,853 AnnTaylor Stores Corporation* .............. 60,825 1,425,130 Chico's FAS, Inc.* ......................... 80,850 1,560,405 Christopher & Banks Corporation* ........... 49,250 1,314,975 Hollywood Entertainment Corporation* ............................. 66,850 1,314,271 Michaels Stores, Inc.* ..................... 31,600 1,420,736 Rent-A-Center, Inc.* ....................... 21,240 941,994 ------------ 9,506,364 ------------ TEXTILES, APPAREL & LUXURY GOODS--.9% Coach, Inc.* ............................... 41,450 1,233,138 ------------ Total Common Stocks (Cost $131,476,941) ...................... 128,649,982 ------------ Principal Short-Term Investments--5.9% Amount ----------- U.S. GOVERNMENT & AGENCY OBLIGATIONS Federal Home Loan Banks, 1.50%, 11/1/02 (Cost $7,700,000) ........................ $ 7,700,000 7,700,000 ------------ Total Investments (Cost $139,176,941)(a) ................... 104.0% 136,349,982 Liabilities in Excess of Other Assets ............................. (4.0) (5,239,851) ----- ------------ Net Assets ................................. 100.0% $131,110,131 ===== ============ * Non-income producing security. + Securities partially or fully on loan. (a) At October 31, 2002, the net unrealized depreciation on investments, based on cost for federal income tax purposes of $139,997,877, amounted to $3,647,895 which consisted of aggregate gross unrealized appreciation of $10,349,106 and aggregate gross unrealized depreciation of $13,997,001. See Notes to Financial Statements. -16- THE ALGER FUND Alger Small Capitalization Portfolio Financial Highlights For a share outstanding throughout the year Class A - -------
Year Ended October 31, ------------------------------------------------------------------------------- 2002 2001 2000 1999 1998 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of year ............ $ 3.54 $ 8.81 $ 10.35 $ 8.74 $ 10.35 ----------- ----------- ----------- ----------- ----------- Net investment income (loss) (i) .............. (.05) (.04) (.08) (.08) (.06) Net realized and unrealized gain (loss) on investments ................................ (.64) (3.41) .35 2.71 (1.04) ----------- ----------- ----------- ----------- ----------- Total from investment operations .............. (.69) (3.45) .27 2.63 (1.10) Distributions from net realized gains ......... -- (1.82) (1.81) (1.02) (.51) ----------- ----------- ----------- ----------- ----------- Net asset value, end of year .................. $ 2.85 $ 3.54 $ 8.81 $ 10.35 $ 8.74 =========== =========== =========== =========== =========== Total Return (ii) ............................. (19.5%) (46.6%) .4% 32.7% (10.9%) =========== =========== =========== =========== =========== Ratios and Supplemental Data: Net assets, end of year (000's omitted) ........................... $ 46,143 $ 64,164 $ 111,665 $ 69,986 $ 59,516 =========== =========== =========== =========== =========== Ratio of expenses to average net assets ................................ 1.75% 1.54% 1.41% 1.38% 1.37% =========== =========== =========== =========== =========== Ratio of net investment income (loss) to average net assets ..................... (1.52%) (.95%) (.81%) (.79%) (.71%) =========== =========== =========== =========== =========== Portfolio Turnover Rate ..................... 132.35% 195.72% 207.19% 110.92% 157.26% =========== =========== =========== =========== ===========
(i) Amount was computed based on average shares outstanding during the year. (ii) Does not reflect the effect of any sales charges. See Notes to Financial Statements. -17- THE ALGER FUND Alger Small Capitalization Portfolio Financial Highlights For a share outstanding throughout the year Class B - -------
Year Ended October 31, ------------------------------------------------------------------------------- 2002 2001 2000 1999 1998 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of year ............ $ 3.36 $ 8.52 $ 10.13 $ 8.61 $ 10.29 ----------- ----------- ----------- ----------- ----------- Net investment income (loss) (i) .............. (.07) (.08) (.16) (.15) (.14) Net realized and unrealized gain (loss) on investments ................................ (.61) (3.26) .36 2.69 (1.03) ----------- ----------- ----------- ----------- ----------- Total from investment operations .............. (.68) (3.34) .20 2.54 (1.17) Distributions from net realized gains ......... -- (1.82) (1.81) (1.02) (.51) ----------- ----------- ----------- ----------- ----------- Net asset value, end of year .................. $ 2.68 $ 3.36 $ 8.52 $ 10.13 $ 8.61 =========== =========== =========== =========== =========== Total Return (ii) ............................. (20.2%) (47.0%) (.4%) 32.1% (11.6%) =========== =========== =========== =========== =========== Ratios and Supplemental Data: Net assets, end of year (000's omitted) ........................... $ 81,758 $ 130,559 $ 325,382 $ 419,842 $ 460,788 =========== =========== =========== =========== =========== Ratio of expenses to average net assets ................................ 2.49% 2.28% 2.14% 2.14% 2.12% =========== =========== =========== =========== =========== Ratio of net investment income (loss) to average net assets ..................... (2.27%) (1.66%) (1.58%) (1.58%) (1.51%) =========== =========== =========== =========== =========== Portfolio Turnover Rate ..................... 132.35% 195.72% 207.19% 110.92% 157.26% =========== =========== =========== =========== ===========
(i) Amount was computed based on average shares outstanding during the year. (ii) Does not reflect the effect of any sales charges. See Notes to Financial Statements. -18- THE ALGER FUND Alger Small Capitalization Portfolio Financial Highlights For a share outstanding throughout the year Class C - -------
Year Ended October 31, ------------------------------------------------------------------------------- 2002 2001 2000 1999 1998 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of year ............ $ 3.36 $ 8.53 $ 10.13 $ 8.59 $ 10.29 ----------- ----------- ----------- ----------- ----------- Net investment income (loss) (i) .............. (.07) (.08) (.16) (.16) (.10) Net realized and unrealized gain (loss) on investments .............................. (.61) (3.27) .37 2.72 (1.09) ----------- ----------- ----------- ----------- ----------- Total from investment operations .............. (.68) (3.35) .21 2.56 (1.19) Distributions from net realized gains ......... -- (1.82) (1.81) (1.02) (.51) ----------- ----------- ----------- ----------- ----------- Net asset value, end of year .................. $ 2.68 $ 3.36 $ 8.53 $ 10.13 $ 8.59 =========== =========== =========== =========== =========== Total Return (ii) ............................. (20.2%) (47.0%) (.3%) 32.4% (11.8%) =========== =========== =========== =========== =========== Ratios and Supplemental Data: Net assets, end of year (000's omitted) ........................... $ 3,209 $ 4,234 $ 11,103 $ 7,659 $ 4,838 =========== =========== =========== =========== =========== Ratio of expenses to average net assets ................................ 2.49% 2.28% 2.15% 2.13% 2.11% =========== =========== =========== =========== =========== Ratio of net investment income (loss) to average net assets ..................... (2.27%) (1.66%) (1.57%) (1.55%) (1.36%) =========== =========== =========== =========== =========== Portfolio Turnover Rate ..................... 132.35% 195.72% 207.19% 110.92% 157.26% =========== =========== =========== =========== ===========
(i) Amount was computed based on average shares outstanding during the year. (ii) Does not reflect the effect of any sales charges. See Notes to Financial Statements. -19- ALGER BALANCED PORTFOLIO PORTFOLIO HIGHLIGHTS THROUGH OCTOBER 31, 2002 (UNAUDITED) HYPOTHETICAL $10,000 INVESTMENT IN CLASS B SHARES -- 10 YEARS ENDED 10/31/02 [The following data represent a line graph in the printed document.] LEHMAN BROTHERS ALGER Russell 1000 GOV'T/CREDIT BALANCED B GROWTH INDEX S&P 500 INDEX BOND INDEX ---------- ------------- ------------- --------------- 11/1/92 10,000 10,000 10,000 10,000 10/31/93 11,236 10,729 11,496 11,366 10/31/94 10,790 11,306 11,940 10,839 10/31/95 13,769 14,614 15,097 12,590 10/31/96 14,631 17,836 18,734 13,269 10/31/97 17,447 23,269 24,751 14,438 10/31/98 20,389 29,001 30,197 15,921 10/31/99 26,809 38,933 37,947 15,817 10/31/00 29,318 42,565 40,260 16,942 10/31/01 25,813 25,567 30,232 19,537 10/31/02 22,492 20,552 25,668 20,607 The chart above illustrates the growth in value of a hypothetical $10,000 investment made in Alger Balanced Class B shares, the Russell 1000 Growth Index, the S&P 500 Index, and the Lehman Brothers Government/Credit Bond Index for the ten years ended October 31, 2002. Figures for the Alger Balanced Portfolio Class B shares, the Russell 1000 Growth Index (an unmanaged index of common stocks), the S&P 500 Index (an unmanaged index of common stocks), and the Lehman Brothers Government/Credit 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. The Portfolio has changed one of its comparative indices to the Russell 1000 Growth Index. Fund management believes this index more closely represents the stocks in which the Portfolio normally invests. PERFORMANCE COMPARISON AS OF 10/31/02+
AVERAGE ANNUAL TOTAL RETURNS 1 5 10 SINCE YEAR YEARS YEARS INCEPTION --------------------------------------------------------------- CLASS A (INCEPTION 1/1/97) (16.78%) 4.88% * 7.24% Russell 1000 Growth Index (19.62%) (2.45%) * 1.54% S&P 500 Index (15.10%) 0.73% * 4.59% Lehman Gov't/Credit Bond Index 5.48% 7.38% * 7.71% - ----------------------------------------------------------------------------------------------------------- CLASS B (INCEPTION 6/1/92) (17.16%) 4.90% 8.44% 8.04% Russell 1000 Growth Index (19.62%) (2.45%) 7.47% 7.49% S&P 500 Index (15.10%) 0.73% 9.89% 9.67% Lehman Gov't/Credit Bond Index 5.48% 7.38% 7.50% 7.67% - ----------------------------------------------------------------------------------------------------------- CLASS C (INCEPTION 8/1/97) (14.57%) 5.00% * 4.29% Russell 1000 Growth Index (19.62%) (2.45%) * (3.26%) S&P 500 Index (15.10%) 0.73% * (0.04%) Lehman Gov't/Credit Bond Index 5.48% 7.38% * 7.42% - -----------------------------------------------------------------------------------------------------------
THE PORTFOLIO'S AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE PRICE AND REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS. THE GRAPH AND TABLE ABOVE DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD HAVE PAID ON FUND DISTRIBUTIONS OR ON THE REDEMPTION OF FUND SHARES. INVESTMENT RETURN AND PRINCIPAL WILL FLUCTUATE AND THE PORTFOLIO'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. + RETURNS REFLECT MAXIMUM INITIAL SALES CHARGES ON CLASS A AND CLASS C SHARES AND APPLICABLE CONTINGENT DEFERRED SALES CHARGES ON CLASS B AND CLASS C SHARES. -20- THE ALGER FUND Alger Balanced Portfolio Schedule of Investments October 31, 2002 Common Stocks--59.9% Shares Value ------- ------ AEROSPACE & DEFENSE--2.1% General Dynamics Corporation ............... 15,350 $1,214,645 Lockheed Martin Corporation ................ 46,875 2,714,063 Northrop Grumman Corporation+ .............. 16,200 1,670,706 ----------- 5,599,414 ----------- AIR FREIGHT & LOGISTICS--.9% FedEx Corp. ................................ 46,475 2,472,005 ----------- AUTOMOTIVE--1.0% Harley-Davidson, Inc. ...................... 49,950 2,612,385 ----------- BANKS--2.1% Bank of America Corporation ................ 55,650 3,884,370 Fifth Third Bancorp ........................ 24,300 1,543,050 ----------- 5,427,420 ----------- BIOTECHNOLOGY--2.4% Amgen Inc.* ................................ 46,176 2,149,955 Biogen, Inc. * ............................. 18,300 671,427 IDEC Pharmaceuticals Corporation*+ ............................ 71,850 3,306,537 ----------- 6,127,919 ----------- BUILDING PRODUCTS--.7% Masco Corporation .......................... 84,195 1,731,049 ----------- COMMERCIAL SERVICES & SUPPLIES--2.1% Concord EFS, Inc.* ......................... 214,050 3,056,634 First Data Corporation ..................... 65,600 2,292,064 ----------- 5,348,698 ----------- COMMUNICATION EQUIPMENT--1.3% Cisco Systems, Inc.* ....................... 297,300 3,323,814 ----------- COMPUTERS & PERIPHERALS--4.0% Dell Computer Corporation* ................. 114,350 3,271,554 EMC Corporation * .......................... 363,000 1,854,930 Lexmark International, Inc. Cl. A*+ ........ 36,770 2,184,873 Sun Microsystems, Inc.* .................... 1,008,700 2,986,761 ----------- 10,298,118 ----------- DIVERSIFIED FINANCIALS--2.4% Citigroup Inc. ............................. 131,125 4,845,069 SLM Corporation ............................ 12,500 1,284,250 ----------- 6,129,319 ----------- DIVERSIFIED TELECOMMUNICATION SERVICES--.3% Verizon Communications Inc. ................ 23,750 896,800 ----------- Common Stocks--(cont.) Shares Value ------ ------ ENERGY EQUIPMENT & SERVICES--1.1% BJ Services Company* ....................... 37,600 $1,140,408 Nabors Industries Ltd.* .................... 48,660 1,701,640 ----------- 2,842,048 ----------- HEALTH CARE EQUIPMENT & SUPPLIES--3.2% Alcon, Inc.*+ .............................. 3,900 159,978 Baxter International Inc. .................. 30,250 756,855 Boston Scientific Corporation* ............. 86,600 3,258,758 Medtronic, Inc. ............................ 40,030 1,793,344 Stryker Corporation ........................ 38,900 2,454,590 ----------- 8,423,525 ----------- HEALTH CARE PROVIDERS & SERVICES--4.1% Anthem, Inc.* .............................. 39,450 2,485,350 HCA Inc. ................................... 73,975 3,217,172 Tenet Healthcare Corporation* .............. 92,725 2,665,843 UnitedHealth Group Incorporated ............ 24,250 2,205,538 ----------- 10,573,903 ----------- HOTELS, RESTAURANTS & LEISURE--.8% Carnival Corporation Cl. A ................. 77,375 2,021,035 ----------- HOUSEHOLD PRODUCTS--1.7% Colgate-Palmolive Company .................. 36,200 1,990,276 Procter & Gamble Company (The) ............. 27,575 2,439,009 ----------- 4,429,285 ----------- INDUSTRIAL CONGLOMERATES--2.8% General Electric Company ................... 156,650 3,955,413 Tyco International Ltd. .................... 241,855 3,497,223 ----------- 7,452,636 ----------- INSURANCE--2.5% AFLAC Incorporated ......................... 26,000 791,440 American International Group, Inc. ......... 51,700 3,233,835 Chubb Corporation (The) .................... 44,225 2,494,732 ----------- 6,520,007 ----------- INTERNET & CATALOG RETAIL--1.8% Amazon.com, Inc.* .......................... 21,000 406,560 eBay Inc.*+ ................................ 68,475 4,330,359 ----------- 4,736,919 ----------- INTERNET SOFTWARE & SERVICES--.3% Yahoo! Inc. * .............................. 55,000 820,600 ----------- -21- THE ALGER FUND Alger Balanced Portfolio Schedule of Investments (Continued) October 31, 2002 Common Stocks--(cont.) Shares Value ------- ------ MEDIA--1.7% Viacom Inc. Cl. B* ......................... 100,475 $ 4,482,190 ----------- MULTILINE RETAIL--2.6% Costco Wholesale Corporation* .............. 23,000 780,390 Kohl's Corporation* ........................ 14,650 856,293 Wal-Mart Stores, Inc. ...................... 98,150 5,255,932 ----------- 6,892,615 ----------- OIL & GAS--.6% Devon Energy Corporation ................... 29,900 1,509,950 ----------- PERSONAL PRODUCTS--.6% Avon Products, Inc. ........................ 34,725 1,683,815 ----------- PHARMACEUTICALS--7.2% Abbott Laboratories ........................ 57,910 2,424,692 Johnson & Johnson .......................... 76,000 4,465,000 Pfizer Inc. ................................ 106,125 3,371,590 Pharmacia Corporation ...................... 77,875 3,348,625 Wyeth ...................................... 154,835 5,186,973 ----------- 18,796,880 ----------- ROAD & RAIL--.5% Union Pacific Corporation .................. 20,550 1,213,478 ----------- SEMICONDUCTOR EQUIPMENT & PRODUCTS--2.9% Intel Corporation .......................... 99,385 1,719,361 Linear Technology Corporation .............. 71,400 1,973,495 Taiwan Semiconductor Manufacturing Company Ltd. ADR* ................................ 504,590 3,945,894 ----------- 7,638,750 ----------- SOFTWARE--3.1% Microsoft Corporation* ..................... 124,250 6,643,647 Synopsys, Inc.*+ ........................... 21,830 826,266 VERITAS Software Corporation * ............. 43,300 660,325 ----------- 8,130,238 ----------- SPECIALTY RETAIL--3.1% Home Depot, Inc. (The) ..................... 110,900 3,202,792 Lowe's Companies, Inc. ..................... 49,500 2,065,635 TJX Companies, Inc. (The) .................. 138,400 2,839,968 ----------- 8,108,395 ----------- Total Common Stock (Cost $159,509,944) ...................... 156,243,210 ----------- Principal Corporate Bonds--15.9% Amount Value ---------- ------ AEROSPACE & DEFENSE--.8% Boeing Capital Corp., 6.50%, 2/15/12 ........................... $1,950,000 $ 1,997,093 ----------- AUTOMOTIVE--.7% General Motors Acceptance Corp., 6.125%, 1/22/08 .......................... 2,000,000 1,867,500 ----------- BANKS--1.5% Associates Corp. of North America, 6.95%, 11/1/18 ........................... 2,000,000 2,191,980 Regions Financial Corp., 6.375%, 5/15/12 .......................... 875,000 935,139 US Bancorp National Association, Minneapolis, 6.50%, 2/1/08 ............... 662,000 735,727 ----------- 3,862,846 ----------- BEVERAGES--1.4% Anheuser-Busch Companies, Inc., 7.00%, 12/1/25 ........................... 2,000,000 2,090,000 Coca-Cola Enterprises Inc., 5.25%, 5/15/07 ........................... 1,500,000 1,590,570 ----------- 3,680,570 ----------- COMPUTERS & PERIPHERALS--.5% International Business Machines Corp., 6.22%, 8/1/27 ............................ 1,150,000 1,242,345 ----------- DIVERSIFIED FINANCIALS--1.8% Block Financial Corp., 8.50%, 4/15/07 ........................... 500,000 576,720 Citigroup Inc., 6.00%, 2/21/12+ .......................... 1,000,000 1,048,940 Goldman Sachs Group, Inc. (The), 6.60%, 1/15/12 ........................... 2,000,000 2,175,540 J.P. Morgan Chase & Co., 6.625%, 3/15/12 .......................... 750,000 838,185 ----------- 4,639,385 ----------- DIVERSIFIED TELECOMMUNICATION SERVICES--1.5% SBC Communications Inc., 6.25%, 3/15/11 ........................... 1,500,000 1,605,450 Verizon Wireless Capital, 2.22%, 12/17/03(a) ....................... 1,000,000 963,580 Verizon Wireless Inc., 5.375%, 12/15/06(a) ...................... 1,250,000 1,225,900 ----------- 3,794,930 ----------- -22- THE ALGER FUND Alger Balanced Portfolio Schedule of Investments (Continued) October 31, 2002 Principal Corporate Bonds--(con't) Amount Value ---------- ------ ELECTRIC UTILITIES--.9% Con Edison Company of New York, 5.625%, 7/1/12+ .......................... $ 1,500,000 $ 1,581,000 Potomac Electric Power Co., 7.00%, 1/15/24 ........................... 200,000 205,458 Washington Gas Light Co., 6.51%, 8/18/08 ........................... 500,000 555,185 ----------- 2,341,643 ----------- ENERGY EQUIPMENT & SERVICES--.8% Baker Hughes Inc., 6.25%, 1/15/09 ........................... 2,000,000 2,163,280 ----------- FOOD PRODUCTS--2.7% Archer-Daniels-Midland Co., 8.875%, 4/15/11 .......................... 2,055,000 2,639,092 Kraft Foods Inc., 6.25%, 6/1/12 ............................ 2,000,000 2,201,480 Sara Lee Corp., 6.25%, 9/15/11 ........................... 2,000,000 2,179,180 ----------- 7,019,752 ----------- INSURANCE--.8% Loews Corp., 7.625%, 6/1/23 ........................... 500,000 506,875 Safeco Corporation, 7.25%, 9/1/12 ............................ 1,500,000 1,619,250 ----------- 2,126,125 ----------- MEDIA--.7% Viacom Inc., 7.875%, 7/30/30 .......................... 1,600,000 1,878,608 ----------- OIL & GAS--.6% Conoco Funding Co., 6.35%, 10/15/11 .......................... 1,500,000 1,614,045 ----------- PHARMACEUTICALS--.4% Pharmacia Corporation, 6.50%, 12/1/18 ........................... 1,000,000 1,082,590 ----------- Principal Corporate Bonds--(con't) Amount Value ---------- ------ WIRELESS TELECOMMUNICATION SERVICES--.8% Vodafone Airtouch PLC., 7.625%, 2/15/05 .......................... $2,000,000 $ 2,191,460 ----------- Total Corporate Bonds (Cost $40,066,661) ....................... 41,502,172 ----------- U.S. Government & Agency Obligations--21.7% Federal Farm Credit Banks, 5.75%, 1/18/11 ........................... 3,000,000 3,243,750 Federal Home Loan Banks, 6.12%, 8/26/08 ........................... 1,000,000 1,036,090 7.625%, 5/14/10 .......................... 2,000,000 2,402,500 Federal Home Loan Mortgage Corporation, 3.25%, 11/15/04 .......................... 3,000,000 3,073,590 4.70%, 11/1/05 ........................... 2,000,000 2,031,100 Federal National Mortgage Association, 4.00%, 12/3/04 ........................... 2,500,000 2,505,500 4.375%, 10/15/06 ......................... 3,000,000 3,160,320 5.50%, 2/15/06 ........................... 3,000,000 3,267,660 6.75%, 2/4/28 ............................ 400,000 405,000 U.S. Treasury Bonds, 8.125%, 8/15/19 .......................... 4,054,000 5,547,656 6.25%, 8/15/23 ........................... 3,148,000 3,614,785 5.50%, 8/15/28 ........................... 2,000,000 2,097,820 5.25%, 11/15/28 .......................... 2,000,000 2,025,940 U.S. Treasury Notes, 1.875%, 9/30/04 .......................... 6,950,000 6,976,063 5.875%, 11/15/04 ......................... 1,000,000 1,082,500 5.625%, 2/15/06 .......................... 2,000,000 2,215,000 4.625%, 5/15/06 .......................... 3,000,000 3,231,570 6.50%, 10/15/06 .......................... 1,500,000 1,724,295 3.50%, 11/15/06 .......................... 4,802,000 4,978,329 6.25%, 2/15/07 ........................... 1,000,000 1,147,660 5.50%, 2/15/08 ........................... 623,000 700,489 ----------- Total U.S. Government & Agency Obligations (Cost $54,596,933) ........... 56,467,617 ----------- -23- THE ALGER FUND Alger Balanced Portfolio Schedule of Investments (Continued) October 31, 2002 Principal Short-Term Investments--6.4% Amount Value ---------- ------ U.S. GOVERNMENT & AGENCY OBLIGATIONS--3.1% Federal Home Loan Banks, 1.50%, 11/1/02 (Cost $8,200,000) ........................ $8,200,000 $ 8,200,000 ----------- OTHER SHORT-TERM INVESTMENTS--3.3% ........................ Shares ---------- Securities Lending Quality Trust (Cost $8,633,202)(b) ..................... 8,633,202 8,633,202 ----------- Total Short-Term Investments (Cost $16,833,202) ....................... 16,833,202 ----------- Total Investments (Cost $271,006,740)(c) ................... 103.9% 271,046,201 Liabilities In Excess of Other Assets ...... (3.9) (10,293,117) ----- ----------- Net Assets ................................. 100.0% $260,753,084 ===== =========== * Non-income producing security. + Securities partially or fully on loan. (a) Pursuant to Securities and Exchange Commission Rule 144A, these securities may be sold prior to their maturity only to qualified institutional buyers. (b) Represents investment of cash collateral received for securities on loan. (c) At October 31, 2002, the net unrealized depreciation on investments, based on cost for federal income tax purposes of $285,322,771, amounted to $14,276,570 which consisted of aggregate gross unrealized appreciation of $7,871,806 and aggregate gross unrealized depreciation of $22,148,376. See Notes to Financial Statements. -24- THE ALGER FUND Alger Balanced Portfolio Financial Highlights For a share outstanding throughout the year Class A - -------
Year Ended October 31, ------------------------------------------------------------------------------- 2002 2001 2000 1999 1998 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of year ............ $ 18.67 $ 21.29 $ 20.95 $ 16.83 $ 16.58 ----------- ----------- ----------- ----------- ----------- Net investment income (loss) (i) .............. .27 .43 .39 .25 .16 Net realized and unrealized gain (loss) on investments .............................. (2.48) (2.83) 1.68 4.97 2.35 ----------- ----------- ----------- ----------- ----------- Total from investment operations .............. (2.21) (2.40) 2.07 5.22 2.51 ----------- ----------- ----------- ----------- ----------- Dividends from net investment income .......... (.44) (.22) (.13) (.08) (.06) Distributions from net realized gains ......... -- -- (1.60) (1.02) (2.20) ----------- ----------- ----------- ----------- ----------- Total distributions ........................... (.44) (.22) (1.73) (1.10) (2.26) ----------- ----------- ----------- ----------- ----------- Net asset value, end of year .................. $ 16.02 $ 18.67 $ 21.29 $ 20.95 $ 16.83 =========== =========== =========== =========== =========== Total Return (ii) ............................. (12.2%) (11.3%) 10.2% 32.5% 17.7% =========== =========== =========== =========== =========== Ratios and Supplemental Data: Net assets, end of year (000's omitted) ........................... $ 78,167 $ 101,440 $ 93,671 $ 12,488 $ 1,354 =========== =========== =========== =========== =========== Ratio of expenses to average net assets ................................ 1.28% 1.20% 1.29% 1.40% 1.79% =========== =========== =========== =========== =========== Ratio of net investment income (loss) to average net assets ..................... 1.53% 2.15% 1.80% 1.15% .98% =========== =========== =========== =========== =========== Portfolio Turnover Rate ..................... 203.96% 74.15% 63.50% 126.01% 93.23% =========== =========== =========== =========== ===========
(i) Amount was computed based on average shares outstanding during the year. (ii) Does not reflect the effect of any sales charges. See Notes to Financial Statements. -25- THE ALGER FUND Alger Balanced Portfolio Financial Highlights For a share outstanding throughout the year Class B - -------
Year Ended October 31, ------------------------------------------------------------------------------- 2002 2001 2000 1999 1998 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of year ............ $ 18.17 $ 20.83 $ 20.59 $ 16.64 $ 16.48 ----------- ----------- ----------- ----------- ----------- Net investment income (loss) (i) .............. .14 .27 .17 .07 .03 Net realized and unrealized gain (loss) on investments .............................. (2.44) (2.75) 1.71 4.93 2.34 ----------- ----------- ----------- ----------- ----------- Total from investment operations .............. (2.30) (2.48) 1.88 5.00 2.37 ----------- ----------- ----------- ----------- ----------- Dividends from net investment income .......... (.25) (.18) (.04) (.03) (.01) Distributions from net realized gains ......... -- -- (1.60) (1.02) (2.20) ----------- ----------- ----------- ----------- ----------- Total distributions ........................... (.25) (.18) (1.64) (1.05) (2.21) ----------- ----------- ----------- ----------- ----------- Net asset value, end of year .................. $ 15.62 $ 18.17 $ 20.83 $ 20.59 $ 16.64 =========== =========== =========== =========== =========== Total Return (ii) ............................. (12.9%) (12.0%) 9.4% 31.5% 16.9% =========== =========== =========== =========== =========== Ratios and Supplemental Data: Net assets, end of year (000's omitted) ........................... $ 137,070 $ 158,766 $ 132,123 $ 52,607 $ 19,282 =========== =========== =========== =========== =========== Ratio of expenses to average net assets ................................ 2.03% 1.95% 2.04% 2.18% 2.58% =========== =========== =========== =========== =========== Ratio of net investment income (loss) to average net assets ..................... .78% 1.40% .98% .36% .19% =========== =========== =========== =========== =========== Portfolio Turnover Rate ..................... 203.96% 74.15% 63.50% 126.01% 93.23% =========== =========== =========== =========== ===========
(i) Amount was computed based on average shares outstanding during the year. (ii) Does not reflect the effect of any sales charges. See Notes to Financial Statements. -26- THE ALGER FUND Alger Balanced Portfolio Financial Highlights For a share outstanding throughout the year Class C - -------
Year Ended October 31, ------------------------------------------------------------------------------- 2002 2001 2000 1999 1998 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of year ............ $ 18.24 $ 20.90 $ 20.65 $ 16.66 $ 16.49 ----------- ----------- ----------- ----------- ----------- Net investment income (loss) (i) .............. .14 .27 .21 .07 .04 Net realized and unrealized gain (loss) on investments .............................. (2.45) (2.75) 1.67 4.95 2.33 ----------- ----------- ----------- ----------- ----------- Total from investment operations .............. (2.31) (2.48) 1.88 5.02 2.37 ----------- ----------- ----------- ----------- ----------- Dividends from net investment income .......... (.25) (.18) (.03) (.01) -- Distributions from net realized gains ......... -- -- (1.60) (1.02) (2.20) ----------- ----------- ----------- ----------- ----------- Total distributions ........................... (.25) (.18) (1.63) (1.03) (2.20) ----------- ----------- ----------- ----------- ----------- Net asset value, end of year .................. $ 15.68 $ 18.24 $ 20.90 $ 20.65 $ 16.66 =========== =========== =========== =========== =========== Total Return (ii) ............................. (12.9%) (12.0%) 9.3% 31.6% 16.8% =========== =========== =========== =========== =========== Ratios and Supplemental Data: Net assets, end of year (000's omitted) ........................... $ 45,516 $ 57,193 $ 49,592 $ 14,626 $ 334 =========== =========== =========== =========== =========== Ratio of expenses to average net assets ................................ 2.03% 1.95% 2.04% 2.16% 2.53% =========== =========== =========== =========== =========== Ratio of net investment income (loss) to average net assets ..................... .78% 1.40% .99% .38% .23% =========== =========== =========== =========== =========== Portfolio Turnover Rate ..................... 203.96% 74.15% 63.50% 126.01% 93.23% =========== =========== =========== =========== ===========
(i) Amount was computed based on average shares outstanding during the year. (ii) Does not reflect the effect of any sales charges. See Notes to Financial Statements. -27- ALGER MIDCAP GROWTH PORTFOLIO PORTFOLIO HIGHLIGHTS THROUGH OCTOBER 31, 2002 (UNAUDITED) HYPOTHETICAL $10,000 INVESTMENT IN CLASS B SHARES FROM 5/24/93 TO 10/31/02 [The following data represent a line graph in the printed document.] ALGER MIDCAP RUSSELL MIDCAP S&P MIDCAP GROWTH B GROWTH INDEX 400 INDEX ------------ -------------- ---------- 5/24/93 10,000 10,000 10,000 10/31/93 12,480 10,933 10,714 10/31/94 13,062 11,211 10,969 10/31/95 19,373 13,928 13,296 10/31/96 20,618 16,429 15,600 10/31/97 25,024 20,471 20,695 10/31/98 26,586 20,967 22,085 10/31/99 35,182 28,868 26,737 10/31/00 51,513 40,030 35,201 10/31/01 39,992 22,904 30,819 10/31/02 31,422 18,870 29,343 The chart above illustrates the growth in value of a hypothetical $10,000 investment made in Alger MidCap Growth Class B shares, Russell Midcap Growth Index and the S&P MidCap 400 Index on May 24, 1993, the inception date of the Alger MidCap Growth Portfolio, through October 31, 2002. Figures for the Alger MidCap Growth Class B shares, Russell Midcap Growth Index (an unmanaged index of common stocks) 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. The Portfolio has added a comparative index, the Russell Midcap Growth Index. PERFORMANCE COMPARISON AS OF 10/31/02+ AVERAGE ANNUAL TOTAL RETURNS 1 5 SINCE YEAR YEARS INCEPTION --------------------------------------------- CLASS A (INCEPTION 1/1/97) (24.83%) 4.37% 6.83% Russell Midcap Growth Index (17.61%) (1.62%) 1.70% S&P MidCap 400 Index (4.79%) 7.23% 10.37% - ------------------------------------------------------------------------------- CLASS B (INCEPTION 5/24/93) (25.36%) 4.43% 12.89% Russell Midcap Growth Index (17.61%) (1.62%) 6.96% S&P MidCap 400 Index (4.79%) 7.23% 12.07% - ------------------------------------------------------------------------------- CLASS C (INCEPTION 8/1/97) (22.91%) 4.42% 4.06% Russell Midcap Growth Index (17.61%) (1.62%) (1.76%) S&P MidCap 400 Index (4.79%) 7.23% 7.08% THE PORTFOLIO'S AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE PRICE AND REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS. THE GRAPH AND TABLE ABOVE DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD HAVE PAID ON FUND DISTRIBUTIONS OR ON THE REDEMPTION OF FUND SHARES. INVESTMENT RETURN AND PRINCIPAL WILL FLUCTUATE AND THE PORTFOLIO'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. + RETURNS REFLECT MAXIMUM INITIAL SALES CHARGES ON CLASS A AND CLASS C SHARES AND APPLICABLE CONTINGENT DEFERRED SALES CHARGES ON CLASS B AND CLASS C SHARES. -28- THE ALGER FUND Alger MidCap Growth Portfolio Schedule of Investments October 31, 2002 Common Stocks--105.3% Shares Value ------- ------ AEROSPACE & DEFENSE--2.3% L-3 Communications Holdings, Inc.* .......................... 211,980 $ 9,963,060 ----------- BANKS--1.7% Compass Bancshares, Inc. ................... 80,275 2,592,883 GreenPoint Financial Corp. ................. 103,530 4,510,802 ----------- 7,103,685 ----------- BEVERAGES--1.1% Constellation Brands, Inc. Cl. A* .......... 180,200 4,564,466 ----------- BIOTECHNOLOGY--5.2% Biogen, Inc. * ............................. 133,765 4,907,838 Gilead Sciences, Inc. * .................... 293,200 10,185,768 IDEC Pharmaceuticals Corporation* ............................. 152,470 7,016,669 ----------- 22,110,275 ----------- COMMERCIAL SERVICES & SUPPLIES--6.1% Avery Dennison Corporation ................. 118,665 7,385,709 BISYS Group, Inc. (The)* ................... 792,905 14,193,000 Corinthian Colleges, Inc.* ................. 121,800 4,616,220 ----------- 26,194,929 ----------- COMMUNICATION EQUIPMENT--2.8% Brocade Communications Systems, Inc.* ........................... 661,330 4,543,337 Emulex Corporation* ........................ 156,400 2,807,380 UTStarcom, Inc.* ........................... 264,200 4,512,536 ----------- 11,863,253 ----------- COMPUTERS & PERIPHERALS--3.5% Lexmark International, Inc. Cl. A* ......... 180,410 10,719,962 Sun Microsystems, Inc.* .................... 1,436,100 4,252,292 ----------- 14,972,254 ----------- CONTAINERS & PACKAGING--.7% Pactiv Corporation* ........................ 140,500 2,787,520 ----------- DIVERSIFIED FINANCIALS--3.3% Affiliated Managers Group, Inc.* ........... 148,848 7,728,187 LaBranche & Co Inc.* ....................... 241,895 6,533,584 ----------- 14,261,771 ----------- ELECTRONIC EQUIPMENT & INSTRUMENTS--2.2% Flextronics International Ltd.* ............ 1,138,000 9,513,680 ----------- Common Stocks--(cont.) Shares Value ------- ------ ENERGY EQUIPMENT & SERVICES--2.9% BJ Services Company* ....................... 146,895 $ 4,455,325 Cooper Cameron Corporation* ................ 90,050 4,198,131 Smith International, Inc.* ................. 118,170 3,693,994 ----------- 12,347,450 ----------- FOOD PRODUCTS--1.4% Dean Foods Company* ........................ 162,595 6,095,687 ----------- HEALTH CARE EQUIPMENT & SUPPLIES--3.4% Alcon, Inc.* ............................... 109,115 4,475,897 Zimmer Holdings, Inc.* ..................... 239,865 9,887,235 ----------- 14,363,132 ----------- HEALTH CARE PROVIDERS & SERVICES--12.2% AmerisourceBergen Corporation .............. 58,075 4,132,036 Anthem, Inc.* .............................. 104,485 6,582,555 Health Management Associates, Inc. Cl. A* .................. 407,540 7,792,165 Laboratory Corporation of America Holdings* ........................ 235,530 5,676,273 MID Atlantic Medical Services, Inc.* .......................... 111,300 4,051,320 Quest Diagnostics Incorporated* ............................ 114,400 7,302,152 Triad Hospitals, Inc.* ..................... 237,690 8,675,685 Universal Health Services, Inc., Cl. B* ................................... 157,455 7,633,418 ----------- 51,845,604 ----------- HOTELS, RESTAURANTS & LEISURE--9.7% Brinker International, Inc.* ............... 299,685 8,508,056 Harrah's Entertainment, Inc.* .............. 103,395 4,342,590 International Game Technology* ............. 137,500 10,341,375 MGM MIRAGE* ................................ 295,635 9,194,249 Royal Caribbean Cruises Ltd. ............... 491,580 9,025,409 ----------- 41,411,679 ----------- HOUSEHOLD DURABLES--3.8% D.R. Horton, Inc. .......................... 322,210 6,208,987 Harman International Industries, Incorporated ............................. 7,600 425,600 Lennar Corporation ......................... 169,865 9,371,452 ----------- 16,006,039 ----------- INFORMATION TECHNOLOGY CONSULTING & SERVICES--.9% Affiliated Computer Services, Inc. ......... Cl. A* ................................... 84,300 3,882,015 ----------- -29- THE ALGER FUND Alger MidCap Growth Portfolio Schedule of Investments (Continued) October 31, 2002 Common Stocks--(cont.) Shares Value ------- ------ INSURANCE--4.9% W. R. Berkley Corporation .................. 278,365 $10,341,260 Willis Group Holdings Limited* ............. 344,530 10,542,618 ----------- 20,883,878 ----------- INTERNET & CATALOG RETAIL--.4% NetFlix Inc.*+ ............................. 201,900 1,811,245 ----------- INTERNET SOFTWARE & SERVICES--3.1% Overture Services, Inc.* ................... 14,400 396,432 VeriSign, Inc.* ............................ 496,600 3,997,630 Yahoo! Inc. * .............................. 582,810 8,695,525 ----------- 13,089,587 ----------- MEDIA--3.9% Entercom Communications Corp.* ................................... 158,530 7,802,847 McClatchy Company, Cl. A (The) ............. 63,300 3,932,829 New York Times Company, Cl. A (The) .............................. 99,990 4,840,516 ----------- 16,576,192 ----------- MULTILINE RETAIL--1.5% Dollar Tree Stores, Inc.* .................. 249,395 6,556,595 ----------- OIL & GAS--1.8% Devon Energy Corporation ................... 72,240 3,648,120 EOG Resources, Inc. ........................ 109,400 4,051,082 ----------- 7,699,202 ----------- PHARMACEUTICALS--2.5% Allergan, Inc. ............................. 79,090 4,306,451 Mylan Laboratories Inc. .................... 72,400 2,278,428 Teva Pharmaceutical Industries Ltd. ADR ...................... 54,200 4,196,706 ----------- 10,781,585 ----------- SEMICONDUCTOR EQUIPMENT & PRODUCTS--4.1% International Rectifier Corporation* ............................. 196,350 3,390,965 Intersil Corporation Cl. A* ................ 312,200 5,304,278 National Semiconductor Corporation* ............................. 678,150 9,005,832 ----------- 17,701,075 ----------- Common Stocks--(cont.) Shares Value ------- ------ SOFTWARE--8.6% Electronic Arts Inc.* ...................... 26,640 $ 1,734,797 Rational Software Corporation* ............. 1,323,815 8,763,655 Synopsys, Inc.* ............................ 333,550 12,624,868 Take-Two Interactive Software, Inc.* .......................... 269,600 6,950,288 VERITAS Software Corporation* ............................. 442,460 6,747,515 ----------- 36,821,123 ----------- SPECIALTY RETAIL--8.9% Blockbuster Inc. Cl. A ..................... 94,450 2,263,967 Chico's FAS, Inc.* ......................... 252,300 4,869,390 Limited Brands ............................. 228,370 3,578,558 Michaels Stores, Inc.* ..................... 183,175 8,235,548 PETsMART, Inc.* ............................ 407,435 7,786,082 Ross Stores, Inc. .......................... 164,090 6,867,167 TJX Companies, Inc. (The) .................. 214,540 4,402,361 ----------- 38,003,073 ----------- TEXTILES, APPAREL & LUXURY GOODS--1.4% Jones Apparel Group, Inc.* ................. 171,795 5,950,979 ----------- TRADING COMPANIES & DISTRIBUTORS--1.0% W. W. Grainger, Inc. ....................... 88,240 4,276,110 ----------- Total Common Stocks (Cost $449,909,843) ...................... 449,437,143 ----------- Principal Short-Term Investments--11.6% Amount --------- U.S. GOVERNMENT & AGENCY OBLIGATIONS Federal Home Loan Banks, 1.50%, 11/1/02 (Cost $49,400,000) ....................... $49,400,000 49,400,000 ----------- Total Investments (Cost $499,309,843)(a) ................... 116.9% 498,837,143 Liabilities in Excess of Other Assets .......................... (16.9) (72,285,484) ----------- ----------- Net Assets ................................. 100.0% $426,551,659 =========== =========== * Non-income producing security. + Securities partially or fully on loan. (a) At October 31, 2002, the net unrealized depreciation on investments, based on cost for federal income tax purposes of $533,586,526, amounted to $34,749,383 which consisted of aggregate gross unrealized appreciation of $13,255,915 and aggregate gross unrealized depreciation of $48,005,298. See Notes to Financial Statements. -30- THE ALGER FUND Alger MidCap Growth Portfolio(i) Financial Highlights For a share outstanding throughout the year Class A - -------
Year Ended October 31, ------------------------------------------------------------------------------- 2002 2001 2000 1999 1998 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of year ............ $ 6.92 $ 10.17 $ 8.20 $ 7.07 $ 7.49 ----------- ----------- ----------- ----------- ----------- Net investment income (loss) (ii) ............. (.07) (.06) (.04) (.05) (.03) Net realized and unrealized gain (loss) on investments .............................. (1.37) (2.01) 3.51 2.16 .43 ----------- ----------- ----------- ----------- ----------- Total from investment operations .............. (1.44) (2.07) 3.47 2.11 .40 Distributions from net realized gains ......... -- (1.18) (1.50) (.98) (.82) ----------- ----------- ----------- ----------- ----------- Net asset value, end of year .................. $ 5.48 $ 6.92 $ 10.17 $ 8.20 $ 7.07 =========== =========== =========== =========== =========== Total Return (iii) ............................ (20.8%) (21.9%) 47.7% 33.3% 7.2% =========== =========== =========== =========== =========== Ratios and Supplemental Data: Net assets, end of year (000's omitted) ........................... $ 133,113 $ 154,412 $ 141,558 $ 49,246 $ 32,447 =========== =========== =========== =========== =========== Ratio of expenses to average net assets ................................ 1.41% 1.31% 1.29% 1.31% 1.34% =========== =========== =========== =========== =========== Ratio of net investment income (loss) to average net assets ..................... (1.05%) (.77%) (.46%) (.58%) (.53%) =========== =========== =========== =========== =========== Portfolio Turnover Rate ..................... 324.69% 115.45% 97.11% 203.86% 180.98% =========== =========== =========== =========== ===========
(i) Per share data has been adjusted to reflect the effect of a 3 for 1 stock split which occurred April 20, 2000. (ii) Amount was computed based on average shares outstanding during the year. (iii) Does not reflect the effect of any sales charges. See Notes to Financial Statements. -31- THE ALGER FUND Alger MidCap Growth Portfolio(i) Financial Highlights For a share outstanding throughout the year Class B - -------
Year Ended October 31, ------------------------------------------------------------------------------- 2002 2001 2000 1999 1998 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of year ............ $ 6.58 $ 9.79 $ 8.00 $ 6.96 $ 7.44 ----------- ----------- ----------- ----------- ----------- Net investment income (loss) (ii) ............. (.11) (.11) (.12) (.11) (.10) Net realized and unrealized gain (loss) on investments .............................. (1.30) (1.92) 3.41 2.13 .44 ----------- ----------- ----------- ----------- ----------- Total from investment operations .............. (1.41) (2.03) 3.29 2.02 .34 Distributions from net realized gains ......... -- (1.18) (1.50) (.98) (.82) ----------- ----------- ----------- ----------- ----------- Net asset value, end of year .................. $ 5.17 $ 6.58 $ 9.79 $ 8.00 $ 6.96 =========== =========== =========== =========== =========== Total Return (iii) ............................ (21.4%) (22.4%) 46.4% 32.3% 6.2% =========== =========== =========== =========== =========== Ratios and Supplemental Data: Net assets, end of year (000's omitted) ........................... $ 247,201 $ 426,699 $ 532,476 $ 248,139 $ 191,934 =========== =========== =========== =========== =========== Ratio of expenses to average net assets ................................ 2.15% 2.06% 2.04% 2.07% 2.10% =========== =========== =========== =========== =========== Ratio of net investment income (loss) to average net assets ..................... (1.80%) (1.49%) (1.23%) (1.39%) (1.38%) =========== =========== =========== =========== =========== Portfolio Turnover Rate ....................... 324.69% 115.45% 97.11% 203.86% 180.98% =========== =========== =========== =========== ===========
(i) Per share data has been adjusted to reflect the effect of a 3 for 1 stock split which occurred April 20, 2000. (ii) Amount was computed based on average shares outstanding during the year. (iii) Does not reflect the effect of any sales charges. See Notes to Financial Statements. -32- THE ALGER FUND Alger MidCap Growth Portfolio(i) Financial Highlights For a share outstanding throughout the year Class C - -------
Year Ended October 31, ------------------------------------------------------------------------------- 2002 2001 2000 1999 1998 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of year ............ $ 6.56 $ 9.77 $ 7.99 $ 6.95 $ 7.44 ----------- ----------- ----------- ----------- ----------- Net investment income (loss) (ii) ............. (.11) (.11) (.11) (.11) (.09) Net realized and unrealized gain (loss) on investments .............................. (1.29) (1.92) 3.39 2.13 .42 ----------- ----------- ----------- ----------- ----------- Total from investment operations .............. (1.40) (2.03) 3.28 2.02 .33 Distributions from net realized gains ......... -- (1.18) (1.50) (.98) (.82) ----------- ----------- ----------- ----------- ----------- Net asset value, end of year .................. $ 5.16 $ 6.56 $ 9.77 $ 7.99 $ 6.95 =========== =========== =========== =========== =========== Total Return (iii) ............................ (21.3%) (22.4%) 46.4% 32.4% 6.1% =========== =========== =========== =========== =========== Ratios and Supplemental Data: Net assets, end of year (000's omitted) ........................... $ 46,238 $ 53,592 $ 51,335 $ 10,827 $ 1,759 =========== =========== =========== =========== =========== Ratio of expenses to average net assets ................................ 2.16% 2.06% 2.04% 2.08% 2.08% =========== =========== =========== =========== =========== Ratio of net investment income (loss) to average net assets ..................... (1.80%) (1.51%) (1.22%) (1.40%) (1.26%) =========== =========== =========== =========== =========== Portfolio Turnover Rate ..................... 324.69% 115.45% 97.11% 203.86% 180.98% =========== =========== =========== =========== ===========
(i) Per share data has been adjusted to reflect the effect of a 3 for 1 stock split which occurred April 20, 2000. (ii) Amount was computed based on average shares outstanding during the year. (iii) Does not reflect the effect of any sales charges. See Notes to Financial Statements. -33- ALGER CAPITAL APPRECIATION PORTFOLIO PORTFOLIO HIGHLIGHTS THROUGH OCTOBER 31, 2002 (UNAUDITED) HYPOTHETICAL $10,000 INVESTMENT IN CLASS B SHARES FROM 11/1/93 TO 10/31/02 [The following data represent a line graph in the printed document.] ALGER CAPITAL RUSSELL 3000 S&P 500 APPRECIATION B GROWTH INDEX INDEX -------------- ------------ ------- 11/1/93 10,000 10,000 10,000 10/31/94 11,110 10,484 10,387 10/31/95 18,620 13,456 13,133 10/31/96 22,246 16,301 16,297 10/31/97 26,918 21,132 21,530 10/31/98 29,572 25,441 26,267 10/31/99 48,198 34,066 33,009 10/31/00 53,789 37,405 35,021 10/31/01 33,808 22,689 26,298 10/31/02 25,442 18,209 22,328 The chart above illustrates the growth in value of a hypothetical $10,000 investment made in Alger Capital Appreciation Class B shares, Russell 3000 Growth Index and the S&P 500 Index on November 1, 1993, the inception date of the Alger Capital Appreciation Portfolio, through October 31, 2002. Figures for the Alger Capital Appreciation Class B shares, Russell 3000 Growth Index (an unmanaged index of common stocks) 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. The Portfolio has changed its comparative index to the Russell 3000 Growth Index. Fund management believes this index more closely represents the stocks in which the Portfolio normally invests. PERFORMANCE COMPARISON AS OF 10/31/02+ AVERAGE ANNUAL TOTAL RETURNS 1 5 SINCE YEAR YEARS INCEPTION ---------------------------------------------- CLASS A (INCEPTION 1/1/97) (28.10%) (1.47%) 2.05% Russell 3000 Growth Index (19.74%) (2.93%) 1.01% S&P 500 Index (15.10%) 0.73% 4.59% - -------------------------------------------------------------------------------- CLASS B (INCEPTION 11/1/93) (28.51%) (1.41%) 10.93% Russell 3000 Growth Index (19.74%) (2.93%) 6.88% S&P 500 Index (15.10%) 0.73% 9.33% - ------------------------------------------------------------------------------- CLASS C (INCEPTION 8/1/97) (26.15%) (1.32%) (2.42%) Russell 3000 Growth Index (19.74%) (2.93%) (3.54%) S&P 500 Index (15.10%) 0.73% (0.04%) THE PORTFOLIO'S AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE PRICE AND REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS. THE GRAPH AND TABLE ABOVE DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD HAVE PAID ON FUND DISTRIBUTIONS OR ON THE REDEMPTION OF FUND SHARES. INVESTMENT RETURN AND PRINCIPAL WILL FLUCTUATE AND THE PORTFOLIO'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. + RETURNS REFLECT MAXIMUM INITIAL SALES CHARGES ON CLASS A AND CLASS C SHARES AND APPLICABLE CONTINGENT DEFERRED SALES CHARGES ON CLASS B AND CLASS C SHARES. -34- THE ALGER FUND Alger Capital Appreciation Portfolio Schedule of Investments October 31, 2002 Common Stocks--92.2% Shares Value ------- ------ AEROSPACE & DEFENSE--1.1% Alliant Techsystems Inc.* .................. 93,875 $ 5,646,581 ----------- BANKS--3.0% Fifth Third Bancorp ........................ 135,095 8,578,533 GreenPoint Financial Corp. ................. 149,300 6,505,001 ----------- 15,083,534 ----------- BEVERAGES--.9% Constellation Brands, Inc. ................. Cl. A* ................................... 167,340 4,238,722 ----------- BIOTECHNOLOGY--6.5% Gilead Sciences, Inc. * .................... 432,700 15,031,998 IDEC Pharmaceuticals Corporation*+ ............................ 367,990 16,934,900 ----------- 31,966,898 ----------- COMMERCIAL SERVICES & SUPPLIES--6.2% Apollo Group, Inc. Cl. A* .................. 110,350 4,579,525 BISYS Group, Inc. (The)* ................... 101,210 1,811,659 Career Education Corporation* .............. 240,200 9,634,422 Concord EFS, Inc.* ......................... 590,305 8,429,555 First Data Corporation ..................... 183,855 6,423,894 ----------- 30,879,055 ----------- DIVERSIFIED FINANCIALS--3.6% Citigroup Inc. ............................. 147,900 5,464,905 SLM Corporation ............................ 118,630 12,188,046 ----------- 17,652,951 ----------- ENERGY EQUIPMENT & SERVICES--.6% BJ Services Company* ....................... 10,300 312,399 Cooper Cameron Corporation* ................ 43,200 2,013,984 Nabors Industries Ltd.* .................... 23,660 827,390 ----------- 3,153,773 ----------- FOOD & DRUG RETAILING--.9% Walgreen Co. ............................... 133,900 4,519,125 ----------- HEALTH CARE EQUIPMENT & SUPPLIES--6.9% Alcon, Inc.* ............................... 157,495 6,460,445 Boston Scientific Corporation* ............. 291,985 10,987,396 St. Jude Medical, Inc.* .................... 190,330 6,777,651 Varian Medical Systems, Inc.* .............. 55,300 2,666,566 Zimmer Holdings, Inc.* ..................... 175,990 7,254,308 ----------- 34,146,366 ----------- Common Stocks--(cont.) Shares Value ------- ------ HEALTH CARE PROVIDERS & SERVICES--11.0% AmerisourceBergen Corporation .............. 198,010 $ 14,088,412 Anthem, Inc.* .............................. 220,170 13,870,710 HCA Inc. ................................... 231,600 10,072,284 Tenet Healthcare Corporation* .............. 234,160 6,732,100 WellPoint Health Networks Inc.* ............ 131,540 9,893,123 ----------- 54,656,629 ----------- HOTELS, RESTAURANTS & LEISURE--5.0% Brinker International, Inc.* ............... 301,150 8,549,649 International Game Technology* ............. 36,600 2,752,686 Mandalay Resort Group * .................... 120,100 3,397,629 MGM MIRAGE* ................................ 172,400 5,361,640 Wendy's International, Inc. ................ 149,995 4,751,841 ----------- 24,813,445 ----------- HOUSEHOLD DURABLES--1.1% D.R. Horton, Inc.+ ......................... 278,160 5,360,143 ----------- INFORMATION TECHNOLOGY CONSULTING & SERVICES--3.1% Affiliated Computer Services, Inc., Cl. A* ................................... 329,740 15,184,527 ----------- INSURANCE--2.3% AFLAC Incorporated ......................... 168,545 5,130,510 Willis Group Holdings Limited * ............ 205,630 6,292,278 ----------- 11,422,788 ----------- INTERNET & CATALOG RETAIL--2.1% eBay Inc.*+ ................................ 163,505 10,340,056 ----------- INTERNET SOFTWARE & SERVICES--.7% Hotels.com Cl. A*+ ......................... 56,900 3,547,715 ----------- LEISURE EQUIPMENT & PRODUCTS--.9% Mattel, Inc. ............................... 244,200 4,483,512 ----------- MEDIA--3.5% Gannett Co., Inc. .......................... 49,950 3,792,704 New York Times Company, Cl. A (The) .............................. 71,730 3,472,449 Tribune Company ............................ 120,000 5,766,000 Viacom Inc. Cl. B* ......................... 91,135 4,065,532 ----------- 17,096,685 ----------- MULTILINE RETAIL--3.5% Dollar Tree Stores, Inc.*+ ................. 366,500 9,635,285 Wal-Mart Stores, Inc.# ..................... 140,300 7,513,065 ----------- 17,148,350 ----------- -35- THE ALGER FUND Alger Capital Appreciation Portfolio Schedule of Investments (Continued) October 31, 2002 Common Stocks--(cont.) Shares Value ------- ------ PHARMACEUTICALS--10.0% Allergan, Inc. ............................. 49,530 $ 2,696,909 Forest Laboratories, Inc. * ................ 97,420 9,546,186 Johnson & Johnson .......................... 180,905 10,628,169 Pfizer Inc. ................................ 472,857 15,022,666 Teva Pharmaceutical Industries Ltd. ADR+ ..................... 77,600 6,008,567 Wyeth ...................................... 163,345 5,472,058 ----------- 49,374,555 ----------- SEMICONDUCTOR EQUIPMENT & PRODUCTS--2.5% Intersil Corporation Cl. A* ................ 172,950 2,938,421 Marvell Technology Group Ltd.*+# ........... 232,000 3,760,720 Maxim Integrated Products, Inc. * .......... 174,195 5,546,369 ----------- 12,245,510 ----------- SOFTWARE--6.9% Intuit Inc.* ............................... 187,400 9,729,808 Microsoft Corporation*# .................... 299,900 16,035,653 Take-Two Interactive Software, Inc.*+ ......................... 319,900 8,247,022 ----------- 34,012,483 ----------- SPECIALTY RETAIL--8.1% Abercrombie & Fitch Co. Cl. A * ............ 471,900 8,409,258 Bed Bath & Beyond Inc. * ................... 172,000 6,099,120 Limited Brands ............................. 520,300 8,153,101 Lowe's Companies, Inc. ..................... 126,310 5,270,916 Michaels Stores, Inc.*+ .................... 117,700 5,291,792 PETsMART, Inc.* ............................ 208,000 3,974,880 Pier 1 Imports, Inc. ....................... 161,000 3,034,850 ----------- 40,233,917 ----------- TEXTILES, APPAREL & LUXURY GOODS--1.8% Jones Apparel Group, Inc.* ................. 82,000 2,840,480 NIKE, Inc. Cl. B ........................... 125,000 5,898,750 ----------- 8,739,230 ----------- Total Common Stocks (Cost $471,352,270) ...................... 455,946,550 ----------- Principal Short-Term Investments--19.2% Amount Value -------- ------ U.S. GOVERNMENT & AGENCY OBLIGATIONS--12.0% Federal Home Loan Banks, 1.50%, 11/1/02 (Cost $59,450,000) ....................... $59,450,000 $ 59,450,000 ------------ OTHER SHORT-TERM INVESTMENTS--7.2% Shares ------- Securities Lending Quality Trust (Cost $35,506,319)(b) .................... 35,506,319 35,506,319 ------------ Total Short-Term Investments (Cost $94,956,319) ....................... 94,956,319 ------------ Total Investments--111.4% (Cost $566,308,589) ...................... 550,902,869 ------------ Call Options Written--(.1%) Contracts --------- Marvell Technology Group Ltd. .............. Expiring 11/02 at $15.00* ................ 500 (110,000) Microsoft Corporation Expiring 11/02 at $50.00* ................ 600 (258,000) Wal-Mart Stores, Inc. ...................... Expiring 12/02 at $60.00* ................ 400 (18,000) ------------ Total Call Options Written (Premiums received $331,990) (Note 4(b)) .................... (386,000) ------------ Total Investments, Net of Call Options Written (Cost $565,976,599)(a) ................... 111.3% 550,516,869 Liabilities in Excess of Other Assets ...... (11.3) (56,026,842) ----- ------------ Net Assets ................................. 100.0% $494,490,027 ===== ============ * Non-income producing security. + Securities partially or fully on loan. # Portion of the security is pledged as collateral for call options written. (a) At October 31, 2002, the net unrealized depreciation on investments and written options, based on cost for federal income tax purposes of $572,685,055, amounted to $22,168,186 which consisted of aggregate gross unrealized appreciation of $26,591,101 and aggregate gross unrealized depreciation of $48,759,287. (b) Represents investment of cash collateral received for securities on loan. See Notes to Financial Statements. -36- THE ALGER FUND Alger Capital Appreciation Portfolio(i) Financial Highlights For a share outstanding throughout the year Class A - -------
Year Ended October 31, ------------------------------------------------------------------------------- 2002 2001 2000 1999 1998 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of year ............ $ 8.21 $ 13.54 $ 13.57 $ 9.03 $ 8.72 ----------- ----------- ----------- ----------- ----------- Net investment income (loss) (ii) ............. (.08) (.05) (.11) (.12) (.05) Net realized and unrealized gain (loss) on investments and written options .......... (1.90) (4.80) 2.01 5.50 .90 ----------- ----------- ----------- ----------- ----------- Total from investment operations .............. (1.98) (4.85) 1.90 5.38 .85 Distributions from net realized gains ......... -- (.48) (1.93) (.84) (.54) ----------- ----------- ----------- ----------- ----------- Net asset value, end of year .................. $ 6.23 $ 8.21 $ 13.54 $ 13.57 $ 9.03 =========== =========== =========== =========== =========== Total Return (iii) ............................ (24.1%) (36.8%) 12.6% 63.9% 10.7% =========== =========== =========== =========== =========== Ratios and Supplemental Data: Net assets, end of year (000's omitted) ........................... $ 97,962 $ 179,365 $ 366,296 $ 147,929 $ 54,415 =========== =========== =========== =========== =========== Ratio of expenses to average net assets ................................ 1.53% 1.40% 1.36% 1.44% 1.49% =========== =========== =========== =========== =========== Ratio of net investment income (loss) to average net assets ..................... (1.06%) (.46%) (.66%) (.98%) (.67%) =========== =========== =========== =========== =========== Portfolio Turnover Rate ..................... 174.83% 102.58% 132.37% 186.93% 184.07% =========== =========== =========== =========== ===========
(i) Per share data has been adjusted to reflect the effect of a 3 for 1 stock split which occurred January 8, 1999. (ii) Amount was computed based on average shares outstanding during the year. (iii) Does not reflect the effect of any sales charges. See Notes to Financial Statements. -37- THE ALGER FUND Alger Capital Appreciation Portfolio(i) Financial Highlights For a share outstanding throughout the year Class B - -------
Year Ended October 31, ------------------------------------------------------------------------------- 2002 2001 2000 1999 1998 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of year ............ $ 7.88 $ 13.09 $ 13.28 $ 8.90 $ 8.67 ----------- ----------- ----------- ----------- ----------- Net investment income (loss) (ii) ............. (.14) (.12) (.22) (.21) (.13) Net realized and unrealized gain (loss) on investments and written options .......... (1.81) (4.61) 1.96 5.43 .90 ----------- ----------- ----------- ----------- ----------- Total from investment operations .............. (1.95) (4.73) 1.74 5.22 .77 Distributions from net realized gains ......... -- (.48) (1.93) (.84) (.54) ----------- ----------- ----------- ----------- ----------- Net asset value, end of year .................. $ 5.93 $ 7.88 $ 13.09 $ 13.28 $ 8.90 =========== =========== =========== =========== =========== Total Return (iii) ............................ (24.8%) (37.2%) 11.6% 63.0% 9.9% =========== =========== =========== =========== =========== Ratios and Supplemental Data: Net assets, end of year (000's omitted) ........................... $ 342,592 $ 572,068 $ 1,056,831 $ 594,971 $ 242,941 =========== =========== =========== =========== =========== Ratio of expenses to average net assets ................................ 2.28% 2.15% 2.11% 2.21% 2.26% =========== =========== =========== =========== =========== Ratio of net investment income (loss) to average net assets ..................... (1.82%) (1.20%) (1.41%) (1.77%) (1.48%) =========== =========== =========== =========== =========== Portfolio Turnover Rate ..................... 174.83% 102.58% 132.37% 186.93% 184.07% =========== =========== =========== =========== ===========
(i) Per share data has been adjusted to reflect the effect of a 3 for 1 stock split which occurred January 8, 1999. (ii) Amount was computed based on average shares outstanding during the year. (iii) Does not reflect the effect of any sales charges. See Notes to Financial Statements. -38- THE ALGER FUND Alger Capital Appreciation Portfolio(i) Financial Highlights For a share outstanding throughout the year Class C - -------
Year Ended October 31, ------------------------------------------------------------------------------- 2002 2001 2000 1999 1998 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of year ............ $ 7.87 $ 13.09 $ 13.27 $ 8.90 $ 8.67 ----------- ----------- ----------- ----------- ----------- Net investment income (loss) (ii) ............. (.14) (.12) (.22) (.22) (.12) Net realized and unrealized gain (loss) on investments and written options .......... (1.80) (4.62) 1.97 5.43 .89 ----------- ----------- ----------- ----------- ----------- Total from investment operations .............. (1.94) (4.74) 1.75 5.21 .77 Distributions from net realized gains ......... -- (.48) (1.93) (.84) (.54) ----------- ----------- ----------- ----------- ----------- Net asset value, end of year .................. $ 5.93 $ 7.87 $ 13.09 $ 13.27 $ 8.90 =========== =========== =========== =========== =========== Total Return (iii) ............................ (24.7%) (37.2%) 11.7% 62.9% 9.9% =========== =========== =========== =========== =========== Ratios and Supplemental Data: Net assets, end of year (000's omitted) ........................... $ 53,936 $ 96,451 $ 180,663 $ 43,789 $ 2,967 =========== =========== =========== =========== =========== Ratio of expenses to average net assets ................................ 2.28% 2.15% 2.12% 2.21% 2.25% =========== =========== =========== =========== =========== Ratio of net investment income (loss) to average net assets ..................... (1.82%) (1.20%) (1.42%) (1.80%) (1.46%) =========== =========== =========== =========== =========== Portfolio Turnover Rate ..................... 174.83% 102.58% 132.37% 186.93% 184.07% =========== =========== =========== =========== ===========
(i) Per share data has been adjusted to reflect the effect of a 3 for 1 stock split which occurred January 8, 1999. (ii) Amount was computed based on average shares outstanding during the year. (iii) Does not reflect the effect of any sales charges. See Notes to Financial Statements. -39- ALGER HEALTH SCIENCES PORTFOLIO PORTFOLIO HIGHLIGHTS THROUGH OCTOBER 31, 2002 (UNAUDITED) HYPOTHETICAL $10,000 INVESTMENT IN CLASS B SHARES FROM 5/01/02 TO 10/31/02 [The following data represent a line graph in the printed document.] ALGER HEALTH RUSSELL 3000 SCIENCES B GROWTH INDEX ------------ ------------ 5/01/02 $10,000 $10,000 10/31/02 8,797 8,196 The chart above illustrates the change in value of a hypothetical $10,000 investment made in Alger Health Sciences Class B shares and the S&P Russell 3000 Growth Index on May 1, 2002, the inception date of the Alger Health Sciences Portfolio, through October 31, 2002. Figures for both the Alger Health Sciences Class B shares and the Russell 3000 Growth Index (an unmanaged index of common stocks) include reinvestment of dividends. Performance for the Alger Health Sciences 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 10/31/02+ CUMULATIVE RETURNS SINCE INCEPTION 5/1/02 ------------------- CLASS A (11.98%) Russell 3000 Growth Index (18.04%) - -------------------------------------------------------------------------------- CLASS B (12.03%) Russell 3000 Growth Index (18.04%) - -------------------------------------------------------------------------------- CLASS C (9.24%) Russell 3000 Growth Index (18.04%) THE PORTFOLIO'S TOTAL RETURNS INCLUDE CHANGES IN SHARE PRICE AND REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS. THE GRAPH AND TABLE ABOVE DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD HAVE PAID ON FUND DISTRIBUTIONS OR ON THE REDEMPTION OF FUND SHARES. INVESTMENT RETURN AND PRINCIPAL WILL FLUCTUATE AND THE PORTFOLIO'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. + RETURNS REFLECT MAXIMUM INITIAL SALES CHARGES ON CLASS A AND CLASS C SHARES AND APPLICABLE CONTINGENT DEFERRED SALES CHARGES ON CLASS B AND CLASS C SHARES. -40- THE ALGER FUND Alger Health Sciences Portfolio Schedule of Investments October 31, 2002 Common Stocks--98.8% Shares Value ------- ------ BIOTECHNOLOGY--19.4% Affymetrix Inc.* ........................... 550 $ 14,355 Amgen Inc.* ................................ 1,254 58,386 Biogen, Inc. * ............................. 500 18,345 Cubist Pharmaceuticals, Inc.* .............. 2,000 12,920 Exelixis, Inc.* ............................ 800 3,952 Gilead Sciences, Inc. * .................... 1,280 44,467 IDEC Pharmaceuticals Corporation* .......... 800 36,815 Neurocrine Biosciences, Inc.* .............. 400 17,960 Transkaryotic Therapies, Inc.* ............. 500 5,820 Trimeris, Inc. * ........................... 905 47,875 ----------- 260,895 ----------- HEALTH CARE EQUIPMENT & SUPPLIES--13.5% Alcon, Inc.* ............................... 615 25,227 Boston Scientific Corporation* ............. 1,250 47,038 Centerpulse ADR* ........................... 1,000 15,900 CTI Molecular Imaging, Inc.* ............... 400 9,032 STERIS Corporation* ........................ 550 14,592 Stryker Corporation ........................ 550 34,705 Wright Medical Group, Inc.* ................ 500 8,606 Zimmer Holdings, Inc.* ..................... 650 26,792 ----------- 181,892 ----------- HEALTH CARE PROVIDERS & SERVICES--23.9% AmerisourceBergen Corporation .............. 462 32,871 Anthem, Inc.* .............................. 318 20,034 Cross Country, Inc.* ....................... 700 8,638 eResearch Technology, Inc.* ................ 800 11,608 HCA Inc. ................................... 1,179 51,275 Health Management Associates, Inc. Cl. A* .................. 700 13,384 LifePoint Hospitals, Inc.* ................. 200 6,270 MID Atlantic Medical Services, Inc.* ....... 550 20,020 Province Healthcare Company* ............... 800 10,440 Stewart Enterprises, Inc. Cl. A* ........... 1,000 5,470 Tenet Healthcare Corporation* .............. 940 27,025 Triad Hospitals, Inc.* ..................... 1,353 49,385 Unilab Corporation* ........................ 350 7,472 UnitedHealth Group Incorporated ............ 450 40,928 Universal Health Services, Inc., Cl. B* .... 350 16,968 ----------- 321,788 ----------- Common Stocks--(cont.) Shares Value ------- ------ MEDICAL TECHNOLOGY--.7% GenVec, Inc.* .............................. 3,750 $ 9,750 ----------- PHARMACEUTICALS--39.6% Abbott Laboratories ........................ 1,300 54,431 Allergan, Inc. ............................. 275 14,974 Alpharma Inc., Cl. A ....................... 1,400 13,272 Bristol-Myers Squibb Company ............... 2,250 55,373 Forest Laboratories, Inc. * ................ 624 61,146 Johnson & Johnson .......................... 750 44,062 Novartis AG ADR ............................ 550 20,867 NPS Pharmaceuticals, Inc.* ................. 1,100 28,577 Pfizer Inc. ................................ 500 15,885 Pharmaceutical Resources, Inc.* ............ 700 16,499 Pharmacia Corporation ...................... 1,650 70,950 Schering-Plough Corporation ................ 1,400 29,890 Scios Inc.* ................................ 650 18,759 Teva Pharmaceutical Industries Ltd. ADR ..................... 200 15,486 Wyeth ...................................... 2,171 72,729 ----------- 532,900 ----------- REAL ESTATE--1.7% Health Care Property Investors, Inc. ....... 300 12,960 Ventas, Inc. ............................... 900 10,260 ----------- 23,220 ----------- Total Investments (Cost $1,334,958)(a) ..................... 98.8% 1,330,445 Other Assets in Excess of Liabilities ...... 1.2 15,713 ----- ----------- Net Assets ................................. 100.0% $ 1,346,158 ===== =========== * Non-income producing security. (a) At October 31, 2002, the net unrealized depreciation on investments, based on cost for federal income tax purposes of $1,344,461, amounted to $14,016 which consisted of aggregate gross unrealized appreciation of $69,664 and aggregate gross unrealized depreciation of $83,680. See Notes to Financial Statements. -41- THE ALGER FUND Alger Health Sciences Portfolio Financial Highlights For a share outstanding throughout the period From May 1, 2002 (commencement of operations) to October 31, 2002 --------------------------------- Class A Class B Class C ------- ------- ------- Net asset value, beginning of period ....... $ 10.00 $ 10.00 $ 10.00 ------- ------- ------- Net investment income (loss) (i) ........... (.06) (.10) (.10) Net realized and unrealized loss on investments ........................... (.65) (.64) (.64) ------- ------- ------- Total from investment operations ........... (.71) (.74) (.74) ------- ------- ------- Net asset value, end of period ............. $ 9.29 $ 9.26 $ 9.26 ======= ======= ======= Total Return (not annualized) (ii) ......... (7.1%) (7.4%) (7.4%) ======= ======= ======= Ratios and Supplemental Data: Net assets, end of period (000's omitted) ........................ $ 712 $ 325 $ 309 ======= ======= ======= Ratio of expenses to average net assets (annualized) ................ 2.15% 2.91% 2.90% ======= ======= ======= Ratio of net investment income (loss) to average net assets (annualized) ..... (1.43%) (2.18%) (2.17%) ======= ======= ======= Portfolio Turnover Rate .................. 135.82% 135.82% 135.82% ======= ======= ======= (i) Amount was computed based on average shares outstanding during the period. (ii) Does not reflect the effect of any sales charges. See Notes to Financial Statements. [This page intentionally left blank] -43- ALGER SMALLCAP AND MIDCAP PORTFOLIO PORTFOLIO HIGHLIGHTS THROUGH OCTOBER 31, 2002 (UNAUDITED) HYPOTHETICAL $10,000 INVESTMENT IN CLASS B SHARES FROM 5/8/02 TO 10/31/02 [The following data represent a line graph in the printed document.] ALGER SMALLCAP RUSSELL 2500 AND MIDCAP B GROWTH INDEX -------------- ------------ 5/13/02 $10,000 $10,000 10/31/02 7,248 7,469 The chart above illustrates the change in value of a hypothetical $10,000 investment made in Alger SmallCap and MidCap Class B shares and the Russell 2500 Growth Index on May 8, 2002, the inception date of the Alger SmallCap and MidCap Portfolio, through October 31, 2002. Figures for both the Alger SmallCap and MidCap Class B shares and the Russell 2500 Growth Index (an unmanaged index of common stocks) include reinvestment of dividends. Performance for the Alger SmallCap and MidCap 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 10/31/02+ CUMULATIVE RETURNS SINCE INCEPTION 5/8/02 ------------------- CLASS A (27.52%) Russell 2500 Growth Index (25.31%) - -------------------------------------------------------------------------------- CLASS B (27.52%) Russell 2500 Growth Index (25.31%) - -------------------------------------------------------------------------------- CLASS C (25.22%) Russell 2500 Growth Index (25.31%) THE PORTFOLIO'S TOTAL RETURNS INCLUDE CHANGES IN SHARE PRICE AND REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS. THE GRAPH AND TABLE ABOVE DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD HAVE PAID ON FUND DISTRIBUTIONS OR ON THE REDEMPTION OF FUND SHARES. INVESTMENT RETURN AND PRINCIPAL WILL FLUCTUATE AND THE PORTFOLIO'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. + RETURNS REFLECT MAXIMUM INITIAL SALES CHARGES ON CLASS A AND CLASS C SHARES AND APPLICABLE CONTINGENT DEFERRED SALES CHARGES ON CLASS B AND CLASS C SHARES. -44- THE ALGER FUND Alger SmallCap and MidCap Portfolio Schedule of Investments October 31, 2002 Common Stocks--9.1% Shares Value ------- ----------- AEROSPACE & DEFENSE--.3% Alliant Techsystems Inc.* .................. 150 $ 9,023 L-3 Communications Holdings, Inc.* ......... 300 14,100 ----------- 23,123 ----------- AIR FREIGHT & LOGISTICS--.3% J.B. Hunt Transport Services, Inc.* ........ 400 11,076 Pacer International, Inc.* ................. 550 6,490 ----------- 17,566 ----------- BANKS--.5% City National Corporation .................. 350 15,837 Compass Bancshares, Inc. ................... 550 17,765 GreenPoint Financial Corp. ................. 200 8,714 ----------- 42,316 ----------- BEVERAGES--.1% Constellation Brands, Inc. Cl. A* .......... 450 11,399 ----------- BIOTECHNOLOGY--.5% Celgene Corporation* ....................... 450 9,968 Charles River Laboratories International, Inc.* ..................... 300 11,025 Transkaryotic Therapies, Inc.* ............. 650 7,566 Trimeris, Inc. * ........................... 200 10,580 ----------- 39,139 ----------- COMMERCIAL SERVICES & SUPPLIES--.4% BISYS Group, Inc. (The)* ................... 600 10,740 ChoicePoint Inc.* .......................... 266 10,071 Corinthian Colleges, Inc.* ................. 400 15,160 ----------- 35,971 ----------- CONTAINERS & PACKAGING--.1% Pactiv Corporation* ........................ 600 11,904 ----------- DIVERSIFIED FINANCIALS--.3% Affiliated Managers Group, Inc.* ........... 325 16,874 Federal Agricultural Mortgage Corporation Cl. C(Farmer Mac)* ........... 250 7,818 ----------- 24,692 ----------- ELECTRONIC EQUIPMENT & INSTRUMENTS--.1% Technitrol, Inc. ........................... 400 5,852 ----------- ENERGY EQUIPMENT & SERVICES--.3% Cooper Cameron Corporation* ................ 450 20,979 ----------- Common Stocks--(cont.) Shares Value ------- ------ FOOD PRODUCTS--.1% American Italian Pasta Company Cl. A* ........................... 200 $ 6,890 ----------- HEALTH CARE EQUIPMENT & SUPPLIES--.5% Respironics, Inc.* ......................... 600 19,164 STERIS Corporation* ........................ 550 14,592 Wright Medical Group, Inc.* ................ 600 10,326 ----------- 44,082 ----------- HEALTH CARE PROVIDERS & SERVICES--.9% Accredo Health, Incorporated* .............. 200 9,256 AMN Healthcare Services, Inc.* ............. 600 8,676 LifePoint Hospitals, Inc.* ................. 500 15,675 MID Atlantic Medical Services, Inc.* ....... 300 10,920 Triad Hospitals, Inc.* ..................... 500 18,250 Unilab Corporation* ........................ 600 12,810 ----------- 75,587 ----------- HOTELS, RESTAURANTS & LEISURE--.3% Brinker International, Inc.* ............... 300 8,517 California Pizza Kitchen, Inc.* ............ 350 9,282 MGM MIRAGE* ................................ 300 9,330 ----------- 27,129 ----------- HOUSEHOLD DURABLES--.2% D.R. Horton, Inc. .......................... 800 15,416 ----------- INFORMATION TECHNOLOGY CONSULTING & SERVICES--.3% CACI International Inc. Cl. A* ............. 450 18,410 Manhattan Associates, Inc.* ................ 400 8,992 ----------- 27,402 ----------- INSURANCE--.4% Arch Capital Group Ltd.* ................... 350 9,804 W. R. Berkley Corporation .................. 525 19,503 ----------- 29,307 ----------- MACHINERY--.3% Actuant Corporation Cl. A* ................. 250 9,950 Pentair, Inc. .............................. 400 13,215 ----------- 23,165 ----------- MEDIA--.4% Entercom Communications Corp.* ............. 350 17,227 McClatchy Company, Cl. A (The) ............. 150 9,320 Radio One, Inc. Cl. D* ..................... 450 7,506 ----------- 34,053 ----------- -45- THE ALGER FUND Alger SmallCap and MidCap Portfolio Schedule of Investments (Continued) October 31, 2002 Common Stocks--(cont.) Shares Value ------- ------ OIL & GAS--.3% EOG Resources, Inc. ........................ 500 $ 18,515 Noble Energy, Inc. ......................... 250 9,098 ----------- 27,613 ----------- PHARMACEUTICALS--.1% NPS Pharmaceuticals, Inc.* ................. 300 7,793 ----------- REAL ESTATE--.1% iStar Financial Inc. ....................... 300 8,520 ----------- SEMICONDUCTOR EQUIPMENT & PRODUCTS--.8% ASM International NV* ...................... 800 10,160 Cymer, Inc.* ............................... 400 10,048 Fairchild Semiconductor Corporation Cl. A* ....................... 900 10,710 International Rectifier Corporation* ....... 700 12,089 Marvell Technology Group Ltd.* ............. 750 12,158 Microchip Technology Incorporated* ......... 500 12,200 ----------- 67,365 ----------- SOFTWARE--.6% Documentum, Inc.* .......................... 800 11,687 Fair, Isaac and Company, Incorporated ............................. 375 14,426 Rational Software Corporation* ............. 1,700 11,254 Synopsys, Inc.* ............................ 400 15,140 ----------- 52,507 ----------- Common Stocks--(cont.) Shares Value ------- ------ SPECIALTY RETAIL--.6% Advance Auto Parts, Inc.* .................. 200 $ 10,710 AnnTaylor Stores Corporation* .............. 700 16,401 Chico's FAS, Inc.* ......................... 650 12,545 PETsMART, Inc.* ............................ 400 7,644 ----------- 47,300 ----------- TEXTILES, APPAREL & LUXURY GOODS--.1% Coach, Inc.* ............................... 400 11,900 ----------- TRADING COMPANIES & DISTRIBUTORS--.2% Fastenal Company ........................... 450 15,278 ----------- Total Investments (Cost $897,452)(a) ....................... 9.1% 754,248 Other Assets in Excess of Liabilities ...... 90.9 7,544,251 ----- ----------- Net Assets ................................. 100.0% $ 8,298,499 ===== =========== * Non-income producing security. (a) At October 31, 2002, the net unrealized depreciation on investments, based on cost for federal income tax purposes of $899,428, amounted to $145,180 which consisted of aggregate gross unrealized appreciation of $19,075 and aggregate gross unrealized depreciation of $164,255. See Notes to Financial Statements. -46- THE ALGER FUND Alger SmallCap and MidCap Portfolio Financial Highlights For a share outstanding throughout the period From May 8, 2002 (commencement of operations) to October 31, 2002 ----------------------------------- Class A Class B Class C --------- --------- --------- Net asset value, beginning of period ..... $ 10.00 $ 10.00 $ 10.00 --------- --------- --------- Net investment income (loss) (i) ......... (.01) (.09) (.09) Net realized and unrealized loss on investments ......................... (2.34) (2.28) (2.28) --------- --------- --------- Total from investment operations ......... (2.35) (2.37) (2.37) --------- --------- --------- Net asset value, end of period ........... $ 7.65 $ 7.63 $ 7.63 ========= ========= ========= Total Return (not annualized) (ii) ....... (23.5%) (23.7%) (23.7%) ========= ========= ========= Ratios and Supplemental Data: Net assets, end of period (000's omitted) ...................... $ 7,775 $ 269 $ 254 ========= ========= ========= Ratio of expenses to average net assets (annualized) .............. 1.89% 2.64% 2.64% ========= ========= ========= Ratio of net investment income (loss) to average net assets (annualized) ... (1.57%) (2.32%) (2.32%) ========= ========= ========= Portfolio Turnover Rate ................ 34.09% 34.09% 34.09% ========= ========= ========= (i) Amount was computed based on average shares outstanding during the period. (ii) Does not reflect the effect of any sales charges. See Notes to Financial Statements. -47- The Alger Fund Alger Money Market Portfolio Schedule of Investments October 31, 2002 Principal Amount Value ----------- ------------ U.S. Government & Agency Obligations--70.4% Federal Farm Credit Banks, 1.60%, 12/6/02 .................. $10,000,000 $ 9,984,444 Federal Home Loan Banks, 1.50%, 11/1/02 .................. 71,253,000 71,253,000 1.72%, 11/4/02 .................. 10,000,000 9,998,567 1.68%, 11/15/02 ................. 10,000,000 9,993,467 1.64%, 12/23/02 ................. 10,000,000 9,976,311 1.66%, 12/30/02 ................. 10,000,000 9,972,794 1.61%, 1/6/03 ................... 10,000,000 9,970,483 1.69%, 1/22/03 .................. 10,000,000 9,961,506 Federal Home Loan Mortgage Assoc., 1.63%, 11/21/02 ................. 10,000,000 9,990,944 1.53%, 1/30/03 .................. 10,000,000 9,961,750 1.66%, 2/28/03 .................. 10,000,000 9,945,128 Federal National Mortgage Assoc., 1.70%, 11/12/02 ................. 10,000,000 9,994,806 1.625%, 12/16/02 ................ 10,000,000 9,979,625 1.64%, 1/13/03 .................. 10,000,000 9,966,744 1.58%, 2/14/03 .................. 10,000,000 9,953,917 1.56%, 3/10/03 .................. 10,000,000 9,944,100 1.57%, 4/9/03 ................... 10,000,000 9,930,658 Student Loan Marketing Assoc., 1.55%, 11/1/02 .................. 1,547,000 1,547,000 ---------- Total Investments (Cost $232,325,244)(a) ................ 70.4% 232,325,244 Other Assets in Excess of Liabilities ... 29.6 97,887,483 ---- ----------- Net Assets .............................. 100.0% $330,212,727 ===== ============ (a) At October 31, 2002, the cost of investments for federal income tax purposes was the same as the cost for financial reporting purposes. See Notes to Financial Statements. -48- THE ALGER FUND Alger Money Market Portfolio Financial Highlights For a share outstanding throughout the year
Year Ended October 31, ------------------------------------------------------------------------------- 2002 2001 2000 1999 1998 ----------- ----------- ----------- ----------- ----------- Net asset value, beginning of year ............ $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 ----------- ----------- ----------- ----------- ----------- Net investment income ......................... .0097 .0387 .0527 .0423 .0476 Dividends from net investment income .......... (.0097) (.0387) (.0527) (.0423) (.0476) ----------- ----------- ----------- ----------- ----------- Net asset value, end of year .................. $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 =========== =========== =========== =========== =========== Total Return .................................. 1.0% 3.9% 5.4% 4.3% 4.9% =========== =========== =========== =========== =========== Ratios and Supplemental Data: Net assets, end of year (000's omitted) ............................. $ 330,213 $ 402,515 $ 233,526 $ 241,310 $ 172,862 =========== =========== =========== =========== =========== Ratio of expenses to average net assets ....... .79% .71% .78% .72% .76% =========== =========== =========== =========== =========== Ratio of net investment income to average net assets ....................... .99% 3.88% 5.14% 4.37% 4.84% =========== =========== =========== =========== ===========
See Notes to Financial Statements. [This page intentionally left blank] -50- THE ALGER FUND Statements of Assets and Liabilities (in thousands, except per share amounts) October 31, 2002
Small LargeCap Capital- Growth ization Balanced ASSETS: Portfolio Portfolio Portfolio -------- -------- --------- Investments in securities, at value (identified cost*)-- see accompanying schedules of investments .................. $558,784 $136,350 $271,046 Cash ......................................................... 54 58 41 Receivable for investment securities sold .................... 24,871 566 7,107 Receivable for shares of beneficial interest sold ............ 1,240 114 1,298 Dividends and interest receivable ............................ 378 12 1,457 Prepaid expenses ............................................. 112 50 53 -------- -------- -------- Total Assets ............................................... 585,439 137,150 281,002 -------- -------- -------- LIABILITIES: Call options written, at value (premiums received**)-- see accompanying schedule of investments ................... -- -- -- Payable for securities loaned ................................ 17,269 -- 8,633 Bank loan payable ............................................ 750 -- -- Payable for investment securities purchased ................. 13,447 1,210 8,188 Payable for shares of beneficial interest redeemed ........... 63,628 4,447 2,861 Interest payable ............................................. 4 -- -- Accrued investment management fees ........................... 347 93 165 Accrued transfer agent fees .................................. 457 151 172 Accrued distribution fees .................................... 227 52 116 Accrued shareholder servicing fees ........................... 115 28 55 Dividends payable--Note 2(e) ................................. -- -- -- Accrued expenses ............................................. 109 59 59 -------- -------- -------- Total Liabilities .......................................... 96,353 6,040 20,249 -------- -------- -------- NET ASSETS ................................................... $489,086 $131,110 $260,753 ======== ======== ======== Net Assets Consist of: Paid-in capital ............................................ $892,904 $327,128 $341,620 Undistributed net investment income (accumulated loss) -- -- 2,859 Undistributed net realized gain (accumulated loss) ......... (379,364) (193,191) (83,765) Net unrealized appreciation (depreciation) of investments and written options ...................................... (24,454) (2,827) 39 -------- -------- -------- NET ASSETS ................................................... $489,086 $131,110 $260,753 ======== ======== ======== Class A Net Asset Value Per Share ................................. $ 7.16 $ 2.85 $ 16.02 ======== ======== ======== Offering Price Per Share .................................. $ 7.56 $ 3.01 $ 16.91 ======== ======== ======== Class B Net Asset Value and Offering Price Per Share .............. $ 6.76 $ 2.68 $ 15.62 ======== ======== ======== Class C Net Asset Value Per Share .................................. $ 6.76 $ 2.68 $ 15.68 ======== ======== ======== Offering Price Per Share ................................... $ 6.83 $ 2.71 $ 15.84 ======== ======== ======== Shares of beneficial interest outstanding--Note 6 Class A .................................................... 18,229 16,197 4,880 ======== ======== ======== Class B .................................................... 47,881 30,490 8,775 ======== ======== ======== Class C .................................................... 5,151 1,196 2,903 ======== ======== ======== * Identified cost ........................................... $583,238 $139,177 $271,007 ======== ======== ======== ** Premiums received ......................................... $ -- $ -- $ -- ======== ======== ========
See Notes to Financial Statements. -51-
SmallCap MidCap Capital Health and Money Growth Appreciation Sciences MidCap Market Portfolio Portfolio Portfolio Portfolio Portfolio -------- -------- --------- -------- -------- $498,837 $ 550,903 $ 1,330 $ 754 $232,325 388 56 11 50 250 10,351 12,110 36 25 -- 482 536 1 7,510 98,340 40 85 2 -- -- 87 113 1 1 79 -------- --------- --------- -------- -------- 510,185 563,803 1,381 8,340 330,994 -------- --------- --------- -------- -------- -- 386 -- -- -- -- 35,506 -- -- -- -- -- -- -- -- 25,584 1,520 32 39 -- 57,003 30,604 -- -- 404 8 -- -- -- -- 296 367 1 1 121 350 501 -- -- 153 181 253 -- -- -- 93 108 -- -- -- -- -- -- -- 31 118 68 2 2 72 -------- --------- --------- -------- ------- 83,633 69,313 35 42 781 -------- --------- --------- -------- -------- $426,552 $ 494,490 $ 1,346 $ 8,298 $330,213 ======== ========= ========= ======== ======== $616,254 $1,172,066 $ 1,447 $ 8,526 $330,486 -- -- -- -- -- (189,229) (662,116) (96) (85) (273) (473) (15,460) (5) (143) -- -------- --------- --------- -------- -------- $426,552 $ 494,490 $ 1,346 $ 8,298 $330,213 ======== ========= ========= ======== ======== $ 5.48 $ 6.23 $ 9.29 $ 7.65 -- ======== ========= ========= ======== ======== $ 5.78 $ 6.58 $ 9.80 $ 8.07 -- ======== ========= ========= ======== ======== $ 5.17 $ 5.93 $ 9.26 $ 7.63 $ 1.00 ======== ========= ========= ======== ======== $ 5.16 $ 5.93 $ 9.26 $ 7.63 -- ======== ========= ========= ======== ======== $ 5.21 $ 5.99 $ 9.35 $ 7.71 -- ======== ========= ========= ======== ======== 24,274 15,716 77 1,016 -- ======== ========= ========= ======== ======== 47,791 57,753 35 35 330,511 ======== ========= ========= ======== ======== 8,954 9,096 33 33 -- ======== ========= ========= ======== ======== $499,310 $ 566,309 $ 1,335 $ 897 $232,325 ======== ========= ========= ======== ======== $ -- $ 332 $ -- $ -- $ -- ======== ========= ========= ======== ========
-52- THE ALGER FUND Statements of Operations (in thousands) For the year ended October 31, 2002
LargeCap Small Growth Capitalization Balanced Portfolio Portfolio Portfolio ------------- -------------- -------- Income: Dividends .................................................... $ 6,042 $ 220 $ 1,482 Interest ..................................................... 556 182 7,197 -------- -------- ------- Total Income ................................................. 6,598 402 8,679 -------- -------- ------- Expenses: Management fees--Note 3(a) ................................... 5,536 1,506 2,314 Distribution fees--Note 3(b): Class B .................................................... 3,505 841 1,178 Class C .................................................... 349 31 415 Shareholder servicing fees--Note 3(f) ........................ 1,845 443 772 Interest on line of credit utilized--Note 5 .................. 41 -- -- Custodian fees ............................................... 83 37 47 Transfer agent fees and expenses--Note 3(e) .................. 2,161 948 668 Registration fees ............................................ 49 60 44 Miscellaneous ................................................ 330 100 108 -------- -------- ------- Total Expenses ............................................... 13,899 3,966 5,546 -------- -------- ------- NET INVESTMENT INCOME (LOSS) .................................. (7,301) (3,564) 3,133 -------- -------- ------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND WRITTEN OPTIONS Net realized loss on investments and written options .......... (194,809) (25,959) (45,399) Net change in unrealized appreciation (depreciation) on investments and written options .......................... 19,221 (2,977) 617 -------- -------- ------- Net realized and unrealized loss on investments and written options ......................................... (175,588) (28,936) (44,782) -------- -------- ------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ................................... $(182,889) $(32,500) $(41,649) ======== ======== =======
* Commenced operations May 1, 2002. ** Commenced operations May 8, 2002. See Notes to Financial Statements. -53-
SmallCap MidCap Capital Health and Money Growth Appreciation Sciences MidCap Market Portfolio Portfolio Portfolio* Portfolio** Portfolio ------------ -------- -------- -------- -------- $ 1,484 $ 2,487 $ 4 $ 1 $ -- 549 900 1 -- 5,276 --------- --------- -------- -------- -------- 2,033 3,387 5 1 5,276 --------- --------- -------- -------- -------- 4,578 6,209 6 3 1,484 2,541 3,702 1 1 -- 417 601 1 1 -- 1,431 1,826 2 1 -- 64 29 -- -- -- 81 83 5 2 46 1,585 2,750 -- -- 635 60 50 -- -- 55 239 256 1 1 117 --------- --------- -------- -------- -------- 10,996 15,506 16 9 2,337 --------- --------- -------- -------- -------- (8,963) (12,119) (11) (8) 2,939 --------- --------- -------- -------- -------- (111,133) (209,158) (96) (85) -- 6,689 38,808 (5) (143) -- --------- --------- -------- -------- -------- (104,444) (170,350) (101) (228) -- --------- --------- -------- -------- -------- $(113,407) $(182,469) $ (112) $ (236) $ 2,939 ========= ========= ======== ======== ========
-54- THE ALGER FUND Statements of Changes in Net Assets (in thousands)
LargeCap Small Growth Capitalization Balanced Portfolio Portfolio Portfolio ----------------------- ----------------------- ----------------------- For the For the For the For the For the For the Year Ended Year Ended Year Ended Year Ended Year Ended Year Ended October 31, October 31, October 31, October 31, October 31, October 31, 2002 2001 2002 2001 2002 2001 ----- ----- ----- ----- ----- ----- Net investment income (loss) ............... $ (7,301) $ (9,703) $ (3,564) $ (4,186) $ 3,133 $ 5,264 Net realized loss on investments and written options ..................... (194,809) (172,699) (25,959) (166,193) (45,399) (37,024) Net change in unrealized appreciation (depreciation) on investments and written options ..................... 19,221 (169,262) (2,977) (24,972) 617 (7,862) --------- --------- --------- --------- --------- -------- Net increase (decrease) in net assets resulting from operations ............. (182,889) (351,664) (32,500) (195,351) (41,649) (39,622) --------- --------- --------- --------- --------- -------- Dividends and distributions to shareholders from: Net investment income Class A .................................. -- -- -- -- (2,370) (1,065) Class B .................................. -- -- -- -- (2,209) (1,254) Class C .................................. -- -- -- -- (811) (441) Net realized gains: Class A .................................. -- (18,355) -- (20,030) -- -- Class B .................................. -- (60,776) -- (67,405) -- -- Class C .................................. -- (4,659) -- (2,276) -- -- --------- --------- --------- --------- --------- -------- Total dividends and distributions to shareholders ........................... -- (83,790) -- (89,711) (5,390) (2,760) --------- --------- --------- --------- --------- -------- Increase (decrease) from shares of beneficial interest transactions: Class A .................................. (40,996) 7,650 (7,328) 22,542 (8,498) 21,325 Class B .................................. (146,914) (10,769) (27,917) 13,133 2,130 47,431 Class C .................................. (1,440) 7,784 (102) 194 (3,239) 15,639 --------- --------- --------- --------- --------- -------- Net increase (decrease) from shares of beneficial interest transactions--Note 6 (189,350) 4,665 (35,347) 35,869 (9,607) 84,395 --------- --------- --------- --------- --------- -------- Total increase (decrease) ............... (372,239) (430,789) (67,847) (249,193) (56,646) 42,013 Net Assets: Beginning of period .................... 861,325 1,292,114 198,957 448,150 317,399 275,386 --------- --------- --------- --------- --------- -------- End of period .......................... $ 489,086 $ 861,325 $ 131,110 $ 198,957 $ 260,753 $ 317,399 ========= ========= ========= ========= ========= ======== Undistributed net investment income (accumulated loss) ............... $ -- $ -- $ -- $ -- $ 2,859 $ 4,512 ========= ========= ========= ========= ========= ========
* Commenced operations May 1, 2002. ** Commenced operations May 8, 2002. See Notes to Financial Statements. -55-
SmallCap MidCap Capital Health and Money Growth Appreciation Sciences MidCap Market Portfolio Portfolio Portfolio* Portfolio** Portfolio ---------------------- ---------------------- ------------ ------------ ----------------------- For the For the For the For the For the For the For the For the Year Ended Year Ended Year Ended Year Ended Period Ended Period Ended Year Ended Year Ended October 31, October 31, October 31, October 31, October 31, October 31, October 31, October 31, 2002 2001 2002 2001 2002 2002 2002 2001 ---- ---- ---- ---- ---- ---- ---- ---- $ (8,963) $ (9,355) $ (12,119) $ (11,878) $ (11) $ (8) $ 2,939 $ 13,439 (111,133) (64,016) (209,158) (431,225) (96) (85) -- (218) 6,689 (103,577) 38,808 (121,549) (5) (143) -- -- --------- --------- ---------- --------- ------- ------- --------- --------- (113,407) (176,948) (182,469) (564,652) (112) (236) 2,939 13,221 --------- --------- ---------- --------- ------- ------- --------- --------- -- -- -- -- -- -- -- -- -- -- -- -- -- -- (2,939) (13,439) -- -- -- -- -- -- -- -- -- (14,320) -- (10,161) -- -- -- -- -- (64,744) -- (37,779) -- -- -- -- -- (6,442) -- (6,592) -- -- -- -- --------- --------- ---------- --------- ------- ------- --------- --------- -- (85,506) -- (54,532) -- -- (2,939) (13,439) --------- --------- ---------- --------- ------- ------- --------- --------- 13,550 60,822 (41,859) (64,520) 773 7,853 -- -- (114,847) 87,484 (105,997) (61,794) 351 348 (72,302) 169,207 6,553 23,482 (23,069) (10,408) 334 333 -- -- --------- --------- ---------- --------- ------- ------- --------- --------- (94,744) 171,788 (170,925) (136,722) 1,458 8,534 (72,302) 169,207 --------- --------- ---------- --------- ------- ------- --------- --------- (208,151) (90,666) (353,394) (755,906) 1,346 8,298 (72,302) 168,989 634,703 725,369 847,884 1,603,790 -- -- 402,515 233,526 --------- --------- ---------- --------- ------- ------- --------- --------- $426,552 $634,703 $ 494,490 $ 847,884 $ 1,346 $ 8,298 $ 330,213 $ 402,515 ========= ========= ========== ========= ======= ======= ========= ========= $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ -- ========= ========= ========== ========= ======= ======= ========= =========
-56- THE ALGER FUND Notes to Financial Statements NOTE 1 -- General: The Alger Fund (the "Fund") is a diversified, open-end registered investment company organized as a business trust under the laws of the Commonwealth of Massachusetts. The Fund operates as a series company currently issuing an unlimited number of shares of beneficial interest in eight portfolios--LargeCap Growth Portfolio, Small Capitalization Portfolio, Balanced Portfolio, MidCap Growth Portfolio, Capital Appreciation Portfolio, Health Sciences Portfolio, SmallCap and MidCap Portfolio and Money Market Portfolio (the "Portfolios"). The LargeCap Growth Portfolio, Small Capitalization Portfolio, MidCap Growth Portfolio, Capital Appreciation Portfolio, Health Sciences Portfolio and SmallCap and MidCap 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. The Money Market Portfolio's investment objective is high current income which it seeks to achieve by investing in short-term instruments. 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 shares are generally subject to a deferred sales charge. Class C shares are generally subject to an initial sales charge and a deferred sales charge. Class B shares will automatically convert to Class A shares eight years after the end of the calendar month in which the order to purchase was accepted. 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. Shares of mutual funds are valued at the net asset value of the underlying mutual fund. (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. Effective November 1, 2000, premiums and discounts on debt securities purchased are amortized or accreted over the lives of the respective securities. This change in accounting policy was applied retroactively and had no material effect on the accompanying financial statements. (c) REPURCHASE AGREEMENTS: The Portfolios enter into repurchase agreements with approved institutions. The repurchase agreements are collateralized by U.S. Government securities, which are either received and held in physical possession by the custodian or received by such custodian in book-entry form through the Federal Reserve book-entry system. The collateral is valued on a daily basis during the term of the agreement to ensure that its value equals or exceeds the agreed-upon repurchase price to be repaid to the Portfolio. Additional collateral is obtained when necessary. (d) OPTION WRITING: When a Portfolio writes an option, an amount equal to the premium received by the Portfolio is recorded as a liability and is subsequently adjusted to the current fair value of the option written. Premiums received from writing options that expire unexercised are -57- THE ALGER FUND Notes to Financial Statements (Continued) treated by the Portfolio on the expiration date as realized gains from investments. The difference between the premium and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or, if the premium is less than the amount paid for the closing purchase transaction, as a realized loss. If a call option is exercised, the premium is added to the proceeds from the sale of the underlying security in determining whether the Portfolio has realized a gain or loss. If a put option is exercised, the premium reduces the cost basis of the securities purchased by the Portfolio. The Portfolio as writer of an option bears the market risk of an unfavorable change in the price of the security underlying the written option. (e) LENDING OF PORTFOLIO SECURITIES: The Portfolios lend their securities to financial institutions, provided that the market value of the securities loaned will not at any time exceed one third of the Portfolio's total assets, as defined. The Portfolios earn fees on the securities loaned, which are included in interest income in the accompanying Statements of Operations. In order to protect against the risk of failure by the borrower to return the securities loaned or any delay in the delivery of such securities, the loan is collateralized by cash, letters of credit or U.S. Government securities that are maintained in an amount equal to at least 100 percent of the current market value of the loaned securities. The market value of the loaned securities is determined at the close of business of the Portfolios and any required additional collateral is delivered to the Portfolios on the next business day. At October 31, 2002, the value of securities loaned and collateral received thereon were as follows: Value of Securities Value of Loaned Collateral --------- --------- LargeCap Growth Portfolio .................. $17,167,110 $17,269,315 Small Capitalization Portfolio ............. 2,009,973 2,222,091 Balanced Portfolio ......................... 8,556,656 8,633,202 MidCap Growth Portfolio .................... 1,081,006 1,300,665 Capital Appreciation Portfolio ............. 35,044,661 35,506,319 Health Sciences Portfolio .................. -- -- SmallCap and MidCap Portfolio ................................ -- -- Money Market Portfolio ..................... -- -- (f) 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 net investment income and capital gains payable to holders of its shares. The characterization of distributions to shareholders for financial reporting purposes is determined in accordance with federal income tax rules. Therefore, the source of the Portfolios' distributions, other than the Money Market Portfolio, may be shown in the accompanying financial statements as either from, or in excess of, net investment income, net realized gain on investment transactions, or from paid-in capital, depending on the type of book/tax differences that may exist. At October 31, 2002, the LargeCap Growth Portfolio, the Small Capitalization Portfolio, the Balanced Portfolio, the MidCap Growth Portfolio, the Capital Appreciation Portfolio, the Health Sciences Portfolio, the SmallCap and MidCap Portfolio and the Money Market Portfolio reclassified approximately $17,004,000, $7,750,000, $605,000, $18,318,000, $23,996,000, $11,000, $7,000 and $0 respectively, from undistributed net investment income (accumulated loss) and $688,000, $668,000, $195,000, $4,697,000, $40,000, $0, $0 and $24,000, respectively, from undistributed net realized gain (accumulated loss) to paid-in capital. Reclassifications result primarily from the difference in tax treatment of net operating losses. The reclassifications had no impact on the net asset values of the Portfolios and are designed to present the Portfolios' capital accounts on a tax basis. (g) 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 investment company taxable income to its shareholders. Provided a Portfolio maintains such compliance, no federal income tax provision is required. Each Portfolio is treated as a separate entity -58- THE ALGER FUND Notes to Financial Statements (Continued) for the purpose of determining such compliance. At October 31, 2002, the net capital loss carryforwards of the LargeCap Growth Portfolio, the Small Capitalization Portfolio, the Balanced Portfolio, the MidCap Growth Portfolio, the Capital Appreciation Portfolio, the Health Sciences Portfolio, the SmallCap and MidCap Portfolio and the Money Market Portfolio, which may be used to offset future net realized gains, were approximately $330,933,994, $192,370,254, $69,449,085, $154,952,867, $655,407,889, $86,171, $82,866 and $273,000, respectively, and expire between 2003 and 2010. (h) 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 based on net assets. 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. (i) OTHER: These financial statements have been prepared using estimates and assumptions that affect the reported amounts therein. Actual results may differ from those estimates. NOTE 3 -- Investment Management Fees and Other Transactions with Affiliates: (a) INVESTMENT MANAGEMENT FEES: Fees incurred by each Portfolio, pursuant to the provisions of its Investment Management Agreement 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: LargeCap Growth Portfolio ............................................... 75% Small Capitalization Portfolio .......................................... 85 Balanced Portfolio ...................................................... 75 MidCap Growth Portfolio ................................................. 80 Capital Appreciation Portfolio .......................................... 85 Health Sciences Portfolio ............................................... 85 SmallCap and MidCap Portfolio ........................................... 85 Money Market Portfolio .................................................. .50 (b) DISTRIBUTION FEES: Class B Shares--The Fund has adopted an Amended and Restated Plan of Distribution pursuant to which Class B shares of each Portfolio, other than the Money Market Portfolio, reimburse Fred Alger & Company, Incorporated, the Fund's distributor and an affiliate of Alger Management (the "Distributor"), for costs and expenses incurred by the Distributor in connection with advertising, marketing and selling the Class B shares. 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 Class B shares of the Portfolios, the excess may be carried forward, with interest, and sought to be reimbursed in future periods. As of October 31, 2002, such excess carried forward was approximately $19,067,000, $16,040,000, $5,082,000, $7,483,000, $24,879,000, $0 and $0 for Class B shares of the LargeCap Growth Portfolio, the Small Capitalization Portfolio, the Balanced Portfolio, the MidCap Growth Portfolio, the Capital Appreciation Portfolio, the Health Sciences Portfolio and the SmallCap and MidCap 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 incurred in distributing the Class C shares. The fees charged may be more or less than the expenses incurred by the Distributor. (c) SALES CHARGES: The purchases and sales of shares of the Portfolios, other than the Money Market Portfolio, may be subject to initial sales charges or contingent deferred sales charges. For the year ended October 31, 2002, the initial sales charges and contingent deferred sales charges retained by the Distributor were approximately $381,000 and $5,922,000, 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. -59- THE ALGER FUND Notes to Financial Statements (Continued) (d) BROKERAGE COMMISSIONS: During the year ended October 31, 2002, the LargeCap Growth Portfolio, the Small Capitalization Portfolio, the Balanced Portfolio, the MidCap Growth Portfolio, the Capital Appreciation Portfolio, the Health Sciences Portfolio and the SmallCap and MidCap Portfolio paid the Distributor commissions of $3,393,707, $419,984, $857,834, $3,380,117, $2,531,702, $4,925, and $1,362, 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, 2002, the LargeCap Growth Portfolio, the Small Capitalization Portfolio, the Balanced Portfolio, the MidCap Growth Portfolio, the Capital Appreciation Portfolio, the Health Sciences Portfolio, the SmallCap and MidCap Portfolio and the Money Market Portfolio incurred fees of $1,587,900, $863,500, $419,830, $1,149,724, $2,202,950, $193, $36 and $434,300, respectively, for services provided by Alger Services. In addition, during the year ended October 31, 2002, the LargeCap Growth Portfolio, the Small Capitalization Portfolio, the Balanced Portfolio, the MidCap Growth Portfolio, the Capital Appreciation Portfolio, the Health Sciences Portfolio, the SmallCap and MidCap Portfolio and the Money Market Portfolio reimbursed Alger Services $573,644, $84,427, $248,361, $435,114, $546,659, $0, $0 and $201,145, 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 each Portfolio's average daily net assets. (g) OTHER TRANSACTIONS WITH AFFILIATES: Certain trustees and officers of the Fund are directors and officers of Alger Management, the Distributor and Alger Services. NOTE 4 -- Securities Transactions: (a) The following summarizes the securities transactions by the Fund, other than short-term securities, for the year ended October 31, 2002 : Purchases Sales ---------- ----- LargeCap Growth Portfolio ........................... $1,513,718,927 $1,583,055,323 Small Capitalization Portfolio ........................... 222,481,149 246,076,504 Balanced Portfolio ................... 602,291,668 598,220,290 MidCap Growth Portfolio .............. 1,779,506,163 1,831,690,632 Capital Appreciation Portfolio ........................... 1,198,218,399 1,340,947,154 Health Sciences Portfolio ............ 3,114,509 1,683,877 SmallCap and MidCap Portfolio .......................... 1,238,883 256,589 (b) As of October 31, 2002, securities valued at $6,160,700 were held in escrow by the custodian to cover call options written by the Capital Appreciation Portfolio. Transactions in options written for the Capital Appreciation Portfolio during the year ended October 31, 2002 were as follows: Number of Premiums Contracts Received ---------- ---------- Call options outstanding at October 31, 2001 ..................... -- $ -- Call options written ..................... 2,000 445,488 Call options exercised ................... (500) (113,498) --------- --------- Call options outstanding at October 31, 2002 ..................... 1,500 $ 331,990 ========= ========= NOTE 5 -- Lines of Credit: The Fund has both committed and uncommitted lines of credit with banks. All borrowings have variable interest rates and are payable on demand. With the exception of the Capital Appreciation Portfolio, the Fund borrows under such lines of credit exclusively for temporary or emergency purposes. The Capital Appreciation Portfolio may borrow under these lines up to 1/3 of the value of its assets, as defined, to purchase additional securities. To the extent the Capital Appreciation Portfolio borrows under these lines, it must pledge securities with a total value of at least twice the amount borrowed. -60- THE ALGER FUND 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 eight series. Each series, other than the Money Market Portfolio, is divided into three separate classes. The transactions of shares of beneficial interest were as follows:
For the year ended For the year ended October 31, 2002 October 31, 2001 Shares Amount Shares Amount ------- --------- ------- --------- Alger LargeCap Growth Portfolio Class A: Shares sold .......................... 276,614,134 $2,387,509,535 162,527,138 $ 1,830,805,578 Shares converted from Class B ........ 1,749,698 15,696,030 1,744,902 19,313,841 Dividends reinvested ................. -- -- 1,455,788 17,178,299 Shares redeemed ......................(284,490,956) (2,444,201,552) (164,368,986) (1,859,646,946) ------------ -------------- ------------ --------------- Net increase (decrease) .............. (6,127,124) $ (40,995,987) 1,358,842 $ 7,650,772 ============ ============== ============ =============== Class B: Shares sold .......................... 35,159,786 $ 310,215,398 113,158,724 $ 1,222,173,474 Dividends reinvested ................. -- -- 5,101,144 57,744,954 Shares converted to Class A .......... (1,843,078) (15,696,030) (1,824,694) (19,313,841) Shares redeemed ...................... (49,901,424) (441,432,982) (118,417,762) (1,271,372,944) ------------ -------------- ------------ --------------- Net decrease ......................... (16,584,716) $ (146,913,614) (1,982,588) $ (10,768,357) ============ ============== ============ =============== Class C: Shares sold .......................... 2,776,017 $ 23,550,591 3,079,453 $ 33,423,162 Dividends reinvested ................. -- -- 395,810 4,476,606 Shares redeemed ...................... (3,049,262) (24,990,877) (2,907,126) (30,115,675) ------------ -------------- ------------ --------------- Net increase (decrease) .............. (273,245) $ (1,440,286) 568,137 $ 7,784,093 ============ ============== ============ =============== Alger Small Capitalization Portfolio Class A: Shares sold .......................... 94,504,077 $ 341,706,969 198,728,297 $ 882,271,963 Shares converted from Class B ........ 2,986,009 10,407,905 5,644,043 27,015,364 Dividends reinvested ................. -- -- 3,184,639 17,611,053 Shares redeemed ...................... (99,421,127) (359,443,070) (202,098,063) (904,356,750) ------------ -------------- ------------ --------------- Net increase (decrease) .............. (1,931,041) $ (7,328,196) 5,458,916 $ 22,541,630 ============ ============== ============ =============== Class B: Shares sold .......................... 9,414,875 $ 32,100,768 22,841,143 $ 95,596,070 Dividends reinvested ................. -- -- 12,370,011 65,313,656 Shares converted to Class A .......... (3,159,766) (10,407,905) (5,922,135) (27,015,364) Shares redeemed ...................... (14,656,966) (49,609,672) (28,588,548) (120,761,077) ------------ -------------- ------------ --------------- Net increase (decrease) .............. (8,401,857) $ (27,916,809) 700,471 $ 13,133,285 ============ ============== ============ =============== Class C: Shares sold .......................... 488,977 $ 1,667,217 240,494 $ 1,131,896 Dividends reinvested ................. -- -- 401,376 2,119,264 Shares redeemed ...................... (553,280) (1,768,580) (683,960) (3,057,492) ------------ -------------- ------------ --------------- Net increase (decrease) .............. (64,303) $ (101,363) (42,090) $ 193,668 ============ ============== ============ ===============
-61- THE ALGER FUND Notes to Financial Statements (Continued)
For the year ended For the year ended October 31, 2002 October 31, 2001 Shares Amount Shares Amount ------- --------- ------- --------- Alger Balanced Portfolio Class A: Shares sold .......................... 9,842,769 $ 174,336,003 6,768,510 $ 132,115,149 Shares converted from Class B ........ 59,378 1,057,572 89,153 1,743,871 Dividends reinvested ................. 119,803 2,245,114 50,567 1,011,849 Shares redeemed ...................... (10,574,844) (186,136,914) (5,876,424) (113,546,080) ------------ -------------- ------------ --------------- Net increase (decrease) .............. (552,894) $ (8,498,225) 1,031,806 $ 21,324,789 ============ ============== ============ =============== Class B: Shares sold .......................... 3,213,303 $ 56,372,933 7,906,564 $ 152,560,732 Dividends reinvested ................. 110,294 2,028,302 59,494 1,166,087 Shares converted to Class A .......... (60,686) (1,057,572) (91,355) (1,743,871) Shares redeemed ...................... (3,227,636) (55,213,659) (5,478,908) (104,552,368) ------------ -------------- ------------ --------------- Net increase ......................... 35,275 $ 2,130,004 2,395,795 $ 47,430,580 ============ ============== ============ =============== Class C: Shares sold .......................... 999,848 $ 17,816,624 2,014,351 $ 39,232,676 Dividends reinvested ................. 39,698 732,826 20,669 406,567 Shares redeemed ...................... (1,272,643) (21,788,159) (1,271,687) (24,000,107) ------------ -------------- ------------ --------------- Net increase (decrease) .............. (233,097) $ (3,238,709) 763,333 $ 15,639,136 ============ ============== ============ =============== Alger MidCap Growth Portfolio Class A: Shares sold .......................... 484,600,552 $3,169,121,933 270,656,811 $ 2,080,103,823 Shares converted from Class B ........ 2,030,059 13,970,774 1,583,901 12,360,222 Dividends reinvested ................. -- -- 1,711,048 13,585,724 Shares redeemed ......................(484,654,290) (3,169,542,793) (265,578,828) (2,045,227,353) ------------ -------------- ------------ --------------- Net increase ......................... 1,976,321 $ 13,549,914 8,372,932 $ 60,822,416 ============ ============== ============ =============== Class B: Shares sold .......................... 46,342,558 $ 308,895,344 59,173,020 $ 453,904,946 Dividends reinvested ................. -- -- 7,947,406 60,320,808 Shares converted to Class A .......... (2,145,231) (13,970,774) (1,661,494) (12,360,222) Shares redeemed ...................... (61,286,740) (409,771,776) (54,994,107) (414,381,042) ------------ -------------- ------------ --------------- Net increase (decrease) .............. (17,089,413) $ (114,847,206) 10,464,825 $ 87,484,490 ============ ============== ============ =============== Class C: Shares sold .......................... 4,806,051 $ 31,510,115 6,129,849 $ 46,967,325 Dividends reinvested ................. -- -- 812,983 6,162,412 Shares redeemed ...................... (4,016,802) (24,957,532) (4,033,062) (29,647,378) ------------ -------------- ------------ --------------- Net increase ......................... 789,249 $ 6,552,583 2,909,770 $ 23,482,359 ============ ============== ============ ===============
-62- THE ALGER FUND Notes to Financial Statements (Continued)
For the year ended For the year ended October 31, 2002 October 31, 2001 Shares Amount Shares Amount ------- --------- ------- --------- Alger Capital Appreciation Portfolio Class A: Shares sold ........................ 220,578,172 $1,757,855,537 151,270,242 $ 1,527,584,316 Shares converted from Class B ...... 574,232 4,710,417 642,324 6,213,185 Dividends reinvested ............... -- -- 877,332 9,791,019 Shares redeemed .................... (227,273,301) (1,804,425,219) (158,003,028) (1,608,108,893) ------------- -------------- ------------ --------------- Net decrease ........................ (6,120,897) $ (41,859,265) (5,213,130) $ (64,520,373) ============= ============== ============ =============== Class B: Shares sold ........................ 21,486,880 $ 169,888,476 59,832,435 $ 613,455,067 Dividends reinvested ............... -- -- 3,314,857 35,701,014 Shares converted to Class A ........ (600,311) (4,710,417) (667,378) (6,213,185) Shares redeemed .................... (35,756,828) (271,175,148) (70,576,090) (704,737,305) ------------- -------------- ------------ --------------- Net decrease ....................... (14,870,259) $ (105,997,089) (8,096,176) $ (61,794,409) ============= ============== ============ =============== Class C: Shares sold ......................... 5,096,484 $ 38,764,304 10,635,925 $ 104,323,214 Dividends reinvested ................ -- -- 575,854 6,196,182 Shares redeemed ..................... (8,250,993) (61,833,849) (12,765,556) (120,927,216) ------------- -------------- ------------ --------------- Net decrease ........................ (3,154,509) $ (23,069,545) (1,553,777) $ (10,407,820) ============= ============== ============ =============== Alger Health Sciences Portfolio* Class A: Shares sold ......................... 89,151 $ 887,740 Shares redeemed ..................... (12,494) (114,207) ------------- -------------- Net increase ........................ 76,657 $ 773,533 ============= ============== Class B: Shares sold ......................... 38,742 $ 385,314 Shares redeemed ..................... (3,665) (34,641) ------------- -------------- Net increase ........................ 35,077 $ 350,673 ============= ============== Class C: Shares sold ......................... 33,383 $ 333,804 Shares redeemed ..................... -- -- ------------- -------------- Net increase ........................ 33,383 $ 333,804 ============= ==============
-63- THE ALGER FUND Notes to Financial Statements (Continued)
For the year ended For the year ended October 31, 2002 October 31, 2001 Shares Amount Shares Amount ------- --------- ------- --------- Alger SmallCap and MidCap Portfolio** Class A: Shares sold ........................ 1,016,307 $ 7,853,142 Shares redeemed .................... -- -- ------------- -------------- Net increase ....................... 1,016,307 $ 7,853,142 ============= ============== Class B: Shares sold ........................ 35,306 $ 347,740 Shares redeemed .................... -- -- ------------- -------------- Net increase ....................... 35,306 $ 347,740 ============= ============== Class C: Shares sold ........................ 33,370 $ 333,611 Shares redeemed .................... -- -- ------------- -------------- Net increase ....................... 33,370 $ 333,611 ============= ============== Alger Money Market Portfolio Shares sold ........................ 7,873,620,498 $7,873,620,498 7,934,516,620 $ 7,934,516,620 Dividends reinvested ............... 2,277,848 2,277,848 11,070,046 11,070,046 Shares redeemed ....................(7,948,200,446) (7,948,200,446) (7,776,379,195) (7,776,379,195) ------------- ------------- ------------- -------------- Net increase (decrease) ........... (72,302,100) $ (72,302,100) 169,207,471 $ 169,207,471 ============= ============== ============= ===============
*Initially offered May 1, 2002. **Initially offered May 8, 2002. -64- THE ALGER FUND Notes to Financial Statements (Continued) NOTE 7 -- Distributions to Shareholders: The tax character of distributions paid were as follows: Year Ended Year Ended October 31, October 31, 2002 2001 -------- -------- LargeCap Growth Portfolio Distributions paid from: Ordinary Income .......................... -- -- Long-term capital gain ................... -- $83,789,906 --------- ----------- Total distributions paid ................. -- $83,789,906 ========= =========== Small Capitalization Portfolio Distributions paid from: Ordinary Income .......................... -- -- Long-term capital gain ................... -- $89,710,890 --------- ----------- Total distributions paid ................. -- $89,710,890 ========= =========== Balanced Portfolio Distributions paid from: Ordinary Income .......................... 5,390,585 $ 2,759,406 Long-term capital gain ................... -- -- --------- ----------- Total distributions paid ................. 5,390,585 $ 2,759,406 ========= =========== MidCap Growth Portfolio Distributions paid from: Ordinary Income .......................... -- $49,618,161 Long-term capital gain ................... -- 35,887,806 --------- ----------- Total distributions paid ................. -- $85,505,967 ========= =========== Capital Appreciation Portfolio Distributions paid from: Ordinary Income .......................... -- -- Long-term capital gain ................... -- $54,532,243 --------- ----------- Total distributions paid ................. -- $54,532,243 ========= =========== Health Sciences Portfolio* Distributions paid from: Ordinary Income .......................... -- -- Long-term capital gain ................... -- -- --------- ----------- Total distributions paid ................. -- -- ========= =========== SmallCap and MidCap Portfolio** Distributions paid from: Ordinary Income .......................... -- -- Long-term capital gain ................... -- -- --------- ----------- Total distributions paid ................. -- -- ========= =========== Money Market Portfolio Distributions paid from: Ordinary Income .......................... 2,938,803 $13,438,710 Long-term capital gain ................... -- -- --------- ----------- Total distributions paid ................. 2,938,803 $13,438,710 ========= =========== * Initially offered May 1, 2002. ** Initially offered May 8, 2002. As of October 31, 2002, the components of distributable earnings on a tax basis were as follows: LargeCap Growth Portfolio Undistributed ordinary income .......................... -- Undistributed long-term gain ........................... -- Capital loss carryforward .............................. $ 330,933,994 Unrealized appreciation (depreciation) ................. (72,884,137) Small Capitalization Portfolio Undistributed ordinary income .......................... -- Undistributed long-term gain ........................... -- Capital loss carryforward .............................. $ 192,370,254 Unrealized appreciation (depreciation) ................. (3,647,895) Balanced Portfolio Undistributed ordinary income .......................... $ 3,133,079 Undistributed long-term gain ........................... -- Capital loss carryforward .............................. 69,449,085 Unrealized appreciation (depreciation) ................. (14,276,570) MidCap Growth Portfolio Undistributed ordinary income .......................... -- Undistributed long-term gain ........................... -- Capital loss carryforward .............................. $ 154,952,867 Unrealized appreciation (depreciation) ................. (34,749,383) Capital Appreciation Portfolio Undistributed ordinary income .......................... -- Undistributed long-term gain ........................... -- Capital loss carryforward .............................. $ 655,407,889 Unrealized appreciation (depreciation) ................. (22,168,186) Health Sciences Portfolio Undistributed ordinary income .......................... -- Undistributed long-term gain ........................... -- Capital loss carryforward .............................. $ 86,171 Unrealized appreciation (depreciation) ................. (14,016) SmallCap and MidCap Portfolio Undistributed ordinary income .......................... -- Undistributed long-term gain ........................... -- Capital loss carryforward .............................. $ 82,866 Unrealized appreciation (depreciation) ................. (145,180) Money Market Portfolio Undistributed ordinary income .......................... -- Undistributed long-term gain ........................... -- Capital loss carryforward .............................. $ 273,121 Unrealized appreciation (depreciation) ................. -- The difference between book basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales. -65- Report of Independent Public Accountants 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 LargeCap Growth, Small Capitalization, Balanced, MidCap Growth, Capital Appreciation, Health Sciences, SmallCap and MidCap and Money Market Portfolios) as of October 31, 2002, and the related statements of operations and financial highlights of the LargeCap Growth, Small Capitalization, Balanced, MidCap Growth, Capital Appreciation and Money Market Portfolios for the year then ended, and the Health Sciences Portfolio for the period from May 1, 2002 (commencement of operations) through October 31, 2002 and the SmallCap and MidCap Portfolio for the period from May 8, 2002 (commencement of operations) through October 31, 2002. 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 audit. The statements of changes in net assets of the LargeCap Growth, Small Capitalization, Balanced, MidCap Growth, Capital Appreciation and Money Market Portfolios for the year ended October 31, 2001 and the financial highlights of LargeCap Growth, Small Capitalization, Balanced, MidCap Growth, Capital Appreciation and Money Market Portfolios for the four years then ended were audited by other auditors, whose report, dated November 30, 2001, expressed an unqualified opinion on those statements of changes in net assets and financial highlights. We conducted our audit in accordance with auditing standards generally accepted in the United States. 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 investments in securities as of October 31, 2002, 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 audit provides a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above, and audited by us, present fairly, in all material respects, the financial position of each of the respective portfolios constituting The Alger Fund at October 31, 2002, the results of their operations, the changes in their net assets, and the financial highlights for the period then ended in conformity with accounting principles generally accepted in the United States. Ernst & Young LLP New York, New York December 13, 2002 -66- Change in the Fund's certifying accountant In December 2001, the Board of Trustees of the Fund selected Arthur Andersen LLP ("Andersen") as its independent public accountant for the fiscal year ended October 31, 2002. At a special meeting held on July 3, 2002, the Board of the Fund, including a majority of the Trustees who are not "interested persons" (as defined in the Investment Company Act of 1940) of the Fund, elected to terminate the appointment of Andersen in light of recent events involving that firm and selected Ernst & Young LLP as the Fund's independent public accountant for the 2002 fiscal year. The decision to change accountants was approved by the Fund's Audit Committee. Andersen's reports on the Fund's financial statements for the Fund's two most recent fiscal years prior to the fiscal year ended October 31, 2002 contained no adverse opinion or disclaimer of opinion, and neither report was qualified or modified as to uncertainty, audit scope, or accounting principles. During those fiscal years and the subsequent period preceding Andersen's dismissal, there were no disagreements with Andersen on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, and there were no reportable events of the kinds listed in Item 304, paragraph (a)(1)(v), of Regulation S-K under the Securities Exchange Act of 1934. -67- Trustees and Officers of the Fund Information about the Trustees and officers of the Fund is set forth below. In the table the term "Alger Fund Complex" refers to the Fund, Spectra Fund, The Alger American Fund, The Alger Institutional Fund and Castle Convertible Fund, Inc., each of which is a registered investment company managed by Fred Alger Management, Inc. ("Alger Management"). Each Trustee serves until an event of termination, such as death or resignation, or until his successor is duly elected; each officer's term of office is one year. Unless otherwise noted, the address of each person named below is 111 Fifth Avenue, New York, NY 10003.
Number of Portfolios in the Alger Fund Trustee Complex Name, Age, Position with and/or which are Overseen the Fund and Address Principal Occupations Officer Since by Trustee - -------------------------------------------------------------------------------------------------------------------------- INTERESTED TRUSTEES Fred M. Alger III (67) Chairman of the Board and President of Alger 1986 22 Chairman of the Board Associates, Inc. ("Associates"), Fred Alger & and President Company, Incorporated ("Alger Inc."), Alger Management, Alger Properties, Inc. ("Properties"), Alger Shareholder Services, Inc. ("Services"), Alger Life Insurance Agency, Inc. ("Agency"), Fred Alger International Advisory S.A. ("International"), and the five funds in the Alger Fund Complex; Chairman of the Boards of Alger SICAV ("SICAV") and Analysts Resources, Inc. ("ARI"). James P. Connelly, Jr. (39) Executive Vice President of Alger Inc; Vice 2001 16 Vice Chairman of the Chairman of the Boards of four of the five funds Board in the Alger Fund Complex; Director of International and SICAV, Executive Vice President and Director of Alger National Trust Company ("Trust"). Dan C. Chung (40) Chief Investment Officer of Alger Management; 2001 16 Trustee Executive Vice President and Director of Associates, Alger Management, Alger Inc., Properties, Services, Agency, International, ARI and Trust; Trustee/ Director of four of the five funds in the Alger Fund Complex.
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Number of Portfolios in the Alger Fund Trustee Complex Name, Age, Position with and/or which are Overseen the Fund and Address Principal Occupations Officer Since by Trustee - -------------------------------------------------------------------------------------------------------------------------- NON-INTERESTED TRUSTEES Stephen E. O'Neil (70) Attorney; Private investor since 1981; Director 1986 22 Trustee of NAHC, Inc. and Brown-Forman Corporation; 200 East 66th Street Trustee/ Director of the five funds in the Alger New York, NY 10021 Fund Complex; formerly of Counsel to the law firm of Kohler & Barnes; formerly Director of Syntro Corporation. Charles F. Baird, Jr. (49) Managing Partner of North Castle Partners, a 2000 16 Trustee private equity securities group; Chairman of 183 East Putnam Avenue Equinox, Leiner Health Products, Elizabeth Arden Greenwich, CT 06830 Day Spas, Grand Expeditions and EAS; Trustee/Director of four of the five funds in the Alger Fund Complex. Formerly Managing Director of AEA Investors, Inc. Roger P. Cheever (57) Associate Dean of Development, Harvard 2000 16 Trustee University; Trustee/Director of four of the five 124 Mount Auburn Street funds in the Alger Fund Complex. Formerly Deputy Cambridge, MA 02138-5762 Director of the Harvard College Fund. Lester L. Colbert, Jr. (68) Private investor; Trustee/Director of four of 2000 16 Trustee the five funds in the Alger Fund Complex. 551 Fifth Avenue Formerly Chairman of the Board and Chief Suite 3800 Executive Officer of Xidex Corporation. New York, NY 10176 Nathan E. Saint-Amand, Medical doctor in private practice; Co-Partner 1986 22 M.D. (64) Fishers Island Partners; Member of the Board of Trustee the Manhattan Institute; Trustee/Director of the 2 East 88th Street five funds in the Alger Fund Complex. Formerly New York, NY 10128 Co-Chairman Special Projects Committee of Memorial Sloan Kettering.
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Number of Portfolios in the Alger Fund Trustee Complex Name, Age, Position with and/or which are Overseen the Fund and Address Principal Occupations Officer Since by Trustee - -------------------------------------------------------------------------------------------------------------------------- B. Joseph White (55) President, William Davidson Institute at the 1999 22 Trustee University of Michigan Business School; William 701 Tappan Street, D2253 K. Pierpont Collegiate Professor, University of Ann Arbor, MI 48109 Michigan Business School; Director, Gordon Food Service; Trustee and Chair, Audit Committee, Equity Residential Properties Trust; Director and Chair, Compensation Committee, Kelly Services, Inc.; Trustee/Director of the five funds in the Alger Fund Complex. OFFICERS Gregory S. Duch (51) Executive Vice President, Treasurer and Director 1989 N/A Treasurer of Alger Inc., Alger Management, Properties and Associates; Executive Vice President and Treasurer of ARI, Services and Agency; Treasurer and Director of International; Treasurer of the five funds in the Alger Fund Complex. Chairman of the Board of Trust. Dorothy G. Sanders (47) Senior Vice President, General Counsel and 2000 N/A Secretary Secretary of Alger, Inc., General Counsel and Secretary of Associates, Agency, Properties, Services, ARI and Alger Management; Secretary of International, and the five funds in the Alger Fund Complex. Formerly Senior Vice President, Fleet Financial Group. Frederick A. Blum (48) Senior Vice President of Alger Management; 1996 N/A Assistant Secretary and Assistant Treasurer and Assistant Secretary of Assistant Treasurer the five funds in the Alger Fund Complex. Director, Executive Vice President and Treasurer of Trust.
Messrs. Alger and Chung are "interested persons"(as defined in the Investment Company Act) of the Fund because of their affiliations with Alger Management and Alger Inc., the Fund's principal underwriter. Mr. Chung is Mr. Alger's son-in-law. Mr. Connelly is an interested person of the Fund because of his affiliation with Alger, Inc. No Trustee is a director of any public company except as may be indicated under "Principal Occupations." The Statement of Additional Information contains additional information about the Fund's Trustees and is available without charge upon request by calling (800) 992-3863. [This page intentionally left blank] THE ALGER FUND 111 Fifth Avenue 2nd Floor New York, NY 10003 (800) 992-3863 www.alger.com BOARD OF TRUSTEES Fred M. Alger, Chairman James P. Connelly, Jr., Vice Chairman Charles F. Baird, Jr. Roger P. Cheever Dan C. Chung Lester L. Colbert, Jr. Stephen E. O'Neil Nathan E. Saint-Amand B. Joseph White INVESTMENT MANAGER Fred Alger Management, Inc. 111 Fifth Avenue 2nd Floor New York, NY 10003 DISTRIBUTOR Fred Alger & Company, Incorporated 30 Montgomery Street Jersey City, NJ 07302 TRANSFER AGENT Alger Shareholder Services, Inc. 30 Montgomery Street Jersey City, NJ 07302 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. AAR102 THE ALGER FUND ALGER LARGECAP GROWTH PORTFOLIO ALGER SMALL CAPITALIZATION PORTFOLIO ALGER BALANCED PORTFOLIO ALGER MIDCAP GROWTH PORTFOLIO ALGER CAPITAL APPRECIATION PORTFOLIO ALGER HEALTH SCIENCES PORTFOLIO ALGER SMALLCAP AND MIDCAP PORTFOLIO ALGER MONEY MARKET PORTFOLIO ANNUAL REPORT OCTOBER 31, 2002 [LOGO] -----END PRIVACY-ENHANCED MESSAGE-----