-----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, FWjR+8MPhUS0FpGr9c7b6U8PgqEMUZacim8l1NFrmjc16gKumCdWGaRD01hMjVZ9 mjgFVSebCMlgHY2HwjzIgw== 0000930413-05-000148.txt : 20050110 0000930413-05-000148.hdr.sgml : 20050110 20050110163910 ACCESSION NUMBER: 0000930413-05-000148 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20041031 FILED AS OF DATE: 20050110 DATE AS OF CHANGE: 20050110 EFFECTIVENESS DATE: 20050110 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALGER FUNDS CENTRAL INDEX KEY: 0000003521 IRS NUMBER: 000000000 STATE OF INCORPORATION: MA FISCAL YEAR END: 1031 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-01355 FILM NUMBER: 05521317 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 FORMER COMPANY: FORMER CONFORMED NAME: ALGER FUND DATE OF NAME CHANGE: 19920703 N-CSR 1 c34185_ncsr.txt --------------------------- OMB APPROVAL --------------------------- OMB Number: 3235-0570 Expires: Nov. 30, 2005 Estimated average burden hours per response: 5.0 --------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-1355 The Alger Funds (Exact name of registrant as specified in charter) 111 Fifth Avenue New York, New York 10003 (Address of principal executive offices) (Zip code) Mr. Frederick A. Blum Fred Alger Management, Inc. 111 Fifth Avenue New York, New York 10003 (Name and address of agent for service) Registrant's telephone number, including area code:212-806-8800 Date of fiscal year end: October 31 Date of reporting period: October 31, 2004 ITEM 1. REPORT(S) TO STOCKHOLDERS. THE ALGER FUNDS (FORMERLY THE ALGER FUND) ALGER LARGECAP GROWTH FUND ALGER SMALLCAP GROWTH FUND ALGER BALANCED FUND ALGER MIDCAP GROWTH FUND ALGER CAPITAL APPRECIATION FUND ALGER HEALTH SCIENCES FUND ALGER SMALLCAP AND MIDCAP GROWTH FUND ALGER MONEY MARKET FUND ANNUAL REPORT OCTOBER 31, 2004 [LOGO] TABLE OF CONTENTS THE ALGER FUNDS Letter to Our Shareholders................................................. 1 Fund Highlights............................................................ 5 Shareholder Expense Example................................................ 12 Portfolio Summary.......................................................... 15 Schedules of Investments................................................... 16 Financial Highlights....................................................... 48 Statements of Assets and Liabilities....................................... 60 Statements of Operations................................................... 62 Statements of Changes in Net Assets........................................ 64 Notes to Financial Statements.............................................. 68 Report of Independent Registered Public Accounting Firm.................... 82 Dear Shareholders, December 6, 2004 THE YEAR IN REVIEW It was an unusual year for investing. Corporate profit growth has rarely been better, and both the U.S. and global economies expanded at a steady, stable clip with very low inflation for most of the year. But a tight presidential race, war in Iraq, rising energy and commodity prices, and continued investor skepticism kept the markets muted until November. The fiscal year began on a positive note, and through March, the markets responded positively to strong manufacturing activity and growing consumer confidence. In April the mood started to shift. Energy prices were on the rise, economic growth led to speculation (correct as it turned out) that the Fed would soon raise interest rates, and the situation in Iraq was not improving. Perhaps just as unsettling to the markets, job growth lagged the broader economic recovery. As a result, the markets retreated from their March peak and progressively moved lower until August. By autumn, manufacturing activity and consumer spending had slowed. The price of oil continued to rise and the Fed increased the short-term rate from 1.00% to 1.75% by fiscal year end (October 31, 2004). The close presidential race generated passion but also created uncertainty, and the markets remained range-bound until election day. It may be a cliche, but investors truly dislike uncertainty, and the markets only moved up significantly after the election was over. As a result, for the 12 months ended October 31, 2004, the equity markets experienced modest gains with the Dow gaining 4.46%, the Nasdaq up 2.68% and the S&P 500 up 9.42%. The yield on the U.S. Treasury 10-year note was 4.05% on October 31, compared to 4.30% a year earlier. PORTFOLIO MATTERS Alger SmallCap Growth Fund The Alger SmallCap Growth Fund gained 4.86% for the year ended October 31, 2004 while the Russell 2000 Growth Index returned 5.54%. Our holdings in the health care sector averaged 20% of the Fund, and we significantly outperformed the benchmark in this sector. Intuitive Surgical, a leader in surgical robotics, was among the top-performing holdings. Other top health care holdings included Immucor, which develops blood diagnostics, and Tularik Inc., whose primary focus is on oral drugs that use gene regulation to fight cancer, immune disorders and metabolic diseases. Dade Behring Holdings, which makes diagnostic testing kits, also contributed to the sector's positive performance. Our holdings in the financial sector outperformed the benchmark with the help of First Marblehead Corp., which provides services for student loan originators. Top energy holdings included oil and natural gas exploration and production company Tom Brown, Inc. and drilling equipment maker Varco International. Although our holdings in the industrials sector did quite well, we underperformed the benchmark. The Fund also -2- suffered from a number of underperforming stocks in the information technology sector including Fairchild Semiconductor, Intelligroup, Inc. and Chordiant Software. Alger MidCap Growth Fund For the year ended October 31, 2004, the Alger MidCap Growth Fund posted a return of 3.53%, while the Russell Midcap Growth Index increase 8.77%. Holdings in the consumer discretionary sector significantly underperformed the benchmark. The Fund suffered from DVD rental service Netflix, which felt the effect of increased competition and was forced to lower its subscription price. Sharper Image Corporation also detracted from Fund performance. However, XM Satellite Radio had an exceptional year and was a top contributor. Our technology holdings were down with disappointing returns from Teradyne, which develops semiconductor testing equipment, and Novellus Systems, a manufacturer of semiconductor production equipment. Health care stocks did quite well and outperformed the benchmark. Top performers included pharmaceutical firms Elan Corporation and Sepracor. Industrial sector holdings significantly outperformed the benchmark with strong returns from defense communications equipment supplier L-3 and freight shipper Yellow Roadway. Alger LargeCap Growth Fund The Alger LargeCap Growth Fund gained 1.32% for the fiscal year ended October 31, 2004, compared with a gain of 3.39% for the Russell 1000 Growth Index. Information technology holdings averaged above market weight and slightly underperformed the benchmark. The semiconductor and software industries performed poorly, notably Applied Materials, a developer of semiconductor production equipment, and Veritas, a provider of data management software. The exception was Google, which was the top-performing holding in the Fund. In the consumer discretionary sector, we were above market weight at 22% of the Fund and we outperformed the benchmark, with Starwood Hotels and Target two of the top contributors. Media companies also performed well, with the highest returns coming from XM Satellite Radio. In Internet retail, online auctioneer eBay was a top performer. A notable exception was online DVD rental service Netflix, which was hit hard after lowering its subscription price due to increased competition. In health care, we were below market weight and performed poorly. Our biotech holdings were particularly weak, with losses in ImClone, ICOS, and Millennium Pharmaceuticals. In financials, we were just below market weight and significantly outperformed the benchmark with a strong showing from investment management firms T. Rowe Price and Affiliated Managers Group. Alger Balanced Fund For the year ended October 31, 2004, the Alger Balanced Fund returned 1.69% while the Russell 1000 Growth Index returned 3.39% and the Lehman Brothers Government/Credit Bond Index rose 5.59%. Information technology stocks represented approximately a third of the equity portion of the portfolio. We significantly underperformed the benchmark in the health care sector because of our holdings in ImClone Systems and Millennium Pharmaceuticals. In consumer discretionary we were on par -3- with the Russell benchmark. However, eBay's solid performance was not enough to offset the loss sustained by our position in Netflix. Although our holdings in industrials were below market weight, the Fund outperformed the benchmark largely due to Tyco International. The fixed-income portion of the portfolio benefited from its overweight in corporate bonds. As the yield curve flattened, the Fund's overweighting in longer-dated Treasuries also added significantly to returns. The Fund was able to capitalize not only on shrinking credit spreads, but on falling long-term interest rates. Alger Health Sciences Fund With a return of 12.90% for the year ended October 31, 2004, the Alger Health Sciences Fund outperformed the Russell 3000 Growth Index, which returned 3.53%. Good stock selection helped us significantly outperform the benchmark. The top-performing industry was health care providers and services. The largest contributors were Sierra Health Services and United Health Group. Pharmaceutical stocks also outperformed. Notable contributors were Elan and Sepracor, while Par Pharmaceutical detracted from overall performance. Holdings in health care equipment and services also performed well, with the best returns coming from Advanced Medical Optics and Guidant Corp. Alger SmallCap and MidCap Growth Fund The Alger SmallCap and MidCap Growth Fund finished the fiscal year with a return of 4.05%, lagging the Russell 2500 Growth Index, which was up 6.14%. Health care was the largest contributing sector. Top performers included Intuitive Surgical, a leader in the field of surgical robotics, and eye care product supplier Advanced Medical Optics. Our information technology holdings were down for the year. Semiconductor stocks suffered the most, with disappointing returns from Fairchild Semiconductor and International Rectifier. IT services outperformed with an impressive showing from Kanbay International and Alliance Data Systems. In the industrials sector, Corinthian Colleges, a for-profit educational company, was a disappointment and hurt the Fund's overall return. The top contributor was First Marblehead, which provides financial services for student loan originators. Alger Capital Appreciation Fund For the fiscal year ended October 31, 2004, the Alger Capital Appreciation Fund lost 1.09% compared with a gain of 3.53% for the Russell 3000 Growth Index. Much of the underperformance was the result of being heavily overweighted in information technology. While we fared better than the benchmark in the information technology sector, our holdings were still down for the year. Semiconductor stocks were hit hardest, notably Kulicke & Soffa Industries, Novellus Systems, and Applied Materials. In software, Red Hat and Veritas also took big hits. Research in Motion Ltd., the creator of the widely-used handheld Blackberry communication product, was an exception. Our holdings in consumer discretionary did better, and we were above market weight. Satellite radio companies XM Satellite and Sirius both had an impressive year, -4- and online retailer eBay was among the top performers in the Fund. The exception here was online DVD rental service Netflix, which detracted from overall performance. LOOKING AHEAD For the first time in many years, we believe that the market is no longer gripped by the irrational exuberance of the late 1990s or the irrational pessimism of the first years of the new millennium. Instead, we think that this market will reward or penalize companies based on how well those companies perform. As a result, heading into 2005, we expect to see steady and rational gains with less volatility than in past years. In light of impressive corporate earnings growth and low interest rates, we believe that much of the market is undervalued, and that companies achieving solid, double-digit earnings should command better prices in the year ahead. At the same time, employment and wage gains are likely to be less impressive than corporate profit growth. Productivity remains high by historic averages, and companies have not needed to initiate substantial new hiring. In addition, higher energy prices look to be a mild check on what is otherwise a very robust economy. While the pace of growth should slow from its pace a year ago, corporate profits overall should grow in the high single-digits, with many companies significantly exceeding that. GDP growth should be at least 3%. Alger is celebrating its 40th anniversary of managing money, and our investment philosophy and process remain the same. This year, however, was a bit disappointing to us. Uncertainty trumped fundamentals, and our stocks didn't do as well as we had expected. Looking back, perhaps this was simply the "pause that refreshes." In the rally following the election, both the markets and our performance have picked up considerably. We think this is a positive harbinger for 2005. As always, we will continue to use our time-tested, disciplined approach in order to identify dynamic companies and invest in them. We value the trust you have placed in us, and we thank you. We look forward to the year ahead. Respectfully submitted, /s/ Dan C. Chung Dan C. Chung Chief Investment Officer -5- ALGER LARGECAP GROWTH FUND FUND HIGHLIGHTS THROUGH OCTOBER 31, 2004 (UNAUDITED) HYPOTHETICAL $10,000 INVESTMENT IN CLASS B SHARES -- 10 YEARS ENDED 10/31/04 [The following graph was depicted as a line chart in the printed materials.] [LINE CHART] Large Cap Russell 1000 11/1/1994 10000 10000 13778 12925 10/31/1996 14891 15774 18605 20580 10/31/1998 22419 25649 31233 34434 10/31/2000 33494 37646 24125 22613 10/31/2002 18070 18177 22596 22141 10/31/2004 22839 22891 The chart above illustrates the growth in value of a hypothetical $10,000 investment made in the Alger LargeCap Growth Class B shares and the Russell 1000 Growth Index for the ten years ended October 31, 2004. Figures for the Alger LargeCap Growth Class B shares and the Russell 1000 Growth 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. PERFORMANCE COMPARISON AS OF 10/31/04+ AVERAGE ANNUAL TOTAL RETURNS 1 5 10 SINCE YEAR YEARS YEARS INCEPTION - -------------------------------------------------------------------------------- CLASS A (INCEPTION 1/1/97) (3.33%) (6.63%) * 5.22% Russell 1000 Growth Index 3.39% (7.84%) * 4.16% - -------------------------------------------------------------------------------- CLASS B (INCEPTION 11/11/86) (3.68%) (6.60%) 8.61% 10.99% Russell 1000 Growth Index 3.39% (7.84%) 8.63% 10.18% - -------------------------------------------------------------------------------- CLASS C (INCEPTION 8/1/97) (0.80%) (6.50%) * 1.95% Russell 1000 Growth Index 3.39% (7.84%) * 0.78% - -------------------------------------------------------------------------------- THE FUND'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 FUND'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. -6- ALGER SMALLCAP GROWTH FUND FUND HIGHLIGHTS THROUGH OCTOBER 31, 2004 (UNAUDITED) HYPOTHETICAL $10,000 INVESTMENT IN CLASS B SHARES -- 10 YEARS ENDED 10/31/04 [The following graph was depicted as a line chart in the printed materials.] [LINE CHART] Alger Small Cap B Russell 2000 11/1/1994 10000 10000 14615 12056 10/31/1996 15079 13663 17016 16556 10/31/1998 15036 13932 19862 18012 10/31/2000 19782 20923 10490 14330 10/31/2002 8373 11240 11705 16470 10/31/2004 12280 17382 The chart above illustrates the growth in value of a hypothetical $10,000 investment made in the Alger SmallCap Growth Class B shares and the Russell 2000 Growth Index for the ten years ended October 31, 2004. Figures for both the Alger SmallCap Growth Class B shares and the Russell 2000 Growth Index (an unmanaged index of common stocks), include reinvestment of dividends. Performance for the Alger SmallCap Growth Class A and Class C shares will vary from the results shown above due to differences in expenses and sales charges those classes bear. PERFORMANCE COMPARISON AS OF 10/31/04+ AVERAGE ANNUAL TOTAL RETURNS 1 5 10 SINCE YEAR YEARS YEARS INCEPTION - -------------------------------------------------------------------------------- CLASS A (INCEPTION 1/1/97) 0.27% (9.71%) * (2.84%) Russell 2000 Growth Index 5.54% (0.71%) * 2.51% - -------------------------------------------------------------------------------- CLASS B (INCEPTION 11/11/86) (0.14%) (9.64%) 2.08% 8.63% Russell 2000 Growth Index 5.54% (0.71%) 5.68% 6.84% - -------------------------------------------------------------------------------- CLASS C (INCEPTION 8/1/97) 2.83% (9.59%) * (4.81%) Russell 2000 Growth Index 5.54% (0.71%) * 1.29% - -------------------------------------------------------------------------------- THE FUND'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 FUND'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. -7- ALGER BALANCED FUND FUND HIGHLIGHTS THROUGH OCTOBER 31, 2004 (UNAUDITED) HYPOTHETICAL $10,000 INVESTMENT IN CLASS B SHARES -- 10 YEARS ENDED 10/31/04 [The following graph was depicted as a line chart in the printed materials.] [LINE CHART] RUSSELL 1000 LEHMAN GOV'T/ ALGER BALANCED B GROWTH INDEX CREDIT BOND INDEX 11/1/1994 10000 10000 10002 12761 12925 11615 10/31/1996 13559 15774 12242 16168 20580 13320 10/31/1998 18894 25649 14688 24849 34434 14592 10/31/2000 27173 37646 15630 23921 22613 18025 10/31/2002 20847 18177 19012 24426 22141 20187 10/31/2004 25202 22891 21295 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 and the Lehman Brothers Government/Credit Bond Index for the ten years ended October 31, 2004. Figures for the Alger Balanced Class B shares, the Russell 1000 Growth 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. PERFORMANCE COMPARISON AS OF 10/31/04+ AVERAGE ANNUAL TOTAL RETURNS 1 5 10 SINCE YEAR YEARS YEARS INCEPTION - -------------------------------------------------------------------------------- CLASS A (INCEPTION 1/1/97) (2.88%) (0.63%) * 7.73% Russell 1000 Growth Index 3.39% 7.84% * 4.16% Lehman Gov't/Credit Bond Index 5.59% 7.87% * 7.23% - -------------------------------------------------------------------------------- CLASS B (INCEPTION 6/1/92) (3.31%) (0.65%) 9.68% 8.38% Russell 1000 Growth Index 3.39% 7.84% 8.63% 8.24% Lehman Gov't/Credit Bond Index 5.59% 7.87% 7.85% 7.37% - -------------------------------------------------------------------------------- CLASS C (INCEPTION 8/1/97) (0.28%) (0.50%) * 5.40% Russell 1000 Growth Index 3.39% 7.84% * 0.78% Lehman Gov't/Credit Bond Index 5.59% 7.87% * 6.99% - -------------------------------------------------------------------------------- THE FUND'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 FUND'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- ALGER MIDCAP GROWTH FUND FUND HIGHLIGHTS THROUGH OCTOBER 31, 2004 (UNAUDITED) HYPOTHETICAL $10,000 INVESTMENT IN CLASS B SHARES -- 10 YEARS ENDED 10/31/04 [The following graph was depicted as a line chart in the printed materials.] [LINE CHART] ALGER MIDCAP RUSSELL MIDCAP GROWTH B GROWTH INDEX 11/1/1994 10000 10000 14832 12423 10/31/1996 15785 14654 19158 18260 10/31/1998 20354 18703 26935 25750 10/31/2000 39438 35706 30564 20430 10/31/2002 24057 16832 33435 23447 10/31/2004 34573 25505 The chart above illustrates the growth in value of a hypothetical $10,000 investment made in Alger MidCap Growth Class B shares and Russell Midcap Growth Index for the ten years ended October 31, 2004. Figures for the Alger MidCap Growth Class B shares and Russell Midcap Growth Index (an unmanaged index of common stocks), include reinvestment of dividends. Performance for the Alger MidCap Growth Class A and Class C shares will vary from the results shown above due to differences in expenses and sales charges those classes bear. PERFORMANCE COMPARISON AS OF 10/31/04+ AVERAGE ANNUAL TOTAL RETURNS 1 5 10 SINCE YEAR YEARS YEARS INCEPTION - -------------------------------------------------------------------------------- CLASS A (INCEPTION 1/1/97) (1.24%) 4.50% * 10.02% Russell Midcap Growth Index 8.77% (0.19%) * 6.78% - -------------------------------------------------------------------------------- CLASS B (INCEPTION 5/24/93) (1.47%) 4.53% 13.21% 14.20% Russell Midcap Growth Index 8.77% (0.19%) 9.82% 9.61% - -------------------------------------------------------------------------------- CLASS C (INCEPTION 8/1/97) 1.52% 4.60% * 7.99% Russell Midcap Growth Index 8.77% (0.19%) * 4.54% - -------------------------------------------------------------------------------- THE FUND'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 FUND'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. -9- ALGER CAPITAL APPRECIATION FUND FUND HIGHLIGHTS THROUGH OCTOBER 31, 2004 (UNAUDITED) HYPOTHETICAL $10,000 INVESTMENT IN CLASS B SHARES -- 10 YEARS ENDED 10/31/04 [The following graph was depicted as a line chart in the printed materials.] [LINE CHART] Alger Capital Russell 3000 11/1/1994 10000 10000 16760 12835 10/31/1996 20024 15548 24229 20157 10/31/1998 26617 24267 43382 32494 10/31/2000 48415 35679 30429 21642 10/31/2002 22913 17368 28687 21422 10/31/2004 28356 22178 The chart above illustrates the growth in value of a hypothetical $10,000 investment made in Alger Capital Appreciation Class B shares and the Russell 3000 Growth Index for the ten years ended October 31, 2004. Figures for the Alger Capital Appreciation Class B shares and the Russell 3000 Growth Index (an unmanaged index of common stocks), include reinvestment of dividends. Performance for Alger Capital Appreciation Class A and Class C shares will vary from the results shown above due to differences in expenses and sales charges those classes bear. PERFORMANCE COMPARISON AS OF 10/31/04+ AVERAGE ANNUAL TOTAL RETURNS 1 5 10 SINCE YEAR YEARS YEARS INCEPTION - -------------------------------------------------------------------------------- CLASS A (INCEPTION 1/1/97) (5.62%) (8.73%) * 4.32% Russell 3000 Growth Index 3.53% (7.35%) * 3.94% - -------------------------------------------------------------------------------- CLASS B (INCEPTION 11/1/93) (6.04%) (8.75%) 10.99% 11.06% Russell 3000 Growth Index 3.53% (7.35%) 8.29% 7.97% - -------------------------------------------------------------------------------- CLASS C (INCEPTION 8/1/97) (3.20%) (8.63%) * 0.95% Russell 3000 Growth Index 3.53% (7.35%) * 0.76% - -------------------------------------------------------------------------------- THE FUND'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 FUND'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. -10- ALGER HEALTH SCIENCES FUND FUND HIGHLIGHTS THROUGH OCTOBER 31, 2004 (UNAUDITED) HYPOTHETICAL $10,000 INVESTMENT IN CLASS B SHARES FROM 5/01/02 TO 10/31/04 [The following graph was depicted as a line chart in the printed materials.] [LINE CHART] ALGER HEALTH RUSSELL 3000 SCIENCES B GROWTH INDEX 5/1/2002 10000 10000 10/31/2002 9260 8133 10/31/2003 11780 10032 10/31/2004 13300 10385 The chart above illustrates the change in value of a hypothetical $10,000 investment made in Alger Health Sciences Class B shares and the Russell 3000 Growth Index on May 1, 2002, the inception date of the Alger Health Sciences Fund, through October 31, 2004. 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 10/31/04+ AVERAGE ANNUAL TOTAL RETURNS 1 SINCE YEAR INCEPTION - ------------------------------------------------------------------------------- CLASS A (INCEPTION 5/1/02) 7.73% 10.48% Russell 3000 Growth Index 3.53% 1.53% - ------------------------------------------------------------------------------- CLASS B (INCEPTION 5/1/02) 7.90% 10.72% Russell 3000 Growth Index 3.53% 1.53% - ------------------------------------------------------------------------------- CLASS C (INCEPTION 5/1/02) 10.78% 11.63% Russell 3000 Growth Index 3.53% 1.53% - ------------------------------------------------------------------------------- THE FUND'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 FUND'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. -11- ALGER SMALLCAP AND MIDCAP GROWTH FUND FUND HIGHLIGHTS THROUGH OCTOBER 31, 2004 (UNAUDITED) HYPOTHETICAL $10,000 INVESTMENT IN CLASS B SHARES FROM 5/8/02 TO 10/31/04 [The following graph was depicted as a line chart in the printed materials.] [LINE CHART] -- PLOT POINTS TO COME -- The chart above illustrates the change in value of a hypothetical $10,000 investment made in Alger SmallCap and MidCap Growth Class B shares and the Russell 2500 Growth Index on May 8, 2002, the inception date of the Alger SmallCap and MidCap Growth Fund, through October 31, 2004. Figures for both the Alger SmallCap and MidCap Growth 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 Growth Class A and Class C shares will vary from the results shown above due to differences in expenses and sales charges those classes bear. PERFORMANCE COMPARISON AS OF 10/31/04+ AVERAGE ANNUAL TOTAL RETURNS 1 SINCE YEAR INCEPTION - -------------------------------------------------------------------------------- CLASS A (INCEPTION 5/8/02) (0.59%) (0.36%) Russell 2500 Growth Index 6.14% 5.50% - -------------------------------------------------------------------------------- CLASS B (INCEPTION 5/8/02) (0.95%) (0.53%) Russell 2500 Growth Index 6.14% 5.50% - -------------------------------------------------------------------------------- CLASS C (INCEPTION 5/8/02) 2.13% 0.67% Russell 2500 Growth Index 6.14% 5.50% - -------------------------------------------------------------------------------- THE FUND'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 FUND'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. -12- THE ALGER FUNDS SHAREHOLDER EXPENSE EXAMPLE (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: transaction costs, if applicable, including sales charges (loads) and redemption fees; and ongoing costs, including management fees, distribution (12b-1) fees, if applicable, and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example below is based on an investment of $1,000 invested at the beginning of the six-month period starting May 1, 2004 and ending October 31, 2004. ACTUAL EXPENSES The first line for each class of shares in the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you would have paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During the Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line for each class of shares in the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratios for each class of shares and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (loads) and redemption fees. Therefore, the second line under each class of shares in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. -13- THE ALGER FUNDS SHAREHOLDER EXPENSE EXAMPLE (UNAUDITED) (CONTINUED)
Ratio of Expenses Expenses to Beginning Ending Paid During Average Account Account the Period Net Assets Value Value May 1, 2004 Year Ended May 1, October 31, to October 31, October 31, 2004 2004 2004(b) 2004 --------- ----------- -------------- ----------- ALGER LARGECAP GROWTH FUND CLASS A ACTUAL .............. $1,000.00 $ 997.80 $ 6.73 1.34% HYPOTHETICAL(A) ..... 1,000.00 1,018.40 6.80 1.34% CLASS B ACTUAL .............. 1,000.00 994.10 10.48 2.09% HYPOTHETICAL(A) ..... 1,000.00 1,014.63 10.58 2.09% CLASS C ACTUAL .............. 1,000.00 994.10 10.48 2.09% HYPOTHETICAL(A) ..... 1,000.00 1,014.63 10.58 2.09% ALGER SMALLCAP GROWTH FUND CLASS A ACTUAL .............. $1,000.00 $ 997.60 $ 8.49 1.69% HYPOTHETICAL(A) ..... 1,000.00 1,016.64 8.57 1.69% CLASS B ACTUAL .............. 1,000.00 994.90 12.19 2.43% HYPOTHETICAL(A) ..... 1,000.00 1,012.92 12.30 2.43% CLASS C ACTUAL .............. 1,000.00 994.90 12.24 2.44% HYPOTHETICAL(A) ..... 1,000.00 1,012.87 12.35 2.44% ALGER BALANCED FUND CLASS A ACTUAL .............. $1,000.00 $1,007.60 $ 6.36 1.26% HYPOTHETICAL(A) ..... 1,000.00 1,018.80 6.39 1.26% CLASS B ACTUAL .............. 1,000.00 1,003.90 10.12 2.01% HYPOTHETICAL(A) ..... 1,000.00 1,015.03 10.18 2.01% CLASS C ACTUAL .............. 1,000.00 1,003.90 10.12 2.01% HYPOTHETICAL(A) ..... 1,000.00 1,015.03 10.18 2.01% ALGER MIDCAP GROWTH FUND CLASS A ACTUAL .............. $1,000.00 $1,019.40 $ 6.80 1.34% HYPOTHETICAL(A) ..... 1,000.00 1,018.40 6.80 1.34% CLASS B ACTUAL .............. 1,000.00 1,015.20 10.59 2.09% HYPOTHETICAL(A) ..... 1,000.00 1,014.63 10.58 2.09% CLASS C ACTUAL .............. 1,000.00 1,015.30 10.59 2.09% HYPOTHETICAL(A) ..... 1,000.00 1,014.63 10.58 2.09% ALGER CAPITAL APPRECIATION FUND CLASS A ACTUAL .............. $1,000.00 $ 985.90 $ 7.89 1.58% HYPOTHETICAL(A) ..... 1,000.00 1,017.19 8.01 1.58% CLASS B ACTUAL .............. 1,000.00 983.70 11.62 2.33% HYPOTHETICAL(A) ..... 1,000.00 1,013.42 11.79 2.33% CLASS C ACTUAL .............. 1,000.00 982.30 11.61 2.33% HYPOTHETICAL(A) ..... 1,000.00 1,013.42 11.79 2.33% ALGER HEALTH SCIENCES FUND CLASS A ACTUAL .............. $1,000.00 $ 956.10 $ 7.62 1.55% HYPOTHETICAL(A) ..... 1,000.00 1,017.34 7.86 1.55% CLASS B ACTUAL .............. 1,000.00 952.60 11.24 2.29% HYPOTHETICAL(A) ..... 1,000.00 1,013.62 11.59 2.29% CLASS C ACTUAL .............. 1,000.00 952.60 11.24 2.29% HYPOTHETICAL(A) ..... 1,000.00 1,013.62 11.59 2.29%
-14- THE ALGER FUNDS SHAREHOLDER EXPENSE EXAMPLE (UNAUDITED) (CONTINUED)
Ratio of Expenses Expenses to Beginning Ending Paid During Average Account Account the Period Net Assets Value Value May 1, 2004 Year Ended May 1, October 31, to October 31, October 31, 2004 2004 2004(b) 2004 --------- ----------- -------------- ----------- ALGER SMALLCAP AND MIDCAP GROWTH FUND CLASS A ACTUAL .................. $1,000.00 $1,021.50 $ 7.77 1.53% HYPOTHETICAL(A) ......... 1,000.00 1,017.44 7.76 1.53% CLASS B ACTUAL .................. 1,000.00 1,017.80 11.51 2.27% HYPOTHETICAL(A) ......... 1,000.00 1,013.72 11.49 2.27% CLASS C ACTUAL .................. 1,000.00 1,017.80 11.56 2.28% HYPOTHETICAL(A) ......... 1,000.00 1,013.67 11.54 2.28% ALGER MONEY MARKET FUND ACTUAL .................. $1,000.00 1,003.00 $ 3.88 0.77% HYPOTHETICAL(A) ......... 1,000.00 1,021.27 3.91 0.77%
- ---------- (a) 5% annual return before expenses. (b) Expenses are equal to the annualized expense ratio of the respective share class, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). -15- THE ALGER FUNDS PORTFOLIO SUMMARY* (UNAUDITED)
SMALLCAP AND LARGECAP SMALLCAP MIDCAP CAPITAL HEALTH MIDCAP GROWTH GROWTH GROWTH APPRECIATION SCIENCES GROWTH SECTORS FUND FUND FUND FUND FUND FUND - ------- -------- -------- ------ ------------ -------- -------- Consumer Discretionary ........... 21.9% 14.4% 16.2% 15.5% 0.0% 16.0% Consumer Staples ................. 3.4 1.3 1.5 1.6 1.2 1.9 Energy ........................... 7.4 4.7 7.8 7.1 0.0 4.7 Financials ....................... 6.3 10.2 8.7 3.5 0.7 9.2 Health Care ...................... 18.5 21.0 21.6 22.5 90.7 23.1 Industrials ...................... 6.2 15.4 7.7 8.5 0.0 14.8 Information Technology ........... 31.7 26.0 29.0 31.8 0.0 23.9 Materials ........................ 2.1 2.4 2.8 3.1 0.5 3.5 Telecommunication Services ....... 2.2 1.0 2.1 0.9 0.0 1.4 Cash and Net Other Assets ........ 0.3 3.6 2.6 5.5 6.9 1.5 ----- ----- ----- ----- ----- ----- 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% ===== ===== ===== ===== ===== ===== SECTORS/SECURITY TYPES BALANCED FUND - ---------------------- ------------- Consumer Discretionary .......................................................... 12.1% Consumer Staples ................................................................ 3.1 Energy .......................................................................... 5.4 Financials ...................................................................... 5.1 Health Care ..................................................................... 11.1 Industrials ..................................................................... 3.4 Information Technology .......................................................... 20.3 Materials ....................................................................... 2.7 Telecommunications Services ..................................................... 1.5 ----- Total Common Stocks ........................................................... 64.7 ----- Corporate Obligations ........................................................... 13.6 U.S. Agency Obligations ......................................................... 7.7 U.S. Treasury Obligations ....................................................... 10.6 ----- Total Obligations ............................................................. 31.9 ----- Cash and Net Other Assets ....................................................... 3.4 ----- 100.0% ===== MONEY MARKET DAYS TO MATURITY FUND - ---------------- ------------ 0 to 30 ......................................................................... 93.7% 31 to 60 ........................................................................ 6.3 ----- 100.0% =====
- ---------- * Based on net assets for each Fund, except for Money Market Fund which is based on total investments. -16- THE ALGER FUNDS ALGER LARGECAP GROWTH FUND SCHEDULE OF INVESTMENTS October 31, 2004 COMMON STOCKS--99.7% SHARES VALUE ------ ----- BIOTECHNOLOGY--7.6% Biogen Idec Inc.* ................................ 134,400 $ 7,816,704 Genentech, Inc.* ................................. 73,700 3,355,561 Genzyme Corporation General Division* ............ 71,100 3,730,617 Gilead Sciences, Inc. * .......................... 238,450 8,257,524 ImClone Systems Incorporated* .................... 91,450 4,005,510 OSI Pharmaceuticals, Inc.* ....................... 153,500 9,974,430 ------------ 37,140,346 ------------ CAPITAL MARKETS--2.7% Affiliated Managers Group, Inc.* ................. 86,537 4,832,226 Bank of New York Company, Inc. (The) ............. 80,150 2,601,669 T. Rowe Price Group Inc. ......................... 103,000 5,744,310 ------------ 13,178,205 ------------ CHEMICALS--2.1% Dow Chemical Company (The) ....................... 233,400 10,488,996 ------------ COMMERCIAL BANKS--1.0% Wells Fargo & Company ............................ 83,100 4,962,732 ------------ COMMUNICATION EQUIPMENT--7.4% Avaya Inc.* ...................................... 453,800 6,534,720 Cisco Systems, Inc.* ............................. 568,120 10,913,585 Ericsson(LM)Telephone Co. Cl. B ADR*# ............ 127,300 3,680,243 Motorola, Inc. ................................... 563,700 9,729,462 Research In Motion Limited* ...................... 60,400 5,327,280 ------------ 36,185,290 ------------ COMPUTERS & PERIPHERALS--2.9% Apple Computer, Inc.* ............................ 79,200 4,160,376 EMC Corporation* ................................. 771,800 9,933,066 ------------ 14,093,442 ------------ CONSUMER FINANCE--1.5% American Express Company ......................... 139,650 7,411,226 ------------ DIVERSIFIED FINANCIAL SERVICES--1.0% Lehman Brothers Holdings Inc. .................... 62,300 5,117,945 ------------ ELECTRONIC EQUIPMENT & INSTRUMENTS--1.3% Symbol Technologies, Inc. ........................ 434,100 6,376,929 ------------ ENERGY EQUIPMENT & SERVICES--3.1% National-Oilwell, Inc.* .......................... 148,600 5,009,306 Schlumberger Limited ............................. 158,200 9,957,108 ------------ 14,966,414 ------------ FOOD & STAPLES RETAILING--3.4% CVS Corporation .................................. 206,100 8,957,106 Wal-Mart Stores, Inc. ............................ 141,050 7,605,416 ------------ 16,562,522 ------------ FREIGHT & LOGISTICS--1.6% FedEx Corp. ...................................... 85,600 7,799,871 ------------ -17- THE ALGER FUNDS ALGER LARGECAP GROWTH FUND SCHEDULE OF INVESTMENTS (CONTINUED) October 31, 2004 COMMON STOCKS--(CONT.) SHARES VALUE ------ ----- HEALTH CARE EQUIPMENT & SUPPLIES--3.2% Boston Scientific Corporation* ................... 130,100 $ 4,592,530 Guidant Corporation .............................. 92,100 6,135,702 Medtronic, Inc. .................................. 95,000 4,855,450 ------------ 15,583,682 ------------ HEALTH CARE PROVIDERS & SERVICES--2.2% Caremark Rx, Inc.* ............................... 125,050 3,747,749 UnitedHealth Group Incorporated .................. 94,300 6,827,320 ------------ 10,575,069 ------------ HOTELS, RESTAURANTS & LEISURE--3.0% Carnival Corporation ............................. 145,300 7,346,368 MGM MIRAGE* ...................................... 23,100 1,242,780 Starwood Hotels & Resorts Worldwide, Inc. ........ 128,400 6,128,532 ------------ 14,717,680 ------------ INDUSTRIAL CONGLOMERATES--4.6% General Electric Company ......................... 286,200 9,765,144 Tyco International Ltd. .......................... 403,800 12,578,370 ------------ 22,343,514 ------------ INFORMATION TECHNOLOGY SERVICES--1.0% Automatic Data Processing, Inc. .................. 108,300 4,699,136 ------------ INTERNET & CATALOG RETAIL--5.8% eBay Inc.* ....................................... 179,060 17,478,047 IAC/InterActiveCorp.* ............................ 263,900 5,705,518 Netflix Inc.* .................................... 561,000 5,312,670 ------------ 28,496,235 ------------ INTERNET SOFTWARE & SERVICES--6.4% Google Inc. Cl A* ................................ 38,400 7,323,072 VeriSign, Inc.* .................................. 264,400 7,093,852 Yahoo! Inc.* ..................................... 462,300 16,730,637 ------------ 31,147,561 ------------ MACHINERY--OIL WELL EQUIPMENT & SERVICES -- .7% Patterson-UTI Energy, Inc. ....................... 181,100 3,482,553 ------------ MEDIA--6.7% DreamWorks Animation SKG, Inc.* .................. 12,000 468,600 Time Warner Inc.* ................................ 662,900 11,030,656 Viacom Inc. Cl. B ................................ 284,300 10,374,107 XM Satellite Radio Holdings Inc. Cl. A* .......... 343,500 11,101,920 ------------ 32,975,283 ------------ MULTILINE RETAIL--3.3% Target Corporation ............................... 318,250 15,918,865 ------------ OIL & GAS--3.6% BP PLC Sponsored ADR# ............................ 112,050 6,526,913 Devon Energy Corporation ......................... 64,920 4,802,132 EOG Resources, Inc. .............................. 70,600 4,699,136 Sasol ADR ........................................ 74,600 1,501,698 ------------ 17,529,879 ------------ -18- THE ALGER FUNDS ALGER LARGECAP GROWTH FUND SCHEDULE OF INVESTMENTS (CONTINUED) October 31, 2004 COMMON STOCKS--(CONT.) SHARES VALUE ------ ----- PHARMACEUTICALS--5.5% Abbott Laboratories .............................. 244,450 $ 10,420,904 IVAX Corporation* ................................ 529,050 9,575,805 Sepracor Inc.* ................................... 154,050 7,075,516 ------------ 27,072,225 ------------ SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--6.6% Altera Corporation * ............................. 109,300 2,484,389 Analog Devices, Inc. ............................. 220,300 8,869,278 Applied Materials, Inc.* ......................... 321,000 5,168,100 Freescale Semiconductor Inc. Cl. A* .............. 307,200 4,773,888 Intel Corporation ................................ 301,300 6,706,938 Linear Technology Corporation .................... 109,950 4,164,906 ------------ 32,167,499 ------------ SOFTWARE--7.0% Electronic Arts Inc.* ............................ 27,300 1,226,316 Microsoft Corporation ............................ 824,130 23,067,399 Oracle Corporation* .............................. 388,500 4,918,410 VERITAS Software Corporation * ................... 234,500 5,130,860 ------------ 34,342,985 ------------ SPECIALTY RETAIL--3.0% Bed Bath & Beyond Inc.* .......................... 184,800 7,537,992 Lowe's Companies, Inc. ........................... 128,800 7,248,864 ------------ 14,786,856 ------------ WIRELESS TELECOMMUNICATION SERVICES -- 1.5% Sprint Corporation ............................... 341,400 7,152,330 ------------ Total Common Stocks (Cost $454,195,426) ............................ 487,275,270 ------------ PRINCIPAL SHORT-TERM INVESTMENTS--2.4% AMOUNT --------- U.S. AGENCY OBLIGATIONS Federal Home Loan Banks, 1.65%, 11/1/2004 (Cost $11,700,000) ............................ $11,700,000 11,700,000 ------------ Total Investments (Cost $465,895,426)(a) ........................ 102.1% 498,975,270 Liabilities in Excess of Other Assets ........... (2.1) (10,095,708) ----------- ------------ Net Assets ...................................... 100.0% $488,879,562 =========== ============ - ---------- * Non-income producing securities. # American Depositary Receipts. (a) At October 31, 2004, the net unrealized appreciation on investments, based on cost for federal income tax purposes of $470,001,770 amounted to $28,973,500 which consisted of aggregate gross unrealized appreciation of $46,436,698 and aggregate gross unrealized depreciation of $17,463,198. See Notes to Financial Statements. -19- THE ALGER FUNDS ALGER SMALLCAP GROWTH FUND SCHEDULE OF INVESTMENTS October 31, 2004 COMMON STOCKS--96.4% SHARES VALUE ------ ----- AEROSPACE & DEFENSE--3.3% Alliant Techsystems Inc.* ...................... 33,250 $ 1,911,543 BE Aerospace, Inc.* ............................ 190,200 1,631,916 SI International Inc.* ......................... 63,500 1,646,555 ------------ 5,190,014 ------------ AIRLINES--1.2% AirTran Holdings, Inc.* ........................ 161,400 1,875,468 ------------ BIOTECHNOLOGY--4.7% Encysive Pharmaceuticals Inc.* ................. 145,700 1,271,961 Ligand Pharmaceuticals Incorporated Cl. B* ..... 85,350 760,895 QLT Inc.* ...................................... 79,200 1,318,680 Serologicals Corporation* ...................... 50,300 1,189,595 Theravance, Inc.* .............................. 73,000 1,238,810 Vicuron Pharmaceuticals Inc.* .................. 112,900 1,582,858 ------------ 7,362,799 ------------ BUSINESS SERVICES--.8% MicroStrategy Incorporated* .................... 21,900 1,313,562 ------------ CAPITAL MARKETS--3.3% Affiliated Managers Group, Inc.* ............... 33,425 1,866,452 National Financial Partners Corporation ........ 57,500 1,767,550 Piper Jaffray Companies, Inc.* ................. 34,050 1,489,007 ------------ 5,123,009 ------------ CHEMICALS--1.3% Lubrizol Corporation ........................... 57,900 2,010,867 ------------ COMMERCIAL BANKS--3.3% Boston Private Financial Holdings, Inc. ........ 11,100 272,394 East West Bancorp, Inc. ........................ 57,600 2,306,304 Southwest Bancorporation of Texas, Inc. ........ 52,800 1,237,632 Westcorp ....................................... 36,450 1,455,084 ------------ 5,271,414 ------------ COMMERCIAL SERVICES & SUPPLIES--4.5% CoStar Group Inc.* ............................. 42,600 1,719,762 Education Management Corporation* .............. 65,200 1,748,664 First Marblehead Corporation (The)* ............ 22,300 1,195,280 FTI Consulting, Inc.* .......................... 41,200 772,912 Gevity HR, Inc. ................................ 94,000 1,674,140 ------------ 7,110,758 ------------ COMMUNICATION EQUIPMENT--1.9% Foundry Networks, Inc.* ........................ 81,500 988,595 NETGEAR, Inc.* ................................. 88,900 1,211,707 Powerwave Technologies, Inc.* .................. 110,900 828,423 ------------ 3,028,725 ------------ COMPUTERS & PERIPHERALS--2.3% Avid Technology, Inc.* ......................... 37,300 1,976,154 Silicon Image, Inc.* ........................... 119,100 1,631,670 ------------ 3,607,824 ------------ -20- THE ALGER FUNDS ALGER SMALLCAP GROWTH FUND SCHEDULE OF INVESTMENTS (CONTINUED) October 31, 2004 COMMON STOCKS--(CONT.) SHARES VALUE ------ ----- COMPUTER SERVICES--1.3% Open Solutions Inc.* ........................... 72,800 $ 2,050,411 ------------ COMPUTER TECHNOLOGY--1.5% Cogent Inc.* ................................... 41,050 785,451 NAVTEQ* ........................................ 39,800 1,604,338 ------------ 2,389,789 ------------ ELECTRIC AND ELECTRONIC EQUIPMENT--1.0% Roper Industries, Inc. ......................... 26,250 1,618,575 ------------ ELECTRONIC EQUIPMENT & INSTRUMENTS--.5% Trimble Navigation Limited* .................... 25,200 722,987 ------------ ENERGY--1.1% Arch Coal, Inc. ................................ 53,200 1,730,064 ------------ ENERGY EQUIPMENT & SERVICES--1.9% Core Laboratories N.V.* ........................ 59,700 1,480,560 Varco International, Inc.* ..................... 57,400 1,588,832 ------------ 3,069,392 ------------ FINANCIAL SERVICES--.8% Calamos Asset Management, Inc.* ................ 68,000 1,326,000 ------------ FOOD & STAPLES RETAILING--1.3% NeighborCare, Inc.* ............................ 81,800 2,096,534 ------------ HEALTH CARE EQUIPMENT & SUPPLIES--3.7% Immucor, Inc.* ................................. 67,200 2,073,120 INAMED Corporation* ............................ 27,800 1,477,570 Intuitive Surgical, Inc.* ...................... 61,550 1,796,029 Mentor Corporation ............................. 13,400 466,320 ------------ 5,813,039 ------------ HEALTH CARE PROVIDERS & SERVICES--7.1% Accredo Health, Incorporated* .................. 32,850 756,536 Centene Corporation* ........................... 43,400 2,058,462 Psychiatric Solutions, Inc.* ................... 73,850 1,879,483 Sierra Health Services, Inc.* .................. 48,600 2,319,192 Sunrise Senior Living Inc.* .................... 55,100 2,099,861 VCA Antech, Inc.* .............................. 94,000 2,107,480 ------------ 11,221,014 ------------ HOTELS, RESTAURANTS & LEISURE--3.6% Applebee's International, Inc. ................. 62,012 1,418,214 Aztar Corporation* ............................. 64,500 1,996,275 Red Robin Gourmet Burgers Inc.* ................ 43,550 1,816,471 Texas Roadhouse, Inc. Cl. A* ................... 22,800 524,856 ------------ 5,755,816 ------------ -21- THE ALGER FUNDS ALGER SMALLCAP GROWTH FUND SCHEDULE OF INVESTMENTS (CONTINUED) October 31, 2004 COMMON STOCKS--(CONT.) SHARES VALUE ------ ----- INFORMATION TECHNOLOGY SERVICES--2.9% Alliance Data Systems Corporation* ............. 28,100 $ 1,188,068 Global Payments Inc. ........................... 29,850 1,634,586 Kanbay International Inc.* ..................... 76,200 1,820,418 ------------ 4,643,072 ------------ INSURANCE--.7% Arch Capital Group Ltd.* ....................... 29,750 1,117,707 ------------ INTERNET & CATALOG RETAIL--2.3% Elong Inc.* .................................... 4,600 62,560 J. Jill Group Inc.* ............................ 93,600 1,645,488 Priceline.com Incorporated* .................... 96,500 1,924,210 ------------ 3,632,258 ------------ INTERNET SOFTWARE & SERVICES--3.5% Chordiant Software Inc.* ....................... 409,600 1,007,616 IVillage Inc.* ................................. 131,400 673,425 Openwave Systems, Inc.* ........................ 97,533 1,147,963 SonicWALL, Inc.* ............................... 244,900 1,224,500 ValueClick, Inc.* .............................. 151,450 1,406,971 ------------ 5,460,475 ------------ LEISURE EQUIPMENT & PRODUCTS--1.1% LIFE TIME FITNESS, Inc.* ....................... 77,600 1,808,080 ------------ MACHINERY--3.0% Actuant Corporation Cl. A* ..................... 38,200 1,515,394 Joy Global Inc. ................................ 41,900 1,415,801 Terex Corporation* ............................. 49,400 1,877,200 ------------ 4,808,395 ------------ MEDIA--2.5% Media General, Inc. Cl. A ...................... 29,570 1,723,931 Spanish Broadcasting System, Inc. Cl. A * ...... 214,900 2,174,788 ------------ 3,898,719 ------------ MEDICAL DEVICES--1.5% Advanced Medical Optics, Inc.* ................. 58,600 2,291,260 ------------ MEDICAL PRODUCTS--.6% Par Pharmaceutical Cos Inc.* ................... 25,000 986,250 ------------ OIL & GAS--2.7% General Maritime Corporation* .................. 29,800 1,132,400 Grey Wolf, Inc.* ............................... 237,800 1,231,804 Todco Cl. A* ................................... 112,934 1,916,490 ------------ 4,280,694 ------------ PHARMACEUTICALS--2.3% Eyetech Pharmaceuticals Inc.* .................. 15,800 670,552 Impax Laboratories, Inc.* ...................... 117,000 1,726,920 Pharmion Corp.* ................................ 25,800 1,185,510 ------------ 3,582,982 ------------ -22- THE ALGER FUNDS ALGER SMALLCAP GROWTH FUND SCHEDULE OF INVESTMENTS (CONTINUED) October 31, 2004 COMMON STOCKS--(CONT.) SHARES VALUE ------ ----- ROAD & RAIL--.8% Landstar Systems, Inc.* ........................ 18,200 $ 1,236,508 ------------ SEMICONDUCTOR CAPITAL EQUIPMENT--.9% SiRF Technology Holdings, Inc.* ................ 117,800 1,394,752 ------------ SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--5.0% AMIS Holdings, Inc.* ........................... 83,700 1,272,240 Axcelis Technologies, Inc.* .................... 147,800 1,271,080 Brooks Automation, Inc.* ....................... 53,600 797,568 Integrated Circuit Systems, Inc.* .............. 51,550 1,162,453 Semtech Corporation* ........................... 96,250 2,009,700 Sigmatel Incorporated* ......................... 45,400 1,339,300 ------------ 7,852,341 ------------ SOFTWARE--6.6% Cerner Corporation* ............................ 41,750 1,885,013 Fair Isaac Corporation ......................... 64,280 1,941,256 Hyperion Solutions Corporation* ................ 53,700 2,154,980 Micromuse Inc.* ................................ 292,000 1,252,680 Quest Software, Inc. * ......................... 84,350 1,237,415 Take-Two Interactive Software, Inc.* ........... 60,350 1,989,136 ------------ 10,460,480 ------------ SPECIALTY RETAIL--3.6% AnnTaylor Stores Corporation* .................. 77,737 1,745,973 Guitar Center, Inc.* ........................... 41,950 1,872,229 PETCO Animal Supplies, Inc.* ................... 56,100 2,006,697 ------------ 5,624,899 ------------ TEXTILES, APPAREL & LUXURY GOODS--1.3% Quiksilver, Inc.* .............................. 77,900 2,122,775 ------------ THRIFTS & MORTGAGE FINANCE--1.4% Bank Mutual Corporation ........................ 173,524 2,130,875 ------------ TRADING COMPANIES & DISTRIBUTORS--1.3% MSC Industrial Direct Co., Cl. A ............... 59,700 2,038,157 ------------ TRANSPORTATION SERVICES--1.0% Sirva Inc.* .................................... 66,600 1,598,400 ------------ WIRELESS TELECOMMUNICATION SERVICES--1.0% SpectraSite, Inc.* ............................. 31,500 1,615,950 ------------ Total Common Stocks (Cost $138,753,168) .......................... 152,273,090 ------------ -23- THE ALGER FUNDS ALGER SMALLCAP GROWTH FUND SCHEDULE OF INVESTMENTS (CONTINUED) October 31, 2004 PRINCIPAL SHORT-TERM INVESTMENTS--4.6% AMOUNT VALUE --------- ----- U.S. AGENCY OBLIGATIONS Federal Home Loan Banks, 1.65%, 11/1/2004 (Cost $7,200,000) ............................ $7,200,000 $ 7,200,000 ------------ Total Investments (Cost $145,953,168)(a) ....................... 101.0% 159,473,090 Liabilities in Excess of Other Assets .......... (1.0) (1,608,984) --------- ------------ Net Assets ..................................... 100.0% $157,864,106 ========= ============ - ---------- * Non-income producing securities. (a) At October 31, 2004, the net unrealized appreciation on investments, based on cost for federal income tax purposes of $146,222,331 amounted to $13,250,759 which consisted of aggregate gross unrealized appreciation of $19,492,420 and aggregate gross unrealized depreciation of $6,241,661. See Notes to Financial Statements. -24- THE ALGER FUNDS ALGER BALANCED FUND SCHEDULE OF INVESTMENTS October 31, 2004 COMMON STOCKS--64.7% SHARES VALUE ------ ----- BIOTECHNOLOGY--4.9% Biogen Idec Inc.* .............................. 30,500 $ 1,773,880 Genentech, Inc.* ............................... 21,500 978,895 Genzyme Corporation General Division* .......... 21,100 1,107,116 Gilead Sciences, Inc.* ......................... 72,100 2,496,823 ImClone Systems Incorporated* .................. 32,800 1,436,640 OSI Pharmaceuticals, Inc.* ..................... 44,900 2,917,602 ------------ 10,710,956 ------------ CAPITAL MARKETS--1.7% Affiliated Managers Group, Inc.* ............... 26,150 1,460,215 Bank of New York Company, Inc. (The) ........... 23,200 753,072 T. Rowe Price Group Inc. ....................... 28,200 1,572,714 ------------ 3,786,001 ------------ CHEMICALS--1.3% Dow Chemical Company (The) ..................... 61,250 2,752,574 ------------ COMMERCIAL BANKS--1.7% Wells Fargo & Company .......................... 24,550 1,466,126 Zions Bancorporation ........................... 34,750 2,299,408 ------------ 3,765,534 ------------ COMMUNICATION EQUIPMENT--4.1% Avaya Inc.* .................................... 132,500 1,908,000 Cisco Systems, Inc.* ........................... 81,750 1,570,418 Ericsson(LM)Telephone Co. Cl. B ADR*# .......... 37,200 1,075,452 Motorola, Inc. ................................. 164,700 2,842,722 Research In Motion Limited* .................... 18,050 1,592,010 ------------ 8,988,602 ------------ COMPUTERS & PERIPHERALS--2.2% Apple Computer, Inc.* .......................... 23,300 1,223,949 EMC Corporation* ............................... 169,500 2,181,465 PalmOne, Inc.* ................................. 46,250 1,339,863 ------------ 4,745,277 ------------ CONSUMER FINANCE--1.0% American Express Company ....................... 40,800 2,165,255 ------------ DIVERSIFIED FINANCIAL SERVICES--.7% Lehman Brothers Holdings Inc. .................. 18,000 1,478,700 ------------ ELECTRONIC EQUIPMENT & INSTRUMENTS--.9% Symbol Technologies, Inc. ...................... 126,800 1,862,691 ------------ ENERGY EQUIPMENT & SERVICES--2.5% National-Oilwell, Inc.* ........................ 74,450 2,509,710 Schlumberger Limited ........................... 46,200 2,907,828 ------------ 5,417,538 ------------ FOOD & STAPLES RETAILING--3.1% CVS Corporation ................................ 60,200 2,616,292 Wal-Mart Stores, Inc. .......................... 40,950 2,208,024 Whole Foods Market, Inc. ....................... 22,400 1,824,032 ------------ 6,648,348 ------------ -25- THE ALGER FUNDS ALGER BALANCED FUND SCHEDULE OF INVESTMENTS (CONTINUED) October 31, 2004 COMMON STOCKS--(CONT.) SHARES VALUE ------ ----- FREIGHT & LOGISTICS--.7% FedEx Corp. .................................... 17,400 $ 1,585,488 ------------ HEALTH CARE EQUIPMENT & SUPPLIES--2.1% Boston Scientific Corporation* ................. 40,200 1,419,060 Guidant Corporation ............................ 26,950 1,795,409 Medtronic, Inc. ................................ 27,750 1,418,303 ------------ 4,632,772 ------------ HEALTH CARE PROVIDERS & SERVICES--1.7% Caremark Rx, Inc.* ............................. 32,850 984,515 UnitedHealth Group Incorporated ................ 37,800 2,736,720 ------------ 3,721,235 ------------ HOTELS, RESTAURANTS & LEISURE--1.1% Carnival Corporation ........................... 42,400 2,143,744 MGM MIRAGE* .................................... 6,700 360,460 ------------ 2,504,204 ------------ INDUSTRIAL CONGLOMERATES--2.7% General Electric Company ....................... 68,550 2,338,926 Tyco International Ltd. ........................ 113,150 3,524,623 ------------ 5,863,549 ------------ INFORMATION TECHNOLOGY SERVICES--1.0% Automatic Data Processing, Inc. ................ 51,200 2,221,568 ------------ INTERNET & CATALOG RETAIL--3.8% eBay Inc.* ..................................... 52,450 5,119,645 IAC/InterActiveCorp.* .......................... 81,550 1,763,111 Netflix Inc.* .................................. 154,350 1,461,695 ------------ 8,344,451 ------------ INTERNET SOFTWARE & SERVICES--4.3% Google Inc. Cl A* .............................. 11,250 2,145,431 VeriSign, Inc.* ................................ 77,400 2,076,642 Yahoo! Inc. * .................................. 145,500 5,265,645 ------------ 9,487,718 ------------ MACHINERY--OIL WELL EQUIPMENT & SERVICES--.5% Patterson-UTI Energy, Inc. ..................... 60,600 1,165,338 ------------ MEDIA--4.2% DreamWorks Animation SKG, Inc.* ................ 3,300 128,865 Time Warner Inc.* .............................. 193,600 3,221,504 Viacom Inc. Cl. B .............................. 83,050 3,030,495 XM Satellite Radio Holdings Inc. Cl. A* ........ 88,350 2,855,472 ------------ 9,236,336 ------------ METALS & MINING--1.5% Peabody Energy Corporation ..................... 50,100 3,195,377 ------------ -26- THE ALGER FUNDS ALGER BALANCED FUND SCHEDULE OF INVESTMENTS (CONTINUED) October 31, 2004 COMMON STOCKS--(CONT.) SHARES VALUE ------ ----- OIL & GAS--2.4% BP PLC Sponsored ADR# .......................... 32,550 $ 1,896,038 Devon Energy Corporation ....................... 19,000 1,405,430 EOG Resources, Inc. ............................ 20,600 1,371,136 Sasol ADR# ..................................... 21,800 438,834 ------------ 5,111,438 ------------ PHARMACEUTICALS--2.4% IVAX Corporation* .............................. 167,350 3,029,035 Sepracor Inc.* ................................. 45,300 2,080,629 ------------ 5,109,664 ------------ SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--3.6% Altera Corporation * ........................... 31,950 726,224 Analog Devices, Inc. ........................... 64,400 2,592,744 Applied Materials, Inc.* ....................... 79,500 1,279,950 Freescale Semiconductor Inc. Cl. A* ............ 89,750 1,394,715 Intel Corporation .............................. 87,500 1,947,750 ------------ 7,941,383 ------------ SOFTWARE--4.7% Electronic Arts Inc.* .......................... 8,200 368,344 Microsoft Corporation .......................... 247,550 6,928,925 Take-Two Interactive Software, Inc.* ........... 41,700 1,374,432 VERITAS Software Corporation * ................. 68,500 1,498,780 ------------ 10,170,481 ------------ SPECIALTY RETAIL--2.2% Bed Bath & Beyond Inc.* ........................ 62,800 2,561,612 Lowe's Companies, Inc. ......................... 37,600 2,116,128 ------------ 4,677,740 ------------ TEXTILES, APPAREL & LUXURY GOODS--.7% Coach, Inc.* ................................... 17,900 834,677 Polo Ralph Lauren Corporation Cl. A ............ 19,750 729,368 ------------ 1,564,045 ------------ WIRELESS TELECOMMUNICATION SERVICES--1.0% Sprint Corporation ............................. 100,300 2,101,284 ------------ Total Common Stocks (Cost $130,467,325) .......................... 140,955,547 ------------ PRINCIPAL CORPORATE BONDS--13.6% AMOUNT --------- AEROSPACE & DEFENSE--.8% Boeing Capital Corp., 6.50%, 2/15/12 ........... $ 425,000 479,006 Northrop Grumman Corporation, 7.125%, 2/15/11 .. 435,000 502,211 United Technologies, 4.875%, 11/1/06 ........... 732,000 761,296 ------------ 1,742,513 ------------ AUTOMOTIVE--1.3% DaimlerChrysler N. A. Holding Corp., 4.05%, 6/4/08 425,000 428,220 General Motors Acceptance Corp., 4.50%, 7/15/06 606,000 615,237 General Motors Acceptance Corp., 7.75%, 1/19/10 1,685,000 1,840,996 ------------ 2,884,453 ------------ -27- THE ALGER FUNDS ALGER BALANCED FUND SCHEDULE OF INVESTMENTS (CONTINUED) October 31, 2004 PRINCIPAL CORPORATE BONDS--(CONT.) AMOUNT VALUE --------- ----- BEVERAGES--.3% Anheuser-Busch Companies, Inc., 7.00%, 12/1/25 . $ 650,000 $ 696,131 ------------ CAPITAL MARKETS--1.2% Goldman Sachs Group, Inc., 6.60%, 1/15/12 ...... 1,000,000 1,125,118 J.P. Morgan Chase & Co., 3.625%, 5/1/08 ........ 750,000 754,342 Morgan Stanley, 6.75%, 4/15/11 ................. 750,000 852,426 ------------ 2,731,886 ------------ COMMERCIAL BANKS--.9% Associates Corp. North America, 6.95%, 11/1/18 . 622,000 733,686 Bank of America Corp., 5.375%, 6/15/14 ......... 800,000 841,963 US Bancorp National Association, Minneapolis, 6.50%, 2/1/08 ................................ 400,000 437,585 ------------ 2,013,234 ------------ COMMUNICATION SERVICES--.8% AT&T Wireless Services Inc., 7.50%, 5/1/07 ..... 1,520,000 1,676,464 ------------ COMPUTERS & PERIPHERALS--.4% International Business Machines Corp., 8.375%, 11/1/19 .............................. 595,000 793,043 ------------ DIVERSIFIED FINANCIAL SERVICES--.7% Block Financial Corp., 8.50%, 4/15/07 .......... 500,000 559,840 Household Finance Corp., 4.75%, 7/15/13 ........ 984,000 984,269 ------------ 1,544,109 ------------ DIVERSIFIED TELECOMMUNICATION SERVICES--1.0% Verizon New York Inc., Series A, 6.875%, 4/1/12 789,000 892,461 Verizon Wireless Capital LLC Note, 5.375%, 12/15/06 ............................. 1,250,000 1,310,823 ------------ 2,203,284 ------------ ELECTRIC UTILITIES--.6% AEP Texas North Company Senior Notes, 5.50%, 3/1/13 ................................ 523,000 548,803 Dominion Resources, Inc., 5.00%, 3/15/13 ....... 690,000 699,188 ------------ 1,247,991 ------------ ENERGY EQUIPMENT & SERVICES--.5% Baker Hughes Inc., 6.25%, 1/15/09 .............. 1,000,000 1,097,674 ------------ FOOD CHAINS--.2% Fred Meyer, Inc. Sr. Notes, 7.45%, 3/1/08 ...... 310,000 347,025 ------------ FOOD PRODUCTS--.7% Kellogg Co. Senior Note, 2.875%, 6/1/08 ........ 697,000 683,731 Kraft Foods Inc., 6.25%, 6/1/12 ................ 840,000 925,930 ------------ 1,609,661 ------------ INDUSTRIAL CONGLOMERATES--.8% General Electric Company, 5.00%, 2/1/13 ........ 680,000 706,062 Tyco International Group SA, 5.80%, 8/1/06 ..... 615,000 644,323 Tyco International Group SA, 6.00%, 11/15/13 ... 340,000 372,093 ------------ 1,722,478 ------------ -28- THE ALGER FUNDS ALGER BALANCED FUND SCHEDULE OF INVESTMENTS (CONTINUED) October 31, 2004 PRINCIPAL CORPORATE BONDS--(CONT.) AMOUNT VALUE --------- ----- INSURANCE--.2% SAFECO Corporation, 7.25%, 9/1/12 .............. $ 298,000 $ 344,122 ------------ MEDIA--1.0% Comcast Corporation, 6.50%, 1/15/15 ............ 459,000 502,910 Cox Enterprises, Inc., 4.375%, 5/1/08 (a) ...... 667,000 662,025 Liberty Media Corporation Floating Rate Note, 3.02%, 9/17/06 ............................... 450,000 455,225 News America Inc., 6.625%, 1/9/08 .............. 435,000 476,402 ------------ 2,096,562 ------------ OIL & GAS--.4% Conoco Funding Co., 6.35%, 10/15/2011 .......... 750,000 843,528 ------------ TELEPHONES--.6% Deutsche Telek International Finance B V Gtd Notes, 8.50%, 6/15/10 ........................ 1,000,000 1,206,142 ------------ THRIFTS & MORTGAGE FINANCE--.5% Washington Mutual, Inc., 4.375%, 1/15/08 ....... 1,050,000 1,078,216 ------------ WIRELESS TELECOMMUNICATION SERVICES--.5% Vodafone Group PLC, 7.75%, 2/15/10 ............. 1,000,000 1,177,900 ------------ UTILITIES--.2% Southern California Edison Co., 5.00%, 1/15/14 . 450,000 461,853 ------------ Total Corporate Bonds (Cost $28,577,810) ........................... 29,518,269 ------------ U.S. GOVERNMENT & AGENCY OBLIGATIONS--18.3% Federal Home Loan Mortgage Corporation, 4.25%, 7/15/09 ............................... 800,000 823,941 Federal National Mortgage Association, 1.875%, 9/15/05 .............................. 2,790,000 2,778,801 2.30%, 1/20/06 ............................... 900,000 897,992 3.125%, 7/15/06 .............................. 9,910,000 9,986,783 6.625%, 10/15/07 ............................. 910,000 1,001,207 3.25%, 8/15/08 ............................... 940,000 938,392 6.625%, 11/15/30 ............................. 350,000 417,035 U.S. Treasury Bonds, 7.25%, 5/15/16 ............................... 3,482,000 4,418,334 7.50%, 11/15/16 .............................. 1,483,000 1,921,123 6.25%, 8/15/23 ............................... 3,148,000 3,719,560 6.875%, 8/15/25 .............................. 1,751,000 2,224,181 6.00%, 2/15/26 ............................... 3,831,000 4,422,863 6.125%, 11/15/27 ............................. 1,020,000 1,199,377 5.50%, 8/15/28 ............................... 1,500,000 1,634,064 U.S. Treasury Notes, 4.375%, 5/15/07 .............................. 480,000 499,744 3.00%, 11/15/07 .............................. 1,776,000 1,785,713 2.625%, 3/15/09 .............................. 455,000 445,011 3.625%, 7/15/09 .............................. 197,000 200,209 4.75%, 5/15/14 ............................... 552,000 583,827 ------------ Total U.S. Government & Agency Obligations (Cost $39,054,070) ........................... 39,898,157 ------------ -29- THE ALGER FUNDS ALGER BALANCED FUND SCHEDULE OF INVESTMENTS (CONTINUED) October 31, 2004 PRINCIPAL SHORT-TERM INVESTMENTS--3.9% AMOUNT VALUE --------- ----- U.S. AGENCY OBLIGATIONS Federal Home Loan Banks, 1.65%, 11/1/04 (Cost $8,600,000) ............................ $8,600,000 $ 8,600,000 ------------ Total Investments (Cost $206,699,205)(b) ....................... 100.5% 218,971,973 Liabilities in Excess of Other Assets .......... (0.5) (1,099,465) ---------- ------------ Net Assets ..................................... 100.0% $217,872,508 ========== ============ - ---------- * Non-income producing securities. # American Depositary Receipts. (a) Pursuant to Securities and Exchange Commission Rule 144A, these securities are liquid and may be sold prior to their maturity only to qualified institutional buyers. These securities represent 0.2% of net assets of the Fund. (b) At October 31, 2004, the net unrealized appreciation on investments, based on cost for federal income tax purposes of $208,727,934, amounted to $10,244,039 which consisted of aggregate gross unrealized appreciation of $15,797,948 and aggregate gross unrealized depreciation of $5,553,909. See Notes to Financial Statements. -30- THE ALGER FUNDS ALGER MIDCAP GROWTH FUND SCHEDULE OF INVESTMENTS October 31, 2004 COMMON STOCKS--97.4% SHARES VALUE ------ ----- AEROSPACE & DEFENSE--2.0% L-3 Communications Holdings, Inc. .............. 189,380 $ 12,485,822 ------------ AIRLINES--.6% JetBlue Airways Corporation* ................... 179,050 3,948,052 ------------ BIOTECHNOLOGY--5.0% Genzyme Corporation General Division* .......... 145,250 7,621,267 ImClone Systems Incorporated* .................. 191,250 8,376,750 OSI Pharmaceuticals, Inc.* ..................... 192,850 12,531,393 QLT Inc.* ...................................... 152,900 2,545,785 ------------ 31,075,195 ------------ BUILDING & CONSTRUCTION--1.0% Toll Brothers, Inc.* ........................... 134,650 6,241,027 ------------ CAPITAL MARKETS--3.5% Affiliated Managers Group, Inc.* ............... 225,922 12,615,484 Legg Mason, Inc. ............................... 149,150 9,502,346 ------------ 22,117,830 ------------ CHEMICALS--1.4% Millennium Chemicals Inc.* ..................... 405,500 8,710,139 ------------ COMMERCIAL BANKS--3.9% East West Bancorp, Inc. ........................ 245,750 9,839,830 North Fork Bancorporation, Inc. ................ 143,200 6,315,120 Zions Bancorporation ........................... 119,300 7,894,081 ------------ 24,049,031 ------------ COMMERCIAL SERVICES & SUPPLIES--2.4% First Marblehead Corporation (The)* ............ 114,150 6,118,440 Service Corporation International* ............. 1,367,750 9,040,827 ------------ 15,159,267 ------------ COMMUNICATION EQUIPMENT--2.1% Avaya Inc.* .................................... 574,950 8,279,280 Brocade Communications Systems, Inc.* .......... 742,000 5,038,180 ------------ 13,317,460 ------------ COMMUNICATION TECHNOLOGY--1.0% Nextel Partners, Inc. Cl A.* ................... 351,200 5,914,208 ------------ COMPUTER SERVICES--1.6% Akamai Technologies Inc.* ...................... 703,250 9,740,012 ------------ COMPUTER TECHNOLOGY--0.6% NAVTEQ* ........................................ 88,200 3,555,342 ------------ COMPUTERS & PERIPHERALS--5.1% Apple Computer, Inc.* .......................... 355,450 18,671,789 PalmOne, Inc.* ................................. 445,200 12,897,444 ------------ 31,569,233 ------------ -31- THE ALGER FUNDS ALGER MIDCAP GROWTH FUND SCHEDULE OF INVESTMENTS (CONTINUED) October 31, 2004 COMMON STOCKS--(CONT.) SHARES VALUE ------ ----- ELECTRICAL EQUIPMENT--2.1% Rockwell Automation, Inc. ...................... 314,000 $ 13,090,660 ------------ ELECTRONIC EQUIPMENT & INSTRUMENTS--1.6% Symbol Technologies, Inc. ...................... 675,850 9,928,237 ------------ ENERGY EQUIPMENT & SERVICES--2.9% Cooper Cameron Corporation* .................... 119,050 5,756,068 National-Oilwell, Inc.* ........................ 361,450 12,184,480 ------------ 17,940,548 ------------ HEALTH CARE EQUIPMENT & SUPPLIES--3.6% C.R. Bard, Inc. ................................ 116,150 6,597,320 Cytyc Corporation* ............................. 138,250 3,606,943 Kinetic Concepts, Inc.* ........................ 250,100 12,462,483 ------------ 22,666,746 ------------ HEALTH CARE PROVIDERS & SERVICES--4.8% American Healthways, Inc.* ..................... 65,000 1,961,700 AMERIGROUP Corporation* ........................ 167,600 10,056,000 Covance Inc.* .................................. 268,650 10,670,778 Magellan Health Services, Inc.* ................ 198,200 7,412,680 ------------ 30,101,158 ------------ HOTELS, RESTAURANTS & LEISURE--4.4% Applebee's International, Inc. ................. 208,150 4,760,391 Aztar Corporation* ............................. 124,200 3,843,990 Cheesecake Factory Incorporated (The)* ......... 131,950 5,727,950 International Speedway Corporation Cl. A ....... 9,700 456,288 Kerzner International Limited* ................. 124,000 6,289,280 Royal Caribbean Cruises Ltd. ................... 129,300 6,025,380 ------------ 27,103,279 ------------ HOUSEHOLD DURABLES--2.1% Garmin Ltd. .................................... 259,950 12,997,500 ------------ INSURANCE--0.3% UICI ........................................... 58,500 1,730,430 ------------ INFORMATION TECHNOLOGY SERVICES--0.7% Global Payments Inc. ........................... 80,000 4,380,800 ------------ INTERNET & CATALOG RETAIL--1.4% Netflix Inc.* .................................. 906,700 8,586,449 ------------ INTERNET SOFTWARE & SERVICES--1.6% Netease.com Inc. ADR*# ......................... 75,800 3,525,458 SINA Corp.* .................................... 89,500 2,998,250 VeriSign, Inc.* ................................ 137,800 3,697,174 ------------ 10,220,882 ------------ LEISURE & ENTERTAINMENT--2.4% Shanda Interactive Entertainment Ltd.* ......... 489,200 14,866,299 ------------ -32- THE ALGER FUNDS ALGER MIDCAP GROWTH FUND SCHEDULE OF INVESTMENTS (CONTINUED) October 31, 2004 COMMON STOCKS--(CONT.) SHARES VALUE ------ ----- MACHINERY--2.0% Joy Global Inc. ................................ 114,600 $ 3,872,334 Pentair, Inc. .................................. 230,900 8,631,042 ------------ 12,503,376 ------------ MACHINERY--OIL WELL EQUIPMENT & SERVICES--1.9% Patterson-UTI Energy, Inc. ..................... 619,700 11,916,831 ------------ MEDIA--2.3% DreamWorks Animation SKG, Inc.* ................ 14,300 558,415 Univision Communications Inc. Cl. A* ........... 39,400 1,219,824 XM Satellite Radio Holdings Inc. Cl. A* ........ 380,700 12,304,224 ------------ 14,082,463 ------------ METALS & MINING--1.4% Peabody Energy Corporation ..................... 139,800 8,916,444 ------------ MULTILINE RETAIL--1.0% Dollar Tree Stores, Inc.* ...................... 218,450 6,313,205 ------------ OIL & GAS--3.0% EOG Resources, Inc. ............................ 153,400 10,210,304 Frontline Limited .............................. 58,000 2,904,640 KFx Inc.* ...................................... 4,200 39,228 Teekay Shipping Corporation .................... 116,900 5,400,780 ------------ 18,554,952 ------------ PHARMACEUTICALS--6.7% Elan Corporation PLC Sponsored ADR*# ........... 468,650 12,091,170 Eyetech Pharmaceuticals Inc.* .................. 152,650 6,478,466 IVAX Corporation* .............................. 677,825 12,268,633 Sepracor Inc.* ................................. 237,800 10,922,154 ------------ 41,760,423 ------------ RETAIL--1.5% Estee Lauder Companies Inc., Cl. A ............. 213,200 9,156,940 ------------ ROAD & RAIL--1.0% Yellow Roadway Corporation* .................... 130,750 6,274,692 ------------ SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--6.7% Altera Corporation * ........................... 214,850 4,883,541 ATI Technologies Inc.* ......................... 276,300 4,987,215 Freescale Semiconductor Inc. Cl. A* ............ 316,900 4,924,626 KLA-Tencor Corporation* ........................ 105,550 4,805,692 Marvell Technology Group Ltd.* ................. 115,000 3,285,550 Rambus Inc.* ................................... 184,200 3,164,556 Semiconductor Manufacturing International Corporation ADR*# ............................ 1,028,500 11,097,515 Skyworks Solutions, Inc.* ...................... 555,650 4,939,729 ------------ 42,088,424 ------------ -33- THE ALGER FUNDS ALGER MIDCAP GROWTH FUND SCHEDULE OF INVESTMENTS (CONTINUED) October 31, 2004 COMMON STOCKS--(CONT.) SHARES VALUE ------ ----- SOFTWARE--4.3% Citrix Systems, Inc.* .......................... 405,900 $ 9,794,367 Fair Isaac Corporation ......................... 51,800 1,564,360 Intuit Inc.* ................................... 135,450 6,144,012 PalmSource, Inc.* .............................. 428,818 9,614,100 ------------ 27,116,839 ------------ SOFTWARE--2.2% Cognos, Inc.* .................................. 127,500 5,037,525 Take-Two Interactive Software, Inc.* ........... 265,000 8,734,400 ------------ 13,771,925 ------------ SPECIALTY RETAIL--1.8% Chico's FAS, Inc.* ............................. 161,000 6,444,830 Tractor Supply Company* ........................ 138,100 5,010,268 ------------ 11,455,098 ------------ TEXTILES, APPAREL & LUXURY GOODS--2.3% Coach, Inc.* ................................... 125,200 5,838,076 Polo Ralph Lauren Corporation Cl. A ............ 118,000 4,357,740 Quiksilver, Inc.* .............................. 158,300 4,313,675 ------------ 14,509,491 ------------ WIRELESS TELECOMMUNICATION SERVICES--1.2% SpectraSite, Inc.* ............................. 142,700 7,320,510 ------------ Total Common Stocks (Cost $565,423,583) 607,237,219 ------------ PRINCIPAL SHORT-TERM INVESTMENTS--3.9% AMOUNT --------- U.S. AGENCY OBLIGATIONS Federal Home Loan Banks, 1.65%, 11/1/04 (Cost $24,500,000) ........................... $24,500,000 24,500,000 ------------ Total Investments (Cost $589,923,583)(a) ....................... 101.3% 631,737,219 Liabilities in Excess of Other Assets .......... (1.3) (8,002,330) ----------- ------------ Net Assets ..................................... 100.0% $623,734,889 =========== ============ - ---------- * Non-income producing security. # American Depositary Receipts. (a) At October 31, 2004, the net unrealized appreciation on investments, based on cost for federal income tax purposes of $592,696,139, amounted to $39,041,080, which consisted of aggregate gross unrealized appreciation of $58,523,685, and aggregate gross unrealized depreciation of $19,482,605. See Notes to Financial Statements. -34- THE ALGER FUNDS ALGER CAPITAL APPRECIATION FUND SCHEDULE OF INVESTMENTS October 31, 2004 COMMON STOCKS--94.5% SHARES VALUE ------ ----- AEROSPACE & DEFENSE--3.3% Lockheed Martin Corporation .................... 125,100 $ 6,891,759 United Technologies Corporation ................ 66,100 6,135,402 ------------ 13,027,161 ------------ BIOTECHNOLOGY--7.6% Biogen Idec Inc.* .............................. 147,900 8,601,864 Genentech, Inc.* ............................... 89,700 4,084,041 Genzyme Corporation General Division* .......... 82,100 4,307,787 Gilead Sciences, Inc.* ......................... 248,800 8,615,944 ImClone Systems Incorporated* .................. 19,300 845,340 OSI Pharmaceuticals, Inc.* ..................... 49,250 3,200,265 ------------ 29,655,241 ------------ BUSINESS SERVICES--.8% MicroStrategy Incorporated* .................... 49,800 2,987,004 ------------ CAPITAL MARKETS--.8% Bank of New York Company, Inc. (The) ........... 30,400 986,784 Merrill Lynch & Co., Inc. ...................... 37,600 2,028,144 ------------ 3,014,928 ------------ CHEMICALS--1.5% Lubrizol Corporation ........................... 171,600 5,959,667 ------------ COMMERCIAL BANKS--.5% Wells Fargo & Company .......................... 33,800 2,018,535 ------------ COMMERCIAL SERVICES & SUPPLIES--1.4% First Marblehead Corporation (The)* ............ 105,000 5,628,000 ------------ COMMUNICATION EQUIPMENT--5.9% Motorola, Inc. ................................. 156,500 2,701,190 Nokia Oyj ADR# ................................. 446,700 6,888,114 QUALCOMM Inc. .................................. 126,850 5,303,599 Research In Motion Limited* .................... 93,300 8,229,060 ------------ 23,121,963 ------------ COMPUTER SOFTWARE--1.0% Check Point Software Technologies Ltd.* ........ 181,000 4,094,401 ------------ COMPUTER TECHNOLOGY--1.4% NAVTEQ* ........................................ 133,700 5,389,447 ------------ COMPUTERS & PERIPHERALS--4.3% Apple Computer, Inc.* .......................... 142,700 7,496,031 PalmOne, Inc.* ................................. 321,600 9,316,752 ------------ 16,812,783 ------------ DIVERSIFIED FINANCIAL SERVICES--.8% Lehman Brothers Holdings Inc. .................. 36,700 3,014,905 ------------ ENERGY EQUIPMENT & SERVICES--2.2% National-Oilwell, Inc.* ........................ 256,100 8,633,130 ------------ -35- THE ALGER FUNDS ALGER CAPITAL APPRECIATION FUND SCHEDULE OF INVESTMENTS (CONTINUED) October 31, 2004 COMMON STOCKS--(CONT.) SHARES VALUE ------ ----- ENERGY EQUIPMENT & SERVICES--1.6% Peabody Energy Corporation ..................... 95,100 $ 6,065,478 ------------ FOOD & STAPLES RETAILING--1.6% CVS Corporation ................................ 147,100 6,392,966 ------------ FREIGHT & LOGISTICS--1.1% FedEx Corp. .................................... 46,400 4,227,968 ------------ HEALTH CARE EQUIPMENT & SUPPLIES--3.7% Fisher Scientific International Inc.* .......... 100,750 5,779,020 Guidant Corporation ............................ 60,900 4,057,158 Kinetic Concepts, Inc.* ........................ 95,400 4,753,782 ------------ 14,589,960 ------------ HEALTH CARE PROVIDERS & SERVICES--3.3% AMERIGROUP Corporation* ........................ 89,350 5,361,000 Caremark Rx, Inc.* ............................. 141,800 4,249,746 Quest Diagnostics Incorporated ................. 36,500 3,195,210 ------------ 12,805,956 ------------ HOTELS, RESTAURANTS & LEISURE--.7% Royal Caribbean Cruises Ltd. ................... 60,200 2,805,320 ------------ HOUSEHOLD DURABLES--.4% Garmin Ltd. .................................... 30,300 1,515,000 ------------ INDUSTRIAL CONGLOMERATES--2.8% General Electric Company ....................... 150,700 5,141,884 Tyco International Ltd. ........................ 193,100 6,015,065 ------------ 11,156,949 ------------ INTERNET & CATALOG RETAIL--4.0% eBay Inc.* ..................................... 129,210 12,612,188 IAC/InterActiveCorp.* .......................... 143,800 3,108,956 Shopping.com Ltd.* ............................. 5,000 134,850 ------------ 15,855,994 ------------ INTERNET SOFTWARE & SERVICES--4.0% Netease.com Inc. ADR#* ......................... 42,500 1,976,675 Yahoo! Inc. * .................................. 373,500 13,516,965 ------------ 15,493,640 ------------ INFORMATION TECHNOLOGY SERVICES--1.3% Accenture Ltd. Cl. A* .......................... 80,500 1,948,905 Cognizant Technology Solutions Corporation Cl. A* 89,000 3,026,000 ------------ 4,974,905 ------------ LEISURE & ENTERTAINMENT--.8% Shanda Interactive Entertainment Ltd.* ......... 100,500 3,054,095 ------------ MACHINERY - OIL WELL EQUIPMENT & SERVICES--1.0% Patterson-UTI Energy, Inc. ..................... 206,550 3,971,957 ------------ -36- THE ALGER FUNDS ALGER CAPITAL APPRECIATION FUND SCHEDULE OF INVESTMENTS (CONTINUED) October 31, 2004 COMMON STOCKS--(CONT.) SHARES VALUE ------ ----- MEDIA--4.9% DreamWorks Animation SKG, Inc.* ................ 8,900 $ 347,545 Sirius Satellite Radio Inc.* ................... 924,000 3,603,600 Time Warner Inc.* .............................. 594,800 9,897,472 Viacom Inc. Cl. B .............................. 142,700 5,207,123 ------------ 19,055,740 ------------ MEDICAL DEVICES--1.0% Advanced Medical Optics, Inc.* ................. 102,350 4,001,885 ------------ MULTILINE RETAIL--.8% Kohl's Corporation* ............................ 61,200 3,106,512 ------------ OFFICE EQUIPMENT--1.1% Zebra Technologies Corporation* ................ 82,450 4,369,026 ------------ OIL & GAS--3.8% BP PLC Sponsored ADR# .......................... 75,200 4,380,400 EOG Resources, Inc. ............................ 66,800 4,446,208 Talisman Energy Inc. ........................... 124,700 3,350,689 Teekay Shipping Corporation .................... 61,200 2,827,440 ------------ 15,004,737 ------------ PHARMACEUTICALS--6.9% Allergan, Inc. ................................. 68,900 4,930,484 IVAX Corporation* .............................. 301,500 5,457,150 Novartis AG ADR# ............................... 20,700 993,807 Pfizer Inc. .................................... 127,410 3,688,520 Schering-Plough Corporation .................... 212,500 3,848,375 Sepracor Inc.* ................................. 43,700 2,007,141 Teva Pharmaceutical Industries Ltd. ADR# ....... 110,900 2,883,400 Wyeth .......................................... 78,800 3,124,420 ------------ 26,933,297 ------------ ROAD & RAIL--1.2% Burlington Northern Santa Fe Corporation ....... 116,300 4,862,503 ------------ SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--3.3% Broadcom Corporation Cl. A * ................... 184,500 4,990,725 Intel Corporation .............................. 97,100 2,161,446 Novellus Systems, Inc. * ....................... 37,450 970,330 Skyworks Solutions, Inc.* ...................... 541,200 4,811,268 ------------ 12,933,769 ------------ SPECIALTY RETAIL--3.3% Bed Bath & Beyond Inc.* ........................ 125,200 5,106,908 Lowe's Companies, Inc. ........................ 72,150 4,060,602 Tractor Supply Company* ........................ 98,900 3,588,092 ------------ 12,755,602 ------------ -37- THE ALGER FUNDS ALGER CAPITAL APPRECIATION FUND SCHEDULE OF INVESTMENTS (CONTINUED) October 31, 2004 COMMON STOCKS--(CONT.) SHARES VALUE ------ ----- SOFTWARE--8.1% Cognos, Inc.* .................................. 84,900 $ 3,354,399 Fair Isaac Corporation ......................... 229,600 6,933,920 Mercury Interactive Corporation* ............... 104,900 4,555,807 Microsoft Corporation .......................... 560,500 15,688,395 Red Hat, Inc.* ................................. 86,450 1,110,018 ------------ 31,642,539 ------------ TEXTILES, APPAREL & LUXURY GOODS--1.4% Coach, Inc.* ................................... 80,200 3,739,726 Polo Ralph Lauren Corporation Cl. A ............ 51,100 1,887,123 ------------ 5,626,849 ------------ WIRELESS TELECOMMUNICATION SERVICES--.9% SpectraSite, Inc.* ............................. 71,900 3,688,470 ------------ Total Common Stocks (Cost $333,429,881) 370,248,282 ------------ SHORT-TERM INVESTMENTS--5.8% PRINCIPAL AMOUNT --------- U.S. AGENCY OBLIGATIONS Federal Home Loan Banks, 1.65%, 11/1/2004 (Cost $ 22,700,000) .......................... $22,700,000 22,700,000 ------------ Total Investments (Cost $356,129,881) .......... 100.3% 392,948,282 Liabilities in Excess of Other Assets .......... (0.3) (1,366,874) ----------- ------------ Net Assets ..................................... 100.0% $391,581,408 =========== ============ - ---------- * Non-income producing securities. # American Depositary Receipts. (a) At October 31, 2004, the net unrealized appreciation on investments, based on cost for federal income tax purposes of $356,608,832, amounted to $36,339,450 which consisted of aggregate gross unrealized appreciation of $43,262,408 and aggregate gross unrealized depreciation of $6,922,958. See Notes to Financial Statements. -38- THE ALGER FUNDS ALGER HEALTH SCIENCES FUND SCHEDULE OF INVESTMENTS October 31, 2004 COMMON STOCKS--93.1% SHARES VALUE ------ ----- BIOTECHNOLOGY--23.2% Biogen Idec Inc.* .............................. 10,500 $ 610,680 Celegene Corporation* .......................... 12,000 355,440 Curis, Inc.* ................................... 47,000 175,310 CV Therapeutics, Inc.* ......................... 10,000 167,300 Encysive Pharmaceuticals Inc.* ................. 30,000 261,900 Gen-Probe Incorporated* ........................ 8,000 280,320 Genentech, Inc.* ............................... 9,000 409,770 Genzyme Corporation General Division* .......... 8,000 419,760 Gilead Sciences, Inc. * ........................ 25,000 865,750 Human Genome Sciences, Inc.* ................... 15,000 154,350 ImClone Systems Incorporated* .................. 8,000 350,400 Incyte Corporation* ............................ 24,500 254,800 Keryx Biopharmaceuticals, Inc. * ............... 16,000 186,080 Ligand Pharmaceuticals Incorporated Cl. B* ..... 17,500 156,012 OSI Pharmaceuticals, Inc.* ..................... 3,300 214,434 QLT Inc.* ...................................... 14,500 241,425 Rigel Pharmaceuticals, Inc.* ................... 10,500 252,000 Serologicals Corporation* ...................... 13,500 319,275 Theravance, Inc.* .............................. 14,700 249,459 Vicuron Pharmaceuticals Inc.* .................. 20,000 280,400 ------------ 6,204,865 ------------ CHEMICALS--.5% Monsanto Company ............................... 3,000 128,250 ------------ FOOD & STAPLES RETAILING--1.2% NeighborCare, Inc.* ............................ 13,000 333,190 ------------ HEALTHCARE--.4% HEALTHSOUTH Corporation* ....................... 20,000 109,400 ------------ HEALTH CARE EQUIPMENT & SUPPLIES--11.6% Animas Corporation* ............................ 20,000 285,400 Beckman Coulter, Inc. .......................... 3,000 178,500 Biomet, Inc. ................................... 6,000 280,080 C.R. Bard, Inc. ................................ 5,000 284,000 Fisher Scientific International Inc.* .......... 6,500 372,840 Guidant Corporation ............................ 9,000 599,580 Hologic, Inc.* ................................. 10,000 200,800 Illumina, Inc.* ................................ 38,000 245,100 INAMED Corporation* ............................ 5,825 309,599 Ventana Medical Systems, Inc.* ................. 6,500 351,780 ------------ 3,107,679 ------------ HEALTH CARE PROVIDERS & SERVICES--16.4% Accredo Health, Incorporated* .................. 7,000 161,210 American Healthways, Inc.* ..................... 6,000 181,080 AMERIGROUP Corporation* ........................ 6,000 360,000 Caremark Rx, Inc.* ............................. 13,000 389,610 Centene Corporation* ........................... 9,000 426,870 Covance Inc.* .................................. 7,000 278,040 HealthStream, Inc.* ............................ 30,300 61,812 Magellan Health Services, Inc.* ................ 5,000 187,000 -39- THE ALGER FUNDS ALGER HEALTH SCIENCES FUND SCHEDULE OF INVESTMENTS (CONTINUED) October 31, 2004 COMMON STOCKS--(CONT.) SHARES VALUE ------ ----- HEALTH CARE PROVIDERS & SERVICES--(CONTINUED) Psychiatric Solutions, Inc.* ................... 14,500 $ 369,025 Sierra Health Services, Inc.* .................. 12,000 572,640 Sunrise Senior Living Inc.* .................... 7,000 266,770 UnitedHealth Group Incorporated ................ 3,500 253,400 VCA Antech, Inc.* .............................. 11,000 246,620 Ventiv Health, Inc.* ........................... 20,000 346,000 WellCare Health Plans Inc.* .................... 12,500 286,250 ------------ 4,386,327 ------------ INSURANCE--.7% American Medical Security Group, Inc.* ......... 6,000 190,500 ------------ MEDICAL DEVICES--1.5% Advanced Medical Optics, Inc.* ................. 10,000 391,000 ------------ MEDICAL PRODUCTS--1.0% Par Pharmaceutical Cos Inc.* ................... 7,000 276,150 ------------ PHARMACEUTICALS--35.6% Abbott Laboratories ............................ 12,000 511,560 Allergan, Inc. ................................. 5,100 364,956 AtheroGenics, Inc.* ............................ 6,500 194,610 BioCryst Pharmaceuticals, Inc.* ................ 45,000 237,375 Bone Care International , Inc. * ............... 12,500 287,062 Cortex Pharmaceuticals, Inc.* .................. 45,000 104,400 Discovery Laboratories, Inc.* .................. 40,000 272,400 Elan Corporation PLC Sponsored ADR*# ........... 30,000 774,000 Eli Lilly and Company .......................... 11,000 604,010 Eyetech Pharmaceuticals Inc.* .................. 5,500 233,420 GlaxoSmithKline PLC Sponsored ADR# ............. 12,000 508,800 Impax Laboratories, Inc.* ...................... 17,500 258,300 IVAX Corporation* .............................. 33,250 601,825 Medicis Pharmaceutical Corporation Cl. A ....... 3,500 142,345 Novartis AG ADR# ............................... 16,000 768,160 Novo Nordisk A/S Cl. B ADR# .................... 9,000 449,550 Pfizer Inc. .................................... 14,510 420,065 Pharmion Corp.* ................................ 6,000 275,700 Sanofi-Aventis ADR# ............................ 18,240 665,760 Schering AG ADR* ............................... 6,000 385,080 Schering-Plough Corporation .................... 25,000 452,750 Sepracor Inc.* ................................. 13,500 620,055 Wyeth .......................................... 10,000 396,500 ------------ 9,528,683 ------------ SOFTWARE--1.0% Cerner Corporation* ............................ 6,000 270,900 ------------ Total Common Stocks (Cost $23,854,240) ........................... 24,926,944 ------------ -40- THE ALGER FUNDS ALGER HEALTH SCIENCES FUND SCHEDULE OF INVESTMENTS (CONTINUED) October 31, 2004 PRINCIPAL SHORT-TERM INVESTMENTS--4.8% AMOUNT VALUE --------- ----- U.S. AGENCY OBLIGATIONS Federal Home Loan Banks, 1.65%, 11/1/04 (Cost $1,300,000) ............................ $1,300,000 $ 1,300,000 ------------ Total Investments (Cost $ 25,154,240)(a) ....................... 97.9% 26,226,944 Other Assets in Excess of Liabilities .......... 2.1 557,395 ---------- ------------ Net Assets ..................................... 100.00% $ 26,784,339 ========== ============ - ---------- * Non-income producing security. # American Depositary Receipts. (a) At October 31, 2004, the net unrealized appreciation on investments, based on cost for federal income tax purposes of $25,257,994, amounted to $968,950 which consisted of aggregate gross unrealized appreciation of $2,141,790 and aggregate gross unrealized depreciation of $1,172,840. See Notes to Financial Statements. -41- THE ALGER FUNDS ALGER SMALLCAP AND MIDCAP GROWTH FUND SCHEDULE OF INVESTMENTS October 31, 2004 COMMON STOCKS--98.5% SHARES VALUE ------ ----- AEROSPACE & DEFENSE--3.0% Alliant Techsystems Inc.* ...................... 2,800 $ 160,972 BE Aerospace, Inc.* ............................ 17,600 151,008 SI International Inc.* ......................... 4,700 121,871 ------------ 433,851 ------------ AIR FREIGHT & LOGISTICS--1.2% J.B. Hunt Transport Services, Inc.* ............ 4,100 167,526 ------------ AIRLINES--1.2% AirTrans Holdings, Inc.* ....................... 14,400 167,328 ------------ BIOTECHNOLOGY--2.7% Encysive Pharmaceuticals Inc.* ................. 14,600 127,458 Serologicals Corporation* ...................... 6,400 151,360 Theravance, Inc.* .............................. 6,600 112,002 ------------ 390,820 ------------ BUSINESS SERVICES--1.0% MicroStrategy Incorporated* .................... 2,300 137,954 ------------ CAPITAL MARKETS--3.2% Affiliated Managers Group, Inc.* ............... 3,412 190,526 National Financial Partners Corporation ........ 4,500 138,330 Piper Jaffray Companies, Inc.* ................. 2,800 122,444 ------------ 451,300 ------------ CHEMICALS--1.2% Lubrizol Corporation ........................... 5,000 173,650 ------------ COMMERCIAL BANKS--3.1% Boston Private Financial Holdings, Inc. ........ 2,000 49,080 Compass Bancshares, Inc. ....................... 3,750 179,137 East West Bancorp, Inc. ........................ 5,400 216,216 ------------ 444,433 ------------ COMMERCIAL SERVICES & SUPPLIES--4.0% CoStar Group Inc.* ............................. 3,900 157,443 Education Management Corporation* .............. 4,950 132,759 First Marblehead Corporation (The)* ............ 3,100 166,160 Gevity HR, Inc. ................................ 7,250 129,122 ------------ 585,484 ------------ COMMUNICATION EQUIPMENT--1.1% F5 Networks, Inc.* ............................. 2,100 83,895 NETGEAR, Inc.* ................................. 5,500 74,965 ------------ 158,860 ------------ COMPUTER SERVICES--1.2% Open Solutions Inc.* ........................... 6,100 171,807 ------------ COMPUTER TECHNOLOGY--1.5% Cogent Inc.* ................................... 3,700 70,796 NAVTEQ* ........................................ 3,700 149,147 ------------ 219,943 ------------ COMPUTERS & PERIPHERALS--1.1% Silicon Image, Inc.* ........................... 12,100 165,770 ------------ -42- THE ALGER FUNDS ALGER SMALLCAP AND MIDCAP GROWTH FUND SCHEDULE OF INVESTMENTS (CONTINUED) October 31, 2004 COMMON STOCKS--(CONT.) SHARES VALUE ------ ----- ELECTRIC AND ELECTRONIC EQUIPMENT--1.1% Roper Industries, Inc. ......................... 2,650 $ 163,399 ------------ ELECTRICAL EQUIPMENT--1.4% AMETEK, Inc. ................................... 6,350 209,042 ------------ ENERGY--.9% Arch Coal, Inc. ................................ 4,000 130,080 ------------ ENERGY EQUIPMENT & SERVICES--1.9% Cooper Cameron Corporation* .................... 3,500 169,225 National-Oilwell, Inc.* ........................ 3,000 101,130 ------------ 270,355 ------------ FINANCIAL SERVICES--.8% Calamos Asset Management, Inc.* ................ 6,200 120,900 ------------ FOOD & STAPLES RETAILING--1.9% NeighborCare, Inc.* ............................ 6,000 153,780 Whole Foods Market, Inc. ....................... 1,400 114,002 ------------ 267,782 ------------ HEALTH CARE--1.0% Chemed Corporation ............................. 2,500 151,125 ------------ HEALTH CARE EQUIPMENT & SUPPLIES--5.3% Animas Corporation* ............................ 6,300 89,901 Cooper Companies, Inc. ......................... 2,300 161,805 INAMED Corporation* ............................ 3,100 164,765 Intuitive Surgical, Inc.* ...................... 5,900 172,162 Kinetic Concepts, Inc.* ........................ 3,650 181,879 ------------ 770,512 ------------ HEALTH CARE PROVIDERS & SERVICES--6.5% Accredo Health, Incorporated* .................. 4,450 102,483 Centene Corporation* ........................... 4,400 208,692 Psychiatric Solutions, Inc.* ................... 6,750 171,788 Sunrise Senior Living Inc. ..................... 4,000 152,440 VCA Antech, Inc.* .............................. 6,600 147,972 Wellcare Group Inc.* ........................... 6,650 152,285 ------------ 935,660 ------------ HOTELS, RESTAURANTS & LEISURE--4.3% Applebee's International, Inc. ................. 7,450 170,381 Aztar Corporation* ............................. 3,500 108,325 Red Robin Gourmet Burgers Inc.* ................ 3,350 139,729 Station Casinos, Inc. .......................... 3,100 157,945 Texas Roadhouse, Inc. Cl. A* ................... 2,100 48,342 ------------ 624,722 ------------ -43- THE ALGER FUNDS ALGER SMALLCAP AND MIDCAP GROWTH FUND SCHEDULE OF INVESTMENTS (CONTINUED) October 31, 2004 COMMON STOCKS--(CONT.) SHARES VALUE ------ ----- INFORMATION TECHNOLOGY SERVICES--4.2% Alliance Data Systems Corporation* ............. 4,850 $ 205,058 Global Payments Inc. ........................... 3,700 202,612 Kanbay International Inc.* ..................... 8,600 205,454 ------------ 613,124 ------------ INTERNET & CATALOG RETAIL--2.3% Elong Inc.* .................................... 400 5,440 J. Jill Group Inc.* ............................ 8,500 149,430 Priceline.com Incorporated* .................... 8,700 173,478 ------------ 328,348 ------------ INTERNET SOFTWARE & SERVICES--3.1% aQuantive, Inc.* ............................... 11,500 102,925 Chordiant Software Inc.* ....................... 31,400 77,244 IVillage Inc.* ................................. 11,800 60,475 SonicWALL, Inc.* ............................... 20,100 100,500 ValueClick, Inc.* .............................. 11,850 110,087 ------------ 451,231 ------------ LEISURE EQUIPMENT & PRODUCTS--1.1% LIFETIME FITNESS, Inc.* ........................ 7,000 163,100 ------------ MACHINERY--1.8% Actuant Corporation Cl. A* ..................... 3,300 130,911 Terex Corporation* ............................. 3,550 134,900 ------------ 265,811 ------------ MACHINERY-OIL WELL EQUIPMENT & SERVICES--1.0% Patterson-UTI Energy, Inc. ..................... 7,600 146,148 ------------ MEDIA--2.5% DreamWorks Animation SKG, Inc.* ................ 400 15,620 Media General, Inc. Cl. A ...................... 1,700 99,110 Sirius Satellite Radio Inc.* ................... 37,600 146,640 Westwood One, Inc.* ............................ 4,600 106,168 ------------ 367,538 ------------ MEDICAL DEVICES--2.1% Advanced Medical Optics, Inc.* ................. 4,800 187,680 IntraLase Corp.* .............................. 6,400 123,072 ------------ 310,752 ------------ OIL & GAS--1.8% EOG Resources, Inc. ............................ 2,750 183,040 General Maritime Corporation* .................. 2,000 76,000 ------------ 259,040 ------------ PAPER & FOREST PRODUCTS--1.4% Louisiana-Pacific Corporation* ................. 8,250 202,208 ------------ PHARMACEUTICALS--5.4% Bone Care International , Inc. * ............... 6,000 137,790 Discovery Laboratories, Inc.* .................. 20,800 141,648 Eyetech Pharmaceuticals, Inc.* ................. 1,350 57,294 Impax Laboratories, Inc.* ...................... 9,100 134,316 -44- THE ALGER FUNDS ALGER SMALLCAP AND MIDCAP GROWTH FUND SCHEDULE OF INVESTMENTS (CONTINUED) October 31, 2004 COMMON STOCKS--(CONT.) SHARES VALUE ------ ----- PHARMACEUTICALS--(CONTINUED) IVAX Corporation* .............................. 11,250 $ 203,625 Sepracor Inc.* ................................. 2,200 101,046 ------------ 775,719 ------------ SEMICONDUCTOR CAPITAL EQUIPMENT--.7% SiRF Technology Holdings, Inc.* ................ 8,500 100,640 ------------ SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--3.9% Axcelis Technologies, Inc.* .................... 10,900 93,740 Brooks Automation, Inc.* ....................... 6,500 96,720 International Rectifier Corporation* ........... 2,800 111,300 Intersil Corporation Cl. A ..................... 4,900 79,968 Semtech Corporation* ........................... 8,700 181,656 ------------ 563,384 ------------ SOFTWARE--6.2% Cognos, Inc.* .................................. 4,250 167,917 Fair Isaac Corporation ......................... 4,800 144,960 Hyperion Solutions Corporation* ................ 4,400 176,572 Micromuse Inc.* ................................ 26,500 113,685 Quest Software, Inc.* .......................... 8,900 130,563 Take-Two Interactive Software, Inc.* ........... 4,850 159,856 ------------ 893,553 ------------ SPECIALTY RETAIL--5.8% Abercrombie & Fitch Co. Cl. A .................. 2,900 113,622 AnnTaylor Stores Corporation* .................. 7,050 158,343 Pacific Sunwear of California, Inc.* ........... 7,900 185,176 PETsMART, Inc. ................................. 5,550 177,489 Williams-Sonoma, Inc.* ......................... 5,300 202,301 ------------ 836,931 ------------ THRIFTS & MORTGAGE FINANCE--1.0% Doral Financial Corp. .......................... 3,450 144,831 ------------ TRADING COMPANIES & DISTRIBUTORS--1.4% MSC Industrial Direct Co., Cl. A ............... 5,850 199,719 ------------ TRANSPORTATION SERVICES--.8% Sirva Inc.* .................................... 4,800 115,200 ------------ WIRELESS TELECOMMUNICATION SERVICES--1.4% American Tower Corporation Cl. A* .............. 11,400 195,966 ------------ Total Common Stocks (Cost $12,400,687) ........................... 14,245,546 ------------ -45- THE ALGER FUNDS ALGER SMALLCAP AND MIDCAP GROWTH FUND SCHEDULE OF INVESTMENTS (CONTINUED) October 31, 2004 PRINCIPAL SHORT-TERM INVESTMENTS--3.2% AMOUNT VALUE --------- ----- REPURCHASE AGREEMENT Securities Held Under Repurchase Agreements, 1.50%, 11/1/04. with State Street Bank and Trust Company, dtd 10/31/04, repurchase price $465,058; collateralized by U.S.Treasury Bonds (par value $325,000 due 2/15/19) (Cost $465,000) ........ $ 465,000 $ 465,000 ------------ Total Investments (Cost $12,865,687)(a) ........................ 101.7% 14,710,546 Liabilities In Excess of Other Assets .......... (1.7) (247,296) --------- ------------ Net Assets ..................................... 100.0% $ 14,463,250 ========= ============ - ---------- * Non-income producing security. # American Depositary Receipts. (a) At October 31, 2004, the net unrealized appreciation on investments, based on cost for federal income tax purposes of $12,865,687, amounted to $1,844,859 which consisted of aggregate gross unrealized appreciation of $2,396,266 and aggregate gross unrealized depreciation of $551,407. See Notes to Financial Statements. -46- THE ALGER FUNDS ALGER MONEY MARKET FUND SCHEDULE OF INVESTMENTS October 31, 2004 PRINCIPAL AMOUNT VALUE --------- ----- U.S. AGENCY OBLIGATIONS--99.8% Federal National Mortgage Association, 1.58%, 11/18/04 .............................. $10,000,000 $ 9,992,538 1.76%, 11/18/04 .............................. 5,000,000 4,995,844 1.66%, 11/24/04 .............................. 15,000,000 14,984,092 1.82%, 12/01/04 .............................. 5,000,000 4,992,417 Federal Home Loan Banks, 1.65%, 11/01/04 .............................. 15,100,000 15,100,000 1.69%, 11/10/04 .............................. 15,200,000 15,193,578 1.73%, 11/23/04 .............................. 10,000,000 9,989,428 1.74%, 12/03/04 .............................. 5,100,000 5,092,112 ------------ Total U.S. Agency Obligations (Cost $80,340,009) ........................... 80,340,009 ------------ REPURCHASE AGREEMENTS--.4% Securities Held Under Repurchase Agreements, 1.50%, 11/1/04 with State Street Bank and Trust Company dtd 10/29/04, repurchase price $350,044, collateralized by Federal Home Loan Mortgage Corp. (par value $360,000, 2.55%, due 10/12/06), (Cost $350,000) .............................. 350,000 350,000 ------------ Total Investments (Cost $80,690,009)(a) ........................ 100.2% 80,690,009 Liabilities in Excess of Other Assets .......... (0.2) (162,391) ---------- ------------ Net Assets ..................................... 100.0% $ 80,527,618 ========== ============ - ---------- (a) At October 31, 2004, the net unrealized appreciation on investments, based on cost for federal income tax purposes was the same as the cost for financial reporting purposes. See Notes to Financial Statements. [This page intentionally left blank] -48- THE ALGER FUNDS FINANCIAL HIGHLIGHTS FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR
Income from Investment Operations ------------------------------ Net Realized and Net Asset Net Unrealized Total Value, Investment Gain from Beginning Income (Loss) on Investment of Year (Loss) (ii) Investments Operations ---------- ----------- ----------- ---------- ALGER LARGECAP GROWTH FUND (I) CLASS A Year ended 10/31/04 ....................... $ 8.87 $(0.07) $0.25 $0.18 Year ended 10/31/03 ....................... 7.16 (0.05) 1.76 1.71 Year ended 10/31/02 ....................... 9.47 (0.04) (2.27) (2.31) Year ended 10/31/01 ....................... 14.09 (0.04) (3.64) (3.68) Year ended 10/31/00 ....................... 15.47 (0.05) 1.33 1.28 CLASS B Year ended 10/31/04 ....................... $ 8.33 $(0.13) $0.24 $0.11 Year ended 10/31/03 ....................... 6.76 (0.10) 1.67 1.57 Year ended 10/31/02 ....................... 9.02 (0.10) (2.16) (2.26) Year ended 10/31/01 ....................... 13.58 (0.12) (3.50) (3.62) Year ended 10/31/00 ....................... 15.09 (0.16) 1.31 1.15 CLASS C Year ended 10/31/04 ....................... $ 8.33 $(0.13) $ 0.23 $0.10 Year ended 10/31/03 ....................... 6.76 (0.10) 1.67 1.57 Year ended 10/31/02 ....................... 9.02 (0.10) (2.16) (2.26) Year ended 10/31/01 ....................... 13.57 (0.12) (3.49) (3.61) Year ended 10/31/00 ....................... 15.08 (0.16) 1.31 1.15 ALGER SMALLCAP GROWTH FUND (IV) CLASS A Year ended 10/31/04 ....................... $ 3.95 $(0.06) $0.29 $0.23 Year ended 10/31/03 ....................... 2.85 (0.05) 1.15 1.10 Year ended 10/31/02 ....................... 3.54 (0.05) (0.64) (0.69) Year ended 10/31/01 ....................... 8.81 (0.04) (3.41) (3.45) Year ended 10/31/00 ....................... 10.35 (0.08) 0.35 0.27
- ---------- (i) Prior to September 29, 2000, the Alger LargeCap Growth Fund was the Alger Growth Portfolio. (ii) Amount was computed based on average shares outstanding during the period. (iii) Does not reflect the effect of any sales charges. (iv) Prior to February 28, 2004, the Alger SmallCap Growth Fund was the Alger Small Capitalization Portfolio. See Notes to Financial Statements. -49-
Ratios/Supplemental Data ----------------------------------------------------------- Ratio of Net Ratio of Net Net Assets, Expenses Investment Distributions Asset End of to Income from Value, Year Average (Loss) to Portfolio Net Realized End of Total (000's Net Average Turnover Gains Year Return (iii) omitted) Assets Net Assets Rate - ------------- ------ ------------ -------- -------- ---------- --------- $ -- $ 9.05 2.0% $166,720 1.34% (0.72)% 191.13% -- 8.87 23.9 168,720 1.44 (0.62) 215.81 -- 7.16 (24.4) 130,464 1.36 (0.47) 213.97 (0.94) 9.47 (27.4) 230,637 1.26 (0.35) 91.40 (2.66) 14.09 8.0 324,130 1.20 (0.32) 96.13 $ -- $ 8.44 1.3% $279,963 2.09% (1.46)% 191.13% -- 8.33 23.2 350,972 2.20 (1.37) 215.81 -- 6.76 (25.1) 323,809 2.11 (1.21) 213.97 (0.94) 9.02 (28.1) 581,770 2.01 (1.09) 91.40 (2.66) 13.58 7.2 902,091 1.96 (1.07) 96.13 $ -- $ 8.43 1.2% $ 42,196 2.09% (1.47)% 191.13% -- 8.33 23.2 41,906 2.19 (1.37) 215.81 -- 6.76 (25.1) 34,813 2.11 (1.22) 213.97 (0.94) 9.02 (28.0) 48,918 2.01 (1.10) 91.40 (2.66) 13.57 7.2 65,893 1.95 (1.08) 96.13 $ -- $ 4.18 5.8% $82,891 1.69% (1.47)% 128.79% -- 3.95 38.6 73,616 1.79 (1.55) 139.28 -- 2.85 (19.5) 46,143 1.75 (1.52) 132.35 (1.82) 3.54 (46.6) 64,164 1.54 (0.95) 195.72 (1.81) 8.81 0.4 111,665 1.41 (0.81) 207.19
-50- THE ALGER FUNDS FINANCIAL HIGHLIGHTS FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR
Income from Investment Operations -------------------------- Net Realized and Net Asset Net Unrealized Total Dividends Distributions Value, Investment Gain from from Net from Beginning Income (Loss) on Investment Investment Net Realized of Year (Loss) (i) Investments Operations Income Gains ---------- ---------- ----------- ---------- ---------- ------------- ALGER SMALLCAP GROWTH FUND (CONTINUED) CLASS B Year ended 10/31/04 ............ $ 3.70 $(0.09) $0.27 $0.18 $ -- $ -- Year ended 10/31/03 ............ 2.68 (0.07) 1.09 1.02 -- -- Year ended 10/31/02 ............ 3.36 (0.07) (0.61) (0.68) -- -- Year ended 10/31/01 ............ 8.52 (0.08) (3.26) (3.34) -- (1.82) Year ended 10/31/00 ............ 10.13 (0.16) 0.36 0.20 -- (1.81) CLASS C Year ended 10/31/04 ............ $ 3.70 $(0.09) $0.27 $0.18 $ -- $ -- Year ended 10/31/03 ............ 2.68 (0.07) 1.09 1.02 -- -- Year ended 10/31/02 ............ 3.36 (0.07) (0.61) (0.68) -- -- Year ended 10/31/01 ............ 8.53 (0.08) (3.27) (3.35) -- (1.82) Year ended 10/31/00 ............ 10.13 (0.16) 0.37 0.21 -- (1.81) ALGER BALANCED FUND CLASS A Year ended 10/31/04 ............ $18.29 $0.10 $0.36 $0.46 $(0.17) $ -- Year ended 10/31/03 ............ 16.02 0.13 2.43 2.56 (0.29) -- Year ended 10/31/02 ............ 18.67 0.27 (2.48) (2.21) (0.44) -- Year ended 10/31/01 ............ 21.29 0.43 (2.83) (2.40) (0.22) -- Year ended 10/31/00 ............ 20.95 0.39 1.68 2.07 (0.13) (1.60) CLASS B Year ended 10/31/04 ............ $17.86 $(0.04) $0.34 $0.30 $(0.03) $ -- Year ended 10/31/03 ............ 15.62 0.01 2.39 2.40 (0.16) -- Year ended 10/31/02 ............ 18.17 0.14 (2.44) (2.30) (0.25) -- Year ended 10/31/01 ............ 20.83 0.27 (2.75) (2.48) (0.18) -- Year ended 10/31/00 ............ 20.59 0.17 1.71 1.88 (0.04) (1.60)
- ---------- (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. -51-
Ratios/Supplemental Data ----------------------------------------------------------- Ratio of Net Ratio of Net Net Assets, Expenses Investment Asset End of to Income Value, Year Average (Loss) to Portfolio Total End of Total (000's Net Average Turnover Distributions Year Return (ii) omitted) Assets Net Assets Rate ------------- ------ ----------- -------- -------- ---------- --------- $ -- $ 3.88 4.9% $ 70,304 2.43% (2.21)% 128.79% -- 3.70 38.1 94,241 2.57 (2.32) 139.28 -- 2.68 (20.2) 81,758 2.49 (2.27) 132.35 (1.82) 3.36 (47.0) 130,559 2.28 (1.66) 195.72 (1.81) 8.52 (0.4) 325,382 2.14 (1.58) 207.19 $ -- $ 3.88 4.9% $ 4,669 2.44% (2.21)% 128.79% -- 3.70 38.1 4,999 2.56 (2.32) 139.28 -- 2.68 (20.2) 3,209 2.49 (2.27) 132.35 (1.82) 3.36 (47.0) 4,234 2.28 (1.66) 195.72 (1.81) 8.53 (0.3) 11,103 2.15 (1.57) 207.19 $(0.17) $18.58 2.5% $ 68,646 1.26% 0.52% 167.72% (0.29) 18.29 16.3 79,387 1.31 0.80 174.97 (0.44) 16.02 (12.2) 78,167 1.28 1.53 203.96 (0.22) 18.67 (11.3) 101,440 1.20 2.15 74.15 (1.73) 21.29 10.2 93,671 1.29 1.80 63.50 $(0.03) $18.13 1.7% $114,387 2.01% (0.23)% 167.72% (0.16) 17.86 15.5 143,765 2.06 0.05 174.97 (0.25) 15.62 (12.9) 137,070 2.03 0.78 203.96 (0.18) 18.17 (12.0) 158,766 1.95 1.40 74.15 (1.64) 20.83 9.4 132,123 2.04 0.98 63.50
-52- THE ALGER FUNDS FINANCIAL HIGHLIGHTS FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR
Income from Investment Operations -------------------------- Net Realized and Net Asset Net Unrealized Total Dividends Distributions Value, Investment Gain from from Net from Beginning Income (Loss) on Investment Investment Net Realized of Year (Loss) (i) Investments Operations Income Gains --------- ---------- ----------- ---------- ---------- ------------- ALGER BALANCED FUND (CONTINUED) CLASS C Year ended 10/31/04 ............ $17.93 $(0.04) $0.35 $0.31 $(0.03) $ -- Year ended 10/31/03 ............ 15.68 0.01 2.39 2.40 (0.15) -- Year ended 10/31/02 ............ 18.24 0.14 (2.45) (2.31) (0.25) -- Year ended 10/31/01 ............ 20.90 0.27 (2.75) (2.48) (0.18) -- Year ended 10/31/00 ............ 20.65 0.21 1.67 1.88 (0.03) (1.60) ALGER MIDCAP GROWTH FUND (III) CLASS A Year ended 10/31/04 ............ $ 7.57 $(0.08) $0.40 $0.32 $ -- $ -- Year ended 10/31/03 ............ 5.48 (0.07) 2.16 2.09 -- -- Year ended 10/31/02 ............ 6.92 (0.07) (1.37) (1.44) -- -- Year ended 10/31/01 ............ 10.17 (0.06) (2.01) (2.07) -- (1.18) Year ended 10/31/00 ............ 8.20 (0.04) 3.51 3.47 -- (1.50) CLASS B Year ended 10/31/04 ............ $ 7.08 $(0.13) $0.38 $0.25 $ -- $ -- Year ended 10/31/03 ............ 5.17 (0.11) 2.02 1.91 -- -- Year ended 10/31/02 ............ 6.58 (0.11) (1.30) (1.41) -- -- Year ended 10/31/01 ............ 9.79 (0.11) (1.92) (2.03) -- (1.18) Year ended 10/31/00 ............ 8.00 (0.12) 3.41 3.29 -- (1.50) CLASS C Year ended 10/31/04 ............ $ 7.06 $(0.13) $0.38 $0.25 $ -- $ -- Year ended 10/31/03 ............ 5.16 (0.11) 2.01 1.90 -- -- Year ended 10/31/02 ............ 6.56 (0.11) (1.29) (1.40) -- -- Year ended 10/31/01 ............ 9.77 (0.11) (1.92) (2.03) -- (1.18) Year ended 10/31/00 ............ 7.99 (0.11) 3.39 3.28 -- (1.50)
- ---------- (i) Amount was computed based on average shares outstanding during the period. (ii) Does not reflect the effect of any sales charges. (iii) Per share data has been adjusted to reflect the effect of a 3 for 1 stock split which occurred April 20, 2000. See Notes to Financial Statements. -53-
Ratios/Supplemental Data ------------------------------------------------------------ Ratio of Net Ratio of Net Net Assets, Expenses Investment Asset End of to Income Value, Year Average (Loss) to Portfolio Total End of Total (000's Net Average Turnover Distributions Year Return (ii) omitted) Assets Net Assets Rate ------------- ------ ----------- -------- -------- ---------- --------- $(0.03) $18.21 1.7% $ 34,840 2.01% (0.23)% 167.72% (0.15) 17.93 15.4 44,801 2.06 0.05 174.97 (0.25) 15.68 (12.9) 45,516 2.03 0.78 203.96 (0.18) 18.24 (12.0) 57,193 1.95 1.40 74.15 (1.63) 20.90 9.3 49,592 2.04 0.99 63.50 $ -- $ 7.89 4.2% $276,076 1.34% (1.08)% 210.18% -- 7.57 38.1 231,711 1.45 (1.16) 238.17 -- 5.48 (20.8) 133,113 1.41 (1.05) 324.69 (1.18) 6.92 (21.9) 154,412 1.31 (0.77) 115.45 (1.50) 10.17 47.7 141,558 1.29 (0.46) 97.11 $ -- $ 7.33 3.5% $276,982 2.09% (1.83)% 210.18% -- 7.08 36.9 326,015 2.20 (1.92) 238.17 -- 5.17 (21.4) 247,201 2.15 (1.80) 324.69 (1.18) 6.58 (22.4) 426,699 2.06 (1.49) 115.45 (1.50) 9.79 46.4 532,476 2.04 (1.23) 97.11 $ -- $ 7.31 3.5% $ 70,677 2.09% (1.83)% 210.18% -- 7.06 36.8 62,627 2.20 (1.92) 238.17 -- 5.16 (21.3) 46,238 2.16 (1.80) 324.69 (1.18) 6.56 (22.4) 53,592 2.06 (1.51) 115.45 (1.50) 9.77 46.4 51,335 2.04 (1.22) 97.11
-54- THE ALGER FUNDS FINANCIAL HIGHLIGHTS FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
Income from Investment Operations ----------------------------- Net Realized and Net Asset Net Unrealized Total Value, Investment Gain from Beginning Income (Loss) on Investment of Period (Loss) (i) Investments Operations --------- ---------- ----------- ---------- ALGER CAPITAL APPRECIATION FUND CLASS A Year ended 10/31/04 ........................ $ 7.74 $(0.10) $0.07 $(0.03) Year ended 10/31/03 ........................ 6.23 (0.07) 1.58 1.51 Year ended 10/31/02 ........................ 8.21 (0.08) (1.90) (1.98) Year ended 10/31/01 ........................ 13.54 (0.05) (4.80) (4.85) Year ended 10/31/00 ........................ 13.57 (0.11) 2.01 1.90 CLASS B Year ended 10/31/04 ........................ $ 7.31 $(0.15) $0.07 $(0.08) Year ended 10/31/03 ........................ 5.93 (0.11) 1.49 1.38 Year ended 10/31/02 ........................ 7.88 (0.14) (1.81) (1.95) Year ended 10/31/01 ........................ 13.09 (0.12) (4.61) (4.73) Year ended 10/31/00 ........................ 13.28 (0.22) 1.96 1.74 CLASS C Year ended 10/31/04 ........................ $ 7.31 $(0.10) $0.01 $(0.09) Year ended 10/31/03 ........................ 5.93 (0.11) 1.49 1.38 Year ended 10/31/02 ........................ 7.87 (0.14) (1.80) (1.94) Year ended 10/31/01 ........................ 13.09 (0.12) (4.62) (4.74) Year ended 10/31/00 ........................ 13.27 (0.22) 1.97 1.75 ALGER HEALTH SCIENCES FUND CLASS A Year ended 10/31/04 ........................ $11.91 $(0.14) $1.75 $1.61 Year ended 10/31/03 ........................ 9.29 (0.20) 2.82 2.62 From 5/1/02 (commencement of operations) to 10/31/2002 (iii) .......... 10.00 (0.06) (0.65) (0.71)
- ---------- (i) Amount was computed based on average shares outstanding during the period. (ii) Does not reflect the effect of any sales charges. (iii) Ratios have been annualized; total return has not been annualized. (iv) Amount has been reduced by 0.14% due to expense reimbursements. See Notes to Financial Statements. -55-
Ratios/Supplemental Data ------------------------------------------------------------ Ratio of Net Ratio of Net Net Assets, Expenses Investment Distributions Asset End of to Income from Value, Period Average (Loss) to Portfolio Net Realized End of Total (000's Net Average Turnover Gains Period Return (ii) omitted) Assets Net Assets Rate ------------- ------ ----------- -------- -------- ---------- --------- $ -- $ 7.71 (0.4)% $ 121,341 1.58% (1.23)% 157.23% -- 7.74 24.2 112,031 1.70 (1.06) 202.81 -- 6.23 (24.1) 97,962 1.53 (1.06) 174.83 (0.48) 8.21 (36.8) 179,365 1.40 (0.46) 102.58 (1.93) 13.54 12.6 366,296 1.36 (0.66) 132.37 $ -- $ 7.23 (1.1)% $ 228,646 2.33% (1.97)% 157.23% -- 7.31 23.3 324,292 2.45 (1.82) 202.81 -- 5.93 (24.8) 342,592 2.28 (1.82) 174.83 (0.48) 7.88 (37.2) 572,068 2.15 (1.20) 102.58 (1.93) 13.09 11.6 1,056,831 2.11 (1.41) 132.37 $ -- $ 7.22 (1.2)% $ 41,595 2.33% (1.98)% 157.23% -- 7.31 23.3 54,273 2.45 (1.81) 202.81 -- 5.93 (24.7) 53,936 2.28 (1.82) 174.83 (0.48) 7.87 (37.2) 96,451 2.15 (1.20) 102.58 (1.93) 13.09 11.7 180,663 2.12 (1.42) 132.37 $(0.23) $13.29 13.7% $ 15,106 1.55%(iv) (1.04)% 202.79% -- 11.91 28.2 8,594 2.36 (1.80) 246.96 -- 9.29 (7.1) 712 2.15 (1.43) 135.82
-56- THE ALGER FUNDS FINANCIAL HIGHLIGHTS FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
Income from Investment Operations ------------------------------ Net Realized and Net Asset Net Unrealized Total Value, Investment Gain from Beginning Income (Loss) on Investment of Period (Loss) (i) Investments Operations --------- ----------- ------------- ----------- ALGER HEALTH SCIENCES FUND (CONTINUED) CLASS B Year ended 10/31/04 ........................ $11.78 $(0.24) $1.74 $1.50 Year ended 10/31/03 ........................ 9.26 (0.28) 2.80 2.52 From 5/1/02 (commencement of operations) to 10/31/2002 (iii) .......... 10.00 (0.10) (0.64) (0.74) CLASS C Year ended 10/31/04 ........................ $11.78 $(0.24) $1.74 $1.50 Year ended 10/31/03 ........................ 9.26 (0.29) 2.81 2.52 From 5/1/02 (commencement of operations) to 10/31/2002 (iii) .......... 10.00 (0.10) (0.64) (0.74) ALGER SMALLCAP AND MIDCAP GROWTH FUND CLASS A Year ended 10/31/04 ........................ $ 9.97 $(0.13) $0.62 $0.49 Year ended 10/31/03 ........................ 7.65 (0.09) 2.41 2.32 From 5/8/02 (commencement of operations) to 10/31/2002 (iii) .......... 10.00 (0.01) (2.34) (2.35) CLASS B Year ended 10/31/04 ........................ $ 9.87 $(0.20) $0.60 $0.40 Year ended 10/31/03 ........................ 7.63 (0.16) 2.40 2.24 From 5/8/02 (commencement of operations) to 10/31/2002 (iii) .......... 10.00 (0.09) (2.28) (2.37) CLASS C Year ended 10/31/04 ........................ $ 9.86 $(0.20) $0.61 $0.41 Year ended 10/31/03 ........................ 7.63 (0.16) 2.39 2.23 From 5/8/02 (commencement of operations) to 10/31/2002 (iii) .......... 10.00 (0.09) (2.28) (2.37)
- ---------- (i) Amount was computed based on average shares outstanding during the period. (ii) Does not reflect the effect of any sales charges. (iii) Ratios have been annualized; total return has not been annualized. (iv) Amount has been reduced by 0.14% due to expense reimbursement. (v) Amount has been reduced by 0.15% due to expense reimbursement. See Notes to Financial Statements. -57-
Ratios/Supplemental Data ----------------------------------------------------------- Ratio of Net Ratio of Net Net Assets, Expenses Investment Dividends Asset End of to Income from Net Value, Period Average (Loss) to Portfolio Realized End of Total (000's Net Average Turnover Gains Period Return (ii) omitted) Assets Net Assets Rate --------- ------ ----------- -------- -------- ---------- --------- $(0.23) $13.05 12.9% $ 7,939 2.29%(iv) (1.78)% 202.79% -- 11.78 27.2 3,620 3.22 (2.63) 246.96 -- 9.26 (7.4) 325 2.91 (2.18) 135.82 $(0.23) $13.05 12.9% $ 3,740 2.29%(v) (1.78)% 202.79% -- 11.78 27.2 1,357 3.30 (2.69) 246.96 -- 9.26 (7.4) 309 2.90 (2.17) 135.82 $ -- $10.46 4.9% $10,827 1.53%(iv) (1.21)% 101.16% -- 9.97 30.3 9,932 1.58 (1.06) 83.67 -- 7.65 (23.5) 7,775 1.89 (1.57) 34.09 $ -- $10.27 4.1% $ 2,291 2.27%(v) (1.95)% 101.16% -- 9.87 29.4 1,205 2.37 (1.87) 83.67 -- 7.63 (23.7) 269 2.64 (2.32) 34.09 $ -- $10.27 4.2% $ 1,345 2.28%(v) (1.95)% 101.16% -- 9.86 29.2 969 2.38 (1.86) 83.67 -- 7.63 (23.7) 254 2.64 (2.32) 34.09
-58- THE ALGER FUNDS FINANCIAL HIGHLIGHTS FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR
Income from Investment Operations ----------------------------- Net Net Asset Net Dividends Asset Value, Investment from Net Value, Beginning Income Investment End of of Year (Loss) Income Year --------- ---------- ---------- ------ ALGER MONEY MARKET FUND Year ended 10/31/04 ........................ $1.0000 $0.0039 $(0.0039) $1.0000 Year ended 10/31/03 ........................ 1.0000 0.0033 (0.0033) 1.0000 Year ended 10/31/02 ........................ 1.0000 0.0097 (0.0097) 1.0000 Year ended 10/31/01 ........................ 1.0000 0.0387 (0.0387) 1.0000 Year ended 10/31/00 ........................ 1.0000 0.0527 (0.0527) 1.0000
See Notes to Financial Statements. -59-
Ratios/Supplemental Data --------------------------------------------- Ratio of Net Ratio of Net Assets, Expenses Investment End of to Income Year Average (Loss) to Total (000's Net Average Return omitted) Assets Net Assets ------ -------- -------- ---------- 0.4% $ 80,528 0.77% 0.37% 0.3 115,935 0.82 0.34 1.0 330,213 0.79 0.99 3.9 402,515 0.71 3.88 5.4 233,526 0.78 5.14
-60- THE ALGER FUNDS STATEMENTS OF ASSETS AND LIABILITIES (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) October 31, 2004
LargeCap SmallCap Growth Growth Fund Fund --------- --------- ASSETS: Investments in securities, at value (identified cost*)-- see accompanying schedules of investments ................................. $ 498,975 $ 159,473 Cash ........................................................................ 50 122 Receivable for investment securities sold ................................... 3,205 4.769 Receivable for shares of beneficial interest sold ........................... 188 96 Dividends and interest receivable ........................................... 103 3 Receivable from Investment Manager--Note 3(a) ............................... -- -- Prepaid expenses ............................................................ 201 21 --------- --------- Total Assets .............................................................. 502,722 164,484 --------- --------- LIABILITIES: Payable for investment securities purchased ................................. 11,406 6,012 Payable for shares of beneficial interest redeemed .......................... 1,379 211 Accrued investment management fees .......................................... 310 113 Accrued transfer agent fees ................................................. 241 109 Accrued distribution fees ................................................... 205 48 Accrued shareholder servicing fees .......................................... 103 33 Dividends payable--Note 2(f) ................................................ -- -- Accrued expenses ............................................................ 198 94 --------- --------- Total Liabilities ......................................................... 13,842 6,620 --------- --------- NET ASSETS .................................................................. $ 488,880 $ 157,864 ========= ========= Net Assets Consist of: Paid-in capital ........................................................... $ 759,166 $ 281,568 Undistributed net investment income (accumulated loss) .................... -- -- Undistributed net realized gain (accumulated loss) ........................ (303,366) (137,224) Net unrealized appreciation (depreciation) of investments ................. 33,080 13,520 --------- --------- NET ASSETS .................................................................. $ 488,880 $ 157,864 ========= ========= Class A Net Asset Value Per Share ................................................. $ 9.05 $ 4.18 ========= ========= Offering Price Per Share .................................................. $ 9.55 $ 4.41 ========= ========= Class B Net Asset Value and Offering Price Per Share .............................. $ 8.44 $ 3.88 ========= ========= Class C Net Asset Value Per Share ................................................. $ 8.43 $ 3.88 ========= ========= Offering Price Per Share .................................................. $ 8.52 $ 3.92 ========= ========= Shares of beneficial interest outstanding--Note 6 Class A ................................................................... 18,417 19,827 ========= ========= Class B ................................................................... 33,182 18,119 ========= ========= Class C ................................................................... 5,004 1,202 ========= ========= *Identified cost ........................................................... $ 465,895 $ 145,953 ========= =========
See Notes to Financial Statements. -61-
SmallCap MidCap Capital Health and MidCap Money Balanced Growth Appreciation Sciences Growth Market Fund Fund Fund Fund Fund Fund - --------- --------- ---------- ---------- --------- --------- $ 218,972 $ 631,737 $ 392,948 $ 26,227 $ 14,711 $ 80,690 66 17 30 54 10 14 472 40,344 10,418 1,167 292 -- 103 445 246 15 9 73 1,054 102 12 4 1 -- -- -- -- 2 2 -- 73 113 78 17 14 27 - --------- --------- ---------- ---------- --------- --------- 220,740 672,758 403,732 27,486 15,039 80,804 - --------- --------- ---------- ---------- --------- --------- 1,672 45,333 10,401 622 547 -- 719 2,444 816 25 -- 143 141 416 281 19 10 34 93 212 259 7 3 33 96 219 172 7 2 -- 47 130 83 6 3 -- -- -- -- -- -- 1 99 269 139 16 11 65 - --------- --------- ---------- ---------- --------- --------- 2,867 49,023 12,151 702 576 276 - --------- --------- ---------- ---------- --------- --------- $ 217,873 $ 623,735 $ 391,581 $ 26,784 $ 14,463 $ 80,528 ========= ========= ========== ========== ========= ========= $ 259,965 $ 609,889 $ 958,941 $ 24,358 $ 11,452 $ 80,746 (147) -- -- -- -- -- (54,218) (27,968) (604,179) 1,353 1,166 (218) 12,273 41,814 36,819 1,073 1,845 -- - --------- --------- ---------- ---------- --------- --------- $ 217,873 $ 623,735 $ 391,581 $ 26,784 $ 14,463 $ 80,528 ========= ========= ========== ========== ========= ========= $ 18.58 $ 7.89 $ 7.71 $ 13.29 $ 10.46 -- ========= ========= ========== ========== ========= ========= $ 19.61 $ 8.33 $ 8.14 $ 14.03 $ 11.04 -- ========= ========= ========== ========== ========= ========= $ 18.13 $ 7.33 $ 7.23 $ 13.05 $ 10.27 $ 1.00 ========= ========= ========== ========== ========= ========= $ 18.21 $ 7.31 $ 7.22 $ 13.05 $ 10.27 -- ========= ========= ========== ========== ========= ========= $ 18.39 $ 7.38 $ 7.29 $ 13.18 $ 10.37 -- ========= ========= ========== ========== ========= ========= 3,694 34,980 15,736 1,136 1,035 -- ========= ========= ========== ========== ========= ========= 6,309 37,811 31,643 608 223 80,727 ========= ========= ========== ========== ========= ========= 1,913 9,665 5,759 287 131 -- ========= ========= ========== ========== ========= ========= $ 206,699 $ 589,923 $ 356,129 $ 25,154 $ 12,866 $ 80,690 ========= ========= ========== ========== ========= =========
-62- THE ALGER FUNDS STATEMENTS OF OPERATIONS (IN THOUSANDS) FOR THE YEAR ENDED OCTOBER 31, 2004
LargeCap SmallCap Growth Growth Fund Fund -------- --------- Income: Dividends .................................................................. $ 3,275 $ 296 Interest ................................................................... 58 76 Security Lending ........................................................... 62 4 -------- --------- Total Income ............................................................... 3,395 376 -------- --------- Expenses: Management fees--Note 3(a) ................................................. 4,056 1,439 Distribution fees--Note 3(b): Class B .................................................................. 2,415 631 Class C .................................................................. 333 38 Shareholder servicing fees--Note 3(f) ...................................... 1,352 423 Interest on line of credit utilized--Note 5 ................................ 7 -- Custodian fees ............................................................. 67 35 Transfer agent fees and expenses--Note 3(e) ................................ 1,309 724 Professional fees .......................................................... 81 36 Registration fees .......................................................... 28 60 Miscellaneous .............................................................. 347 137 -------- --------- 9,995 3,523 Less, expense reimbursements Note 3(a) ...................................... -- -- -------- --------- Total Expenses ............................................................. 9,995 3,523 -------- --------- NET INVESTMENT INCOME (LOSS) ............................................. (6,600) (3,147) -------- --------- REALIZED AND UNREALIZED GAIN(LOSS) ON INVESTMENTS Net realized gain (loss) on investments ..................................... 56,527 35,504 Net change in unrealized appreciation (depreciation) on investments ............................................................ (40,501) (23,229) -------- --------- Net realized and unrealized gain (loss) on investments ...................... 16,026 12,275 -------- --------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ................................................. $ 9,426 $ 9,128 ======== =========
See Notes to Financial Statements. -63-
SmallCap MidCap Capital Health and MidCap Money Balanced Growth Appreciation Sciences Growth Market Fund Fund Fund Fund Fund Fund -------- --------- --------- -------- -------- -------- $ 989 $ 1,446 $ 1,481 $ 103 $ 40 $ -- 3,426 130 73 7 5 1,052 21 76 57 -- -- -- -------- --------- --------- -------- -------- -------- 4,436 1,652 1,611 110 45 1,052 -------- --------- --------- -------- -------- -------- 1,862 5,086 3,830 183 117 460 982 2,324 2,112 49 15 -- 308 514 369 20 9 -- 621 1,589 1,126 54 34 -- 1 5 89 -- -- -- 44 86 52 16 7 9 420 1,223 1,581 46 17 150 31 94 46 12 11 2 16 29 105 34 27 48 142 406 304 19 17 41 -------- --------- --------- -------- -------- -------- 4,427 11,356 9,614 433 254 710 -- -- -- (31) (19) -- -------- --------- --------- -------- -------- -------- 4,427 11,356 9,614 402 235 710 -------- --------- --------- -------- -------- -------- 9 (9,704) (8,003) (292) (190) 342 -------- --------- --------- -------- -------- -------- 20,515 76,357 31,334 1,665 1,451 (1) (15,068) (43,853) (25,988) 331 (683) -- -------- --------- --------- -------- -------- -------- 5,447 32,504 5,346 1,996 768 (1) -------- --------- --------- -------- -------- -------- $ 5,456 $ 22,800 $ (2,657) $ 1,704 $ 58 $ 341 ======== ========= ========= ======== ======== ========
-64- THE ALGER FUNDS STATEMENTS OF CHANGES IN NET ASSETS (IN THOUSANDS)
LargeCap Growth Fund ---------------------------------- For the For the Year Ended Year Ended October 31, October 31, 2004 2003 ----------- ----------- NET INVESTMENT INCOME (LOSS) ......................... $ (6,600) $ (5,919) Net realized gain on investments and written options . 56,527 19,471 Net change in unrealized appreciation (depreciation) on investments and written options ................. (40,501) 98,035 --------- --------- Net increase in net assets resulting from operations .......................... 9,426 111,587 --------- --------- Dividends to shareholders from: Net investment income Class A ............................................ -- -- Class B ............................................ -- -- Class C ............................................ -- -- --------- --------- Total dividends to shareholders ...................... -- -- --------- --------- Increase (decrease) from shares of beneficial interest transactions: Class A ............................................ (5,085) 2,351 Class B ............................................ (77,035) (41,003) Class C ............................................ (24) (423) --------- --------- Net increase (decrease) from shares of beneficial interest transactions--Note 6 ........... (82,144) (39,075) --------- --------- Total increase (decrease) ........................... (72,718) 72,512 Net Assets: Beginning of year ................................... 561,598 489,086 --------- --------- End of year ......................................... $ 488,880 $ 561,598 ========= ========= Undistributed net investment income (accumulated loss) $ -- $ -- ========= =========
See Notes to Financial Statements. -65-
SmallCap MidCap Growth Balanced Growth Fund Fund Fund --------------------------------- --------------------------------- --------------------------------- 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, 2004 2003 2004 2003 2004 2003 ----------- ----------- ----------- ----------- ----------- ----------- $ (3,147) $ (3,108) $ 9 $ 702 $ (9,704) $ (8,062) 35,504 20,463 20,515 9,527 76,357 84,904 (23,229) 39,576 (15,068) 27,302 (43,853) 86,140 --------- --------- --------- --------- --------- --------- 9,128 56,931 5,456 37,531 22,800 162,982 --------- --------- --------- --------- --------- --------- -- -- (719) (1,359) -- -- -- -- (248) (1,356) -- -- -- -- (71) (407) -- -- --------- --------- --------- --------- --------- --------- -- -- (1,038) (3,122) -- -- --------- --------- --------- --------- --------- --------- 5,234 (746) (12,048) (8,881) 34,556 38,586 (28,777) (14,978) (31,815) (11,962) (60,164) (8,309) (577) 539 (10,635) (6,366) 6,190 542 --------- --------- --------- --------- --------- --------- (24,120) (15,185) (54,498) (27,209) (19,418) 30,819 --------- --------- --------- --------- --------- --------- (14,992) 41,746 (50,080) 7,200 3,382 193,801 172,856 131,110 267,953 260,753 620,353 426,552 --------- --------- --------- --------- --------- --------- $ 157,864 $ 172,856 $ 217,873 $ 267,953 $ 623,735 $ 620,353 ========= ========= ========= ========= ========= ========= $ -- $ -- $ (147) $ 870 $-- $ -- ========= ========= ========= ========= ========= =========
-66- THE ALGER FUNDS STATEMENTS OF CHANGES IN NET ASSETS (IN THOUSANDS)
Capital Appreciation Fund --------------------------------- For the For the Year Ended Year Ended October 31, October 31, 2004 2003 ----------- ----------- Net investment income (loss) .................................. $ (8,003) $ (7,839) Net realized gain (loss) on investments and written options ... 31,334 28,900 Net change in unrealized appreciation (depreciation) on investments and written options .......................... (25,988) 78,267 ----------- ----------- Net increase (decrease) in net assets resulting from operations (2,657) 99,328 ----------- ----------- Dividends and distributions to shareholders from: Net investment income Class A ..................................................... -- -- Class B ..................................................... -- -- Class C ..................................................... -- -- Net realized gains Class A ..................................................... -- -- Class B ..................................................... -- -- Class C ..................................................... -- -- ----------- ----------- Total dividends and distributions to shareholders ............. -- -- ----------- ----------- Increase (decrease) from shares of beneficial interest transactions: Class A ..................................................... 10,673 (10,863) Class B ..................................................... (94,734) (82,483) Class C ..................................................... (12,297) (9,876) ----------- ----------- Net increase (decrease) from shares of beneficial interest transactions--Note 6 .................... (96,358) (103,222) ----------- ----------- Total increase (decrease) .................................... (99,015) (3,894) Net Assets: Beginning of year ............................................ 490,596 494,490 ----------- ----------- End of year .................................................. $ 391,581 $ 490,596 =========== =========== Undistributed net investment income (accumulated loss) ........ $ -- $ -- =========== ===========
See Notes to Financial Statements. -67-
SmallCap Health and MidCap Money Sciences Growth Market Fund Fund Fund - --------------------------------- --------------------------------- --------------------------------- 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, 2004 2003 2004 2003 2004 2003 - ----------- ----------- ----------- ----------- ----------- ----------- $ (292) $ (113) $ (190) $ (105) $ 342 $ 872 1,665 473 1,451 (11) (1) 56 331 747 (683) 2,671 -- -- - ----------- ----------- ----------- ----------- ----------- ----------- 1,704 1,107 578 2,555 341 928 - ----------- ----------- ----------- ----------- ----------- ----------- -- -- -- -- -- -- -- -- -- -- (342) (872) -- -- -- -- -- -- (174) -- -- -- -- -- (79) -- -- -- -- -- (31) -- -- -- -- -- - ----------- ----------- ----------- ----------- ----------- ----------- (284) -- -- -- (342) (872) - ----------- ----------- ----------- ----------- ----------- ----------- 5,570 7,247 411 (37) -- -- 3,959 2,972 1,029 728 (35,406) (214,334) 2,264 899 339 562 -- -- - ----------- ----------- ----------- ----------- ----------- ----------- 11,793 11,118 1,779 1,253 (35,406) (214,334) - ----------- ----------- ----------- ----------- ----------- ----------- 13,213 12,225 2,357 3,808 (35,407) (214,278) 13,571 1,346 12,106 8,298 115,935 330,213 - ----------- ----------- ----------- ----------- ----------- ----------- $ 26,784 $ 13,571 $ 14,463 $ 12,106 $ 80,528 $ 115,935 =========== =========== =========== =========== =========== =========== $ -- $ -- $ -- $ -- $ -- $ -- =========== =========== =========== =========== =========== ===========
-68- THE ALGER FUNDS NOTES TO FINANCIAL STATEMENTS NOTE 1 -- GENERAL: The Alger Funds (formerly The Alger Fund) (the "Trust") is a diversified, open-end registered investment company organized as a business trust under the laws of the Commonwealth of Massachusetts. The Trust operates as a series company currently issuing an unlimited number of shares of beneficial interest in eight Funds--LargeCap Growth Fund, SmallCap Growth Fund, Balanced Fund, MidCap Growth Fund, Capital Appreciation Fund, Health Sciences Fund, SmallCap and MidCap Growth Fund and Money Market Fund (the "Funds"). Prior to February 28, 2004, the LargeCap Growth Fund was the LargeCap Growth Portfolio, the SmallCap Growth Fund was the Small Capitalization Portfolio, the Balanced Fund was the Balanced Portfolio, the MidCap Growth Fund was the MidCap Growth Portfolio, the Capital Appreciation Fund was the Capital Appreciation Portfolio, the Health Sciences Fund was the Health Sciences Portfolio, the SmallCap and MidCap Growth Fund was the SmallCap and MidCap Portfolio and the Money Market Fund was the Money Market Portfolio. The LargeCap Growth Fund, SmallCap Growth Fund, MidCap Growth Fund, Capital Appreciation Fund, Health Sciences Fund and SmallCap and MidCap Growth Fund normally invest primarily in equity securities and each has an investment objective of long-term capital appreciation. The Balanced Fund'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 Fund's investment objective is high current income which it seeks to achieve by investing in short-term instruments. Each Fund, other than the Money Market Fund, offers Class A, Class B and Class C shares. 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 Funds, other than the Money Market Fund, are valued on each day the NewYork Stock Exchange (the "NYSE") is open as of the close of the NYSE (normally 4:00 p.m. Eastern time). Listed 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 included within the Nasdaq market shall be valued at the Nasdaq official closing price (NOCP) on the day of valuation, or if there is no NOCP issued, at the last sale price on such day. Securities included within the Nasdaq market for which there is no NOCP and -69- THE ALGER FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) no last sale price on the day of valuation shall be valued at the mean between the last bid and asked prices on such day. 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 Fund, and short-term securities held by the other Funds 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. Premiums and discounts on debt securities purchased are amortized or accreted over the lives of the respective securities. (C) REPURCHASE AGREEMENTS: The Funds 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 Fund. Additional collateral is obtained when necessary. (D) OPTION WRITING: When a Fund writes an option, an amount equal to the premium received by the Fund 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 treated by the Fund 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 Fund has realized a gain or loss. If a put option is exercised, the premium reduces the cost basis of the securities purchased by the Fund. The Fund 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 FUND SECURITIES: The Funds 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 Fund's total assets, as defined. The Funds earn fees on the securities loaned. 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 -70- THE ALGER FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) the current market value of the loaned securities. The market value of the loaned securities is determined at the close of business of the Funds and any required additional collateral is delivered to the Funds on the next business day. As of October 31, 2004, there were no securities on loan. (F) DIVIDENDS TO SHAREHOLDERS: Dividends payable to shareholders are recorded on the ex-dividend date. The Money Market Fund declares dividends daily from net investment income; such dividends are paid monthly. The dividends from net investment income of the other Funds are declared and paid annually. With respect to all Funds, 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 Funds' distributions 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 return of capital, depending on the type of book/tax differences that may exist. Capital accounts within the financial statements are adjusted for permanent book/tax differences. Reclassifications result primarily from the differences in tax treatment of net operating losses and premium/discount of debt securities. The reclassifications had no impact on the net asset values of the Funds and are designed to present the Funds' capital accounts on a tax basis. (G) FEDERAL INCOME TAXES: It is each Fund'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 Fund maintains such compliance, no federal income tax provision is required. Each Fund is treated as a separate entity for the purpose of determining such compliance. (H) ALLOCATION METHODS: The Trust accounts separately for the assets, liabilities and operations of each Fund. Expenses directly attributable to each Fund are charged to that Fund's operations; expenses which are applicable to all Funds are allocated among them based on net assets. Income, realized and unrealized gains and losses, and expenses of each Fund, other than the Money Market Fund, are allocated among the Fund'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) INDEMNIFICATION: The Trust enters into contracts that contain a variety of indemnification provisions. The Trust's maximum exposure under these arrangements is unknown. The Trust does not anticipate recognizing any loss related to these arrangements. -71- THE ALGER FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) (J) 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 Fund, 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 Fund at the following annual rates: LargeCap Growth Fund ............................................... .75% SmallCap Growth Fund ............................................... .85 Balanced Fund ...................................................... .75 MidCap Growth Fund ................................................. .80 Capital Appreciation Fund .......................................... .85 Health Sciences Fund ............................................... .85 SmallCap and MidCap Growth Fund .................................... .85 Money Market Fund .................................................. .50 Alger Management has established an expense cap for the Health Sciences Fund and the SmallCap and MidCap Growth Fund effective March 1, 2004. Alger Management will reimburse these Funds if annualized operating expenses exceed 1.50% of average daily net assets for Class A shares and 2.25% of average daily net assets for Class B and Class C shares, respectively. For the period ended October 31, 2004, Alger Management reimbursed the Health Sciences Fund and the SmallCap and MidCap Growth Fund $30,503 and $19,397, respectively. Alger Management has contractually agreed to extend the expense cap through February 28, 2005. (B) DISTRIBUTION FEES: Class B Shares--The Trust has adopted an Amended and Restated Plan of Distribution pursuant to which Class B shares of each Fund, other than the Money Market Fund, 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 Funds. 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 Funds, the excess may be carried forward, with interest, and sought to be reimbursed in future periods. As of October 31, 2004, such excess carried forward was approximately $17,311,000, $13,438,000, $4,526,000, $11,163,000, $20,670,000, $486,000 and $85,000 for Class B shares of the LargeCap Growth Fund, the SmallCap Growth Fund, the Balanced Fund, the MidCap Growth Fund, the Capital Appreciation Fund, the Health Sciences Fund and the SmallCap and MidCap -72- THE ALGER FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) Growth Fund, 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 Trust has adopted a Distribution Plan pursuant to which Class C shares of each Fund, other than the Money Market Fund, 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 Funds 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: Purchases and sales of shares of the Funds, other than the Money Market Fund, may be subject to initial sales charges or contingent deferred sales charges. For the year ended October 31, 2004, the initial sales charges and contingent deferred sales charges retained by the Distributor were approximately $192,905 and $3,074,784, 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 Trust. (D) BROKERAGE COMMISSIONS: During the year ended October 31, 2004, the LargeCap Growth Fund, the SmallCap Growth Fund, the Balanced Fund, the MidCap Growth Fund, the Capital Appreciation Fund, the Health Sciences Fund and the SmallCap and MidCap Growth Fund paid the Distributor commissions of $1,845,086, $251,874, $616,493, $1,926,220, $1,179,150, $60,922 and $16,567 respectively, in connection with securities transactions. (E) TRANSFER AGENT FEES AND EXPENSES: Alger Shareholder Services, Inc. ("Alger Services"), an affiliate of Alger Management, served as transfer agent for the Trust. During the year ended October 31, 2004, the LargeCap Growth Fund, the SmallCap Growth Fund, the Balanced Fund, the MidCap Growth Fund, the Capital Appreciation Fund, the Health Sciences Fund, the SmallCap and MidCap Growth Fund and the Money Market Fund incurred fees of $1,012,497, $604,725, $249,154, $822,658, $1,190,285, $40,240, $15,293 and $141,556, respectively, for services provided by Alger Services. In addition, during the year ended October 31, 2004, the LargeCap Growth Fund, the SmallCap Growth Fund, the Balanced Fund, the MidCap Growth Fund, the Capital Appreciation Fund, the Health Sciences Fund, the SmallCap and MidCap Growth Fund, and the Money Market Fund reimbursed Alger Services $296,228, $119,552, $171,261, $400,194, $390,867, $5,643, $2,070 and $8,700, respectively, for transfer agent related expenses paid by Alger Services on behalf of the Funds. Effective November 22, 2004, State Street Bank and Trust Company replaced Alger Services as the Funds' transfer agent. Transfer agent services are provided by State Street Bank and Trust Company's affiliate, Boston Financial Data Services, Inc. (F) SHAREHOLDER SERVICING FEES: The Trust has entered into a shareholder servicing agreement with the Distributor whereby the Distributor provides each Fund, other than the Money Market Fund, with ongoing servicing of share -73- THE ALGER FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) holder accounts. As compensation for such services, each designated Fund pays the Distributor a monthly fee at an annual rate equal to .25% of each Fund's average daily net assets. (G) OTHER TRANSACTIONS WITH AFFILIATES: Certain trustees and officers of the Trust are directors and officers of Alger Management, the Distributor and Alger Services. NOTE 4 -- SECURITIES TRANSACTIONS: The following summarizes the securities transactions by the Trust, other than short-term securities, for the year ended October 31, 2004: PURCHASES SALES --------- ----- LargeCap Growth Fund ................. $1,024,397,642 $1,088,407,276 SmallCap Growth Fund ................. 209,884,259 234,900,640 Balanced Fund ........................ 405,399,749 460,555,728 MidCap Growth Fund ................... 1,312,576,319 1,312,130,142 Capital Appreciation Fund ............ 704,054,010 838,063,902 Health Sciences Fund ................. 52,183,932 41,919,972 SmallCap and MidCap Growth Fund ...... 15,413,752 13,366,149 NOTE 5 -- LINES OF CREDIT: The Trust 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 Fund, the Trust borrows under such lines of credit exclusively for temporary or emergency purposes. The Capital Appreciation Fund 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 Fund borrows under these lines, it must pledge securities with a total value of at least twice the amount borrowed. For the year ended October 31, 2004, the Fund had borrowings which averaged $5,754,301 at a weighted average interest rate of 1.55%. -74- THE ALGER FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 6 -- SHARE CAPITAL: The Trust 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 Fund, 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, 2004 OCTOBER 31, 2003 SHARES AMOUNT SHARES AMOUNT ------ ------ ------ ------ Alger LargeCap Growth Fund Class A: Shares sold ................. 3,785,781 $ 34,961,378 212,076,287 $ 1,562,324,472 Shares converted from Class B 4,951,285 45,970,273 1,686,453 13,613,533 Shares redeemed ............. (9,331,571) (86,016,972) (212,980,056) (1,573,586,334) --------------- --------------- --------------- --------------- Net increase (decrease) ..... (594,505) $ (5,085,321) 782,684 $ 2,351,671 =============== =============== =============== =============== Class B: Shares sold ................. 3,625,445 $ 31,437,096 14,454,845 $ 104,309,598 Shares converted to Class A . (5,290,324) (45,970,273) (1,792,383) (13,613,533) Shares redeemed ............. (7,267,198) (62,501,351) (18,429,789) (131,699,387) --------------- --------------- --------------- --------------- Net decrease ................ (8,932,077) $ (77,034,528) (5,767,327) $ (41,003,322) =============== =============== =============== =============== Class C: Shares sold ................. 1,471,428 $ 12,812,280 1,828,434 $ 13,221,973 Shares redeemed ............. (1,498,494) (12,836,202) (1,947,938) (13,645,371) --------------- --------------- --------------- --------------- Net decrease ................ (27,066) $ (23,922) (119,504) $ (423,398) =============== =============== =============== =============== Alger SmallCap Growth Fund Class A: Shares sold ................. 1,181,044 $ 4,955,133 37,858,894 $ 114,234,402 Shares converted from Class B 5,051,160 21,245,305 2,759,290 9,070,302 Shares redeemed ............. (5,027,530) (20,965,950) (38,192,618) (124,050,570) --------------- --------------- --------------- --------------- Net increase (decrease) ..... 1,204,674 $ 5,234,488 2,425,566 $ (745,866) =============== =============== =============== =============== Class B: Shares sold ................. 2,159,641 $ 8,451,362 3,414,803 $ 10,168,201 Shares converted to Class A . (5,423,212) (21,245,305) (2,941,586) (9,070,302) Shares redeemed ............. (4,112,290) (15,983,490) (5,468,347) (16,076,058) --------------- --------------- --------------- --------------- Net decrease ................ (7,375,861) $ (28,777,433) (4,995,130) $ (14,978,159) =============== =============== =============== =============== Class C: Shares sold ................. 256,688 $ 984,448 437,287 $ 1,371,519 Shares redeemed ............. (405,714) (1,561,201) (281,680) (832,175) --------------- --------------- --------------- --------------- Net increase (decrease) ..... (149,026) $ (576,753) 155,607 $ (539,344) =============== =============== =============== ===============
-75- THE ALGER FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED FOR THE YEAR ENDED OCTOBER 31, 2004 OCTOBER 31, 2003 SHARES AMOUNT SHARES AMOUNT ------ ------ ------ ------ Alger Balanced Fund Class A: Shares sold ................. 786,535 $ 14,753,407 11,851,443 $ 194,267,241 Shares converted from Class B 209,794 3,938,485 67,609 1,173,948 Dividends reinvested ........ 37,398 692,621 81,528 1,277,555 Shares redeemed ............. (1,679,123) (31,432,047) (12,541,030) (205,600,058) --------------- --------------- --------------- --------------- Net decrease ................ (645,396) $ (12,047,534) (540,450) $ (8,881,314) =============== =============== =============== =============== Class B: Shares sold ................. 659,551 $ 12,118,921 1,683,865 $ 27,187,759 Dividends reinvested ........ 12,407 225,684 80,559 1,238,989 Shares converted to Class A . (214,310) (3,938,485) (69,170) (1,173,948) Shares redeemed ............. (2,200,661) (40,221,437) (2,418,357) (39,214,660) --------------- --------------- --------------- --------------- Net decrease ................ (1,743,013) $ (31,815,317) (723,103) $ (11,961,860) =============== =============== =============== =============== Class C: Shares sold ................. 233,090 $ 4,341,356 1,039,674 $ 16,671,772 Dividends reinvested ........ 3,643 66,554 24,499 378,516 Shares redeemed ............. (822,031) (15,043,212) (1,469,094) (23,415,964) --------------- --------------- --------------- --------------- Net decrease ................ (585,298) $ (10,635,302) (404,921) $ (6,365,676) =============== =============== =============== =============== Alger MidCap Growth Fund Class A: Shares sold ................. 14,804,827 $ 116,632,798 315,152,796 $ 1,833,356,690 Shares converted from Class B 5,032,695 39,698,864 1,822,715 12,100,586 Shares redeemed ............. (15,480,099) (121,775,451) (310,626,789) (1,806,871,564) --------------- --------------- --------------- --------------- Net increase ................ 4,357,423 $ 34,556,211 6,348,722 $ 38,585,712 =============== =============== =============== =============== Class B: Shares sold ................. 6,665,291 $ 49,119,085 25,079,209 $ 147,315,129 Shares converted to Class A . (5,403,047) (39,698,864) (1,943,984) (12,100,586) Shares redeemed ............. (9,524,724) (69,584,665) (24,853,213) (143,523,850) --------------- --------------- --------------- --------------- Net decrease ................ (8,262,480) $ (60,164,444) (1,717,988) $ (8,309,307) =============== =============== =============== =============== Class C: Shares sold ................. 3,207,328 $ 23,687,883 4,127,671 $ 23,569,244 Shares redeemed ............. (2,408,406) (17,497,437) (4,215,789) (23,026,860) --------------- --------------- --------------- --------------- Net increase (decrease) ..... 798,922 $ 6,190,446 (88,118) $ 542,384 =============== =============== =============== ===============
-76- THE ALGER FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED FOR THE YEAR ENDED OCTOBER 31, 2004 OCTOBER 31, 2003 SHARES AMOUNT SHARES AMOUNT ------ ------ ------ ------ Alger Capital Appreciation Fund* Class A: Shares sold .................. 1,957,522 $ 15,512,290 176,690,199 $ 1,129,412,858 Shares converted from Class B 4,670,294 37,504,791 1,063,251 7,715,269 Shares redeemed .............. (5,362,253) (42,343,889) (178,999,396) (1,147,990,627) --------------- --------------- --------------- --------------- Net increase (decrease) ...... 1,265,563 $ 10,673,192 (1,245,946) $ (10,862,500) =============== =============== =============== =============== Class B: Shares sold .................. 2,196,054 $ 16,518,900 8,005,635 $ 51,174,080 Shares converted to Class A .. (4,965,396) (37,504,791) (1,124,507) (7,715,269) Shares redeemed .............. (9,956,627) (73,748,590) (20,265,703) (125,941,339) --------------- --------------- --------------- --------------- Net decrease ................. (12,725,969) $ (94,734,481) (13,384,575) $ (82,482,528) =============== =============== =============== =============== Class C: Shares sold .................. 629,566 $ 4,764,214 2,474,578 $ 15,066,837 Shares redeemed .............. (2,298,916) (17,061,481) (4,142,353) (24,943,221) --------------- --------------- --------------- --------------- Net decrease ................. (1,669,350) $ (12,297,267) (1,667,775) $ (9,876,384) =============== =============== =============== =============== Alger Health Sciences Fund Class A: Shares sold .................. 563,963 $ 7,639,625 1,090,711 $ 12,568,348 Shares converted from Class B 10,929 146,271 2,994 33,202 Dividends reinvested ......... 13,576 167,934 -- -- Shares redeemed .............. (173,720) (2,383,764) (448,650) (5,354,354) --------------- --------------- --------------- --------------- Net increase ................. 414,748 $ 5,570,066 645,055 $ 7,247,196 =============== =============== =============== =============== Class B: Shares sold .................. 396,834 $ 5,173,379 328,618 $ 3,576,815 Dividends reinvested ......... 3,637 44,444 -- -- Shares converted to Class A .. (11,091) (146,271) (3,020) (33,202) Shares redeemed .............. (88,324) (1,112,852) (53,322) (571,217) --------------- --------------- --------------- --------------- Net increase ................. 301,056 $ 3,958,700 272,276 $ 2,972,396 =============== =============== =============== =============== Class C: Shares sold .................. 192,177 $ 2,535,031 95,328 $ 1,055,031 Dividends reinvested ......... 2,366 28,911 -- -- Shares redeemed .............. (23,169) (299,835) (13,435) (155,536) --------------- --------------- --------------- --------------- Net increase ................. 171,374 $ 2,264,107 81,893 $ 899,495 =============== =============== =============== ===============
-77- THE ALGER FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED FOR THE YEAR ENDED OCTOBER 31, 2004 OCTOBER 31, 2003 SHARES AMOUNT SHARES AMOUNT ------ ------ ------ ------ Alger SmallCap and MidCap Growth Fund Class A: Shares sold ................. 98,734 $ 1,035,622 78,285 $ 682,445 Shares converted from Class B 4,329 43,957 2,467 22,392 Shares redeemed ............. (64,161) (668,477) (100,835) (741,740) --------------- --------------- --------------- --------------- Net increase (decrease) ..... 38,902 $ 411,102 (20,083) $ (36,903) =============== =============== =============== =============== Class B: Shares sold ................. 133,855 $ 1,360,513 105,823 889,378 Shares converted to Class A . (4,398) (43,957) (2,489) (22,392) Shares redeemed ............. (28,523) (287,651) (16,500) (139,209) --------------- --------------- --------------- --------------- Net increase ................ 100,934 $ 1,028,905 86,834 $ 727,777 =============== =============== =============== =============== Class C: Shares sold ................. 54,030 $ 556,186 67,392 $ 582,253 Shares redeemed ............. (21,312) (216,701) (2,515) (20,488) --------------- --------------- --------------- --------------- Net increase ................ 32,718 $ 339,485 64,877 $ 561,765 =============== =============== =============== =============== Alger Money Market Fund Shares sold ................. 66,115,637 $ 66,158,584+ 5,071,470,541 $ 5,071,470,541 Dividends reinvested ........ 330,082 330,082 683,554 683,554 Shares redeemed ............. (101,895,323) (101,895,323) (5,286,488,553) (5,286,488,553) --------------- --------------- --------------- --------------- Net decrease ................ (35,449,604) $ (35,406,657) (214,334,458) $ (214,334,458) =============== =============== =============== ===============
* On April 30, 2003, the Capital Appreciation Fund distributed securities, with a market value of $34,727,148, to satisfy redemption requests. This distribution resulted in a realized gain of $2,297,610, which is included in net realized gain (loss) on investments on the accompanying statement of operations. + Dollar amount of shares sold includes a reimbursement by Alger Management of $42,947 for losses on portfolio investments incurred in previous fiscal years. -78- THE ALGER FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 7 -- TAX CHARACTER OF DISTRIBUTIONS TO SHAREHOLDERS: The tax character of distributions paid during the year ended October 31, 2004 and the year ended October 31, 2003 were as follows: YEAR ENDED YEAR ENDED OCTOBER 31, 2004 OCTOBER 31, 2003 ---------------- ---------------- LargeCap Growth Fund Distributions paid from: Ordinary Income ...................... -- -- Long-term capital gain ............... -- -- ----------- ---------- Total distributions paid ............. -- -- =========== ========== SmallCap Growth Fund Distributions paid from: Ordinary Income ...................... -- -- Long-term capital gain ............... -- -- ----------- ---------- Total distributions paid ............. -- -- =========== ========== Balanced Fund Distributions paid from: Ordinary Income ...................... $ 1,038,280 $3,122,162 Long-term capital gain ............... -- -- ----------- ---------- Total distributions paid ............. $ 1,038,280 $3,122,162 =========== ========== MidCap Growth Fund Distributions paid from: Ordinary Income ...................... -- -- Long-term capital gain ............... -- -- ----------- ---------- Total distributions paid ............. -- -- =========== ========== Capital Appreciation Fund Distributions paid from: Ordinary Income ...................... -- -- Long-term capital gain ............... -- -- ----------- ---------- Total distributions paid ............. -- -- =========== ========== Health Sciences Fund Distributions paid from: Ordinary Income ...................... $ 242,648 -- Long-term capital gain ............... 41,250 -- ----------- ---------- Total distributions paid ............. $ 283,898 -- =========== ========== SmallCap and MidCap Growth Fund Distributions paid from: Ordinary Income ...................... -- -- Long-term capital gain ............... -- -- ----------- ---------- Total distributions paid ............. -- -- =========== ========== Money Market Fund Distributions paid from: Ordinary Income ...................... $ 342,302 $ 871,752 Long-term capital gain ............... -- -- ----------- ---------- Total distributions paid ............. $ 342,302 $ 871,752 =========== ========== -79- THE ALGER FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) As of October 31, 2004, the components of distributable earnings on a tax basis were as follows: LargeCap Growth Fund Undistributed ordinary income ......................... -- Undistributed long-term gain .......................... -- Unrealized appreciation ............................... $28,973,500 SmallCap Growth Fund Undistributed ordinary income ......................... -- Undistributed long-term gain .......................... -- Unrealized appreciation ............................... $13,250,759 Balanced Fund Undistributed ordinary income ......................... $ 282,804 Undistributed long-term gain .......................... -- Unrealized appreciation ............................... 10,244,039 MidCap Growth Fund Undistributed ordinary income ......................... -- Undistributed long-term gain .......................... -- Unrealized appreciation ............................... $39,041,080 Capital Appreciation Fund Undistributed ordinary income ......................... -- Undistributed long-term gain .......................... -- Unrealized appreciation ............................... $36,339,450 Health Sciences Fund Undistributed ordinary income ......................... $ 1,113,122 Undistributed long-term gain .......................... 343,643 Unrealized appreciation ............................... 968,950 SmallCap and MidCap Growth Fund Undistributed ordinary income ......................... $ 166,869 Undistributed long-term gain .......................... 998,061 Unrealized appreciation ............................... 1,844,859 Money Market Fund Undistributed ordinary income ......................... -- Undistributed long-term gain .......................... -- Unrealized appreciation ............................... -- The difference between book basis and tax basis unrealized appreciation is attributable primarily to the tax deferral of losses on wash sales. At October 31, 2004, the Funds, for federal income tax purposes, had capital loss caryforwards which expire as set forth in the table below. These amounts may be applied against future net realized gains until the earlier of their utilization or expiration.
EXPIRATION DATE --------------------------------------------- 2009 2010 2011 2012 TOTAL ----------- ----------- ----------- ----------- ----------- LargeCap Growth Fund ............. 111,770,355 165,962,647 21,526,122 -- 299,259,124 SmallCap Growth Fund ............. 106,802,360 30,152,501 -- -- 136,954,861 Balanced Fund ...... 15,717,959 34,009,327 2,892,067 -- 52,619,353 MidCap Growth Fund ............. -- 25,196,444 -- -- 25,196,444 Capital Appreciation Fund ............. 398,880,536 204,820,909 -- -- 603,701,445 Money Market Fund .. 216,474 -- 640 217,114
-80- THE ALGER FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 8 -- REGULATORY MATTERS AND LEGAL PROCEEDINGS: Alger Management has been responding to inquiries, document requests and/or subpoenas from regulatory authorities, including the United States Securities and Exchange Commission ("SEC"), the Office of the New York State Attorney General, and the Attorney General of New Jersey, in connection with their investigation of practices in the mutual fund industry identified as "market timing" and "late trading." Alger Management has assured the board of the Trust that if it be determined that improper trading practices in the Trust detrimentally affected its performance, Alger Management will make appropriate restitution. At the present time, Alger Management is unable to estimate the impact, if any, that the outcome of these investigations may have on the Trust's results of operations or financial condition. Certain civil actions have developed out of the regulatory investigations. Several purported class actions and shareholder derivative suits have been filed against various parties, including, depending on the lawsuit, Alger Management, certain of the mutual funds managed by Alger Management (the "Alger Mutual Funds"), and certain current and former Alger Mutual Fund trustees and officers, alleging wrongful market-timing and late-trading activities. These cases have been transferred to the U.S. District Court of Maryland by the Judicial Panel on Multidistrict Litigation for consolidated pre-trial proceedings. On September 29, 2004, consolidated amended complaints involving these cases -- a Consolidated Amended Fund Derivative Complaint (the "Derivative Complaint") and two substantially identical Consolidated Amended Class Action Complaints (together, the "Class Action Complaint") -- were filed in the Maryland federal district court under the caption number 1:04-MD-15863 (JFM). The Derivative Complaint, brought on behalf of the Alger Mutual Funds and Castle Convertible Fund, Inc., a registered closed-end fund managed by Alger Management, alleges (i) violations, by Alger Management and, depending on the specific offense alleged, by its immediate parent the Distributor, (Fred Alger & Company, Incorporated) and/or the fund trustee defendants, of Sections 36(a), 36(b), 47, and 48 of the Investment Company Act of 1940 and of Sections 206 and 215 of the Investment Advisers Act of 1940, breach of fiduciary duty, and breach of contract, (ii) various offenses by other, unrelated, third-party defendants, and (iii) unjust enrichment by all the named defendants, all by virtue of the alleged wrongful market-timing and late-trading activities. The complaint seeks, among other things, removal of the trustee defendants and of Alger Management, certain rescissory relief, disgorgement of management fees and allegedly unlawful profits, compensatory and punitive monetary damages, and plaintiffs' fees and expenses (including attorney and expert fees). The Class Action Complaint names the Alger-related defendants named in the Derivative Complaint as well as certain defendants not named in the Derivative Complaint, including certain entities affiliated with Alger Management, certain Alger Mutual Funds, including the Trust, and certain additional former trustees and a former officer of the defendant Alger Mutual Funds. It alleges, on the basis of factual allegations similar to those of the Derivative Complaint with respect to the Alger defendants, (i) offenses by Alger defendants similar to those alleged in the -81- THE ALGER FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) Derivative Complaint, (ii) violations, by Alger Management, the Distributor, their affiliates, the funds named as defendants, and the current and former fund trustees and officers, of Sections 11, 12(a)(2), and 15 of the Securities Act of 1933, Sections 10(b) (and Rule 10b-5 thereunder) and 20(a) of the Securities Exchange Act of 1934, and Section 34(b) of the Investment Company Act of 1940, (iii) breach of contract by the funds named as defendants, and (iv) unjust enrichment by all of the named defendants. It seeks relief similar to that sought in the Derivative Complaint. Alger Management does not believe that the foregoing lawsuits will materially affect its ability to perform its management contracts with any of the funds that it manages, and the management of the Trust believes that it will not be materially adversely affected by the pending lawsuits. -82- REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Board of Trustees of The Alger Funds: We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of The Alger Funds (a Massachusetts business trust comprising, respectively, the LargeCap Growth, SmallCap Growth, Balanced, MidCap Growth, Capital Appreciation, Health Sciences, SmallCap and MidCap Growth, and Money Market Funds) (collectively, the "Funds") as of October 31, 2004, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights of the LargeCap Growth, SmallCap Growth, Balanced, MidCap Growth, Capital Appreciation, and Money Market Funds for the two years ended October 31, 2001 were audited by other auditors, whose report, dated November 30, 2001, expressed an unqualified opinion on those financial highlights. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (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 and financial highlights. Our procedures included confirmation of investments owned as of October 31, 2004, by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above, and audited by us, present fairly, in all material respects, the financial position of The Alger Funds at October 31, 2004, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP December 15, 2004 -83- TAX INFORMATION (UNAUDITED) In accordance with subchapter M of the Internal Revenue Code of 1986, as amended, for the year ended October 31, 2004, 19.98% and 3.25% of the Balanced and the Health Sciences Funds' ordinary dividends, respectively, qualified for the dividends received deduction for corporations. For the year ended October 31, 2004, certain dividends paid by the funds may be subject to a maximum rate of 15%, as provided by the Jobs and Growth Tax Relief Reconciliation Act of 2003. Of the distributions paid during the fiscal year, the following represents the maximum amount that may be considered qualified dividend income: Alger Balanced Fund $1,038,280 Alger Health Sciences Fund 242,648 Shareholders should not use the above information to prepare their tax returns. Since the Trust's fiscal year is not the calendar year, another notification will be sent with respect to calendar year 2004. Such notification, which will reflect the amount to be used by taxpayers on their federal income tax returns, will be made in conjunction with Form 1099 DIV and will be mailed in January 2005. Shareholders are advised to consult their own tax advisers with respect to the tax consequences of their investment in the Trust. -84- TRUSTEES AND OFFICERS OF THE FUNDS (UNAUDITED) Information about the Trustees and officers of the Funds is set forth below. In the table the term "Alger Fund Complex" refers to the Funds, Spectra Fund, The Alger American Fund, The Alger Institutional Funds, The China-U.S. Growth 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 FUNDS IN THE ALGER FUND NAME, AGE, TRUSTEE COMPLEX WHICH POSITION WITH THE AND/OR ARE OVERSEEN FUND AND ADDRESS PRINCIPAL OCCUPATIONS OFFICER SINCE BY TRUSTEE - -------------------------------------------------------------------------------------------------------------- INTERESTED TRUSTEES Fred M. Alger III (69) Chairman of the Board of Alger 1986 22 Chairman of the Board Associates, Inc. ("Associates"), Fred Alger & 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 five of the six funds in the Alger Fund Complex; Chairman of the Boards of Alger SICAV("SICAV") and Analysts Resources, Inc. ("ARI"). Dan C. Chung (42) President, Director and Chief Investment 2001 16 President and Trustee Officer of Alger Management; President and Director of Associates, Alger Inc., Properties, Services, Agency, International, ARI and Trust; Trustee/Director of four of the six funds in the Alger Fund Complex. Hilary M. Alger (43) Trustee/Director of five of the six funds 2003 17 Trustee in the Alger Fund Complex; Director of Development, Pennsylvania Ballet; formerly Associate Director of Development, College of Arts and Sciences, University of Virginia, formerly Director of Development and Communications, Lenox Hill Neighborhood House.
-85-
NUMBER OF FUNDS IN THE ALGER FUND NAME, AGE, TRUSTEE COMPLEX WHICH POSITION WITH THE AND/OR ARE OVERSEEN FUND AND ADDRESS PRINCIPAL OCCUPATIONS OFFICER SINCE BY TRUSTEE - -------------------------------------------------------------------------------------------------------------- NON-INTERESTED TRUSTEES Stephen E. O'Neil (72) Attorney; Private investor since 1981; 1986 23 Trustee Director of Brown-Forman Corporation; Trustee/Director of the six funds in the Alger Fund Complex; formerly of Counsel to the law firm of Kohler & Barnes. Charles F. Baird, Jr. (51) Managing Partner of North Castle Partners, 2000 16 Trustee a private equity securities group; Chairman of Equinox, Leiner Health Products, Elizabeth Arden Day Spas, Grand Expeditions and EAS; Trustee/Director of four of the six funds in the Alger Fund Complex. Formerly Managing Director of AEAInvestors, Inc. Roger P. Cheever (59) Associate Dean of Development, Harvard 2000 16 Trustee University; Trustee/Director of four of the six funds in the Alger Fund Complex. Formerly Deputy Director of the Harvard College Fund. Lester L. Colbert, Jr. (70) Private investor; Trustee/Director of five of 2000 17 Trustee the six funds in the Alger Fund Complex. Formerly Chairman of the Board and Chief Executive Officer of Xidex Corporation. Nathan E. Saint-Amand, Medical doctor in private practice; Co-Partner 1986 23 M.D. (66) Fishers Island Partners; Member of the Board Trustee of the Manhattan Institute; Trustee/Director of the six funds in the Alger Fund Complex. Formerly Co-Chairman Special Projects Committee of Memorial Sloan Kettering. Joseph S. Nye, Jr. (66) Trustee/Director of the six funds in the 2003 23 Trustee Alger Fund Complex; Dean, John F. Kennedy School of Government, Harvard University, since 1995; Assistant Secretary of Defense for International Security Affairs 1994-1995; Chairman, National Intelligence Council, 1993-1994.
-86-
NUMBER OF FUNDS IN THE ALGER FUND NAME, AGE, TRUSTEE COMPLEX WHICH POSITION WITH THE AND/OR ARE OVERSEEN FUND AND ADDRESS PRINCIPAL OCCUPATIONS OFFICER SINCE BY TRUSTEE - -------------------------------------------------------------------------------------------------------------- OFFICERS Frederick A. Blum (51) Executive Vice President and Treasurer of 1996 N/A Treasurer and Alger Inc., Alger Management, Properties, Assistant Secretary Associates, ARI, Services and Agency since September 2003 and Senior Vice President prior thereto; Treasurer or Assistant Treasurer, and Assistant Secretary, of each of the other five investment companies in the Alger Fund Complex since the later of 1996 or its inception. Director of SICAV and International and Chairman of the Board (and prior thereto, Senior Vice President) and Treasurer of Alger National Trust Company since 2003. Dorothy G. Sanders (49) 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 six funds in the Alger Fund Complex. Formerly Senior Vice President, Fleet Financial Group.
Messrs. Alger and Chung are "interested persons"(as defined in the Investment Company Act) of the Fund because of their affiliations with Alger Management. Mr. Chung is Mr. Alger's son-in-law. Ms. Alger is a daughter of Fred M. Alger III. Ms. Alger is an "interested person" because she is an immediate family member of Mr. Alger. No Trustee is a director of any public company except as may be indicated under "Principal Occupations." Mr. Nye has given notice of his intention to resign as Trustee of the Trust. Ms. Sanders resigned as Secretary effective November 19, 2004. 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. NOTES: NOTES: NOTES: NOTES: NOTES: NOTES: THE ALGER FUNDS 111 Fifth Avenue New York, NY 10003 (800) 992-3863 www.alger.com INVESTMENT MANAGER Fred Alger Management, Inc. 111 Fifth Avenue New York, NY 10003 DISTRIBUTOR Fred Alger & Company, Incorporated 30 Montgomery Street Jersey City, NJ 07302 TRANSFER AGENT AND DIVIDEND DISBURSING AGENT Boston Financial Data Services, Inc. P.O. Box 8480 Boston, MA 02266 This report is submitted for the general information of the shareholders of The Alger Funds. It is not authorized for distribution to prospective investors unless accompanied by an effective Prospectus for the Funds, which contains information concerning the Trust's investment policies, fees and expenses as well as other pertinent information. PROXY VOTING POLICIES A description of the policies and procedures the Trust uses to determine how to vote proxies relating to portfolio securities and the proxy voting record is available, without charge, by calling (800) 992-3863 or online on the Funds' website at http://www.alger.com or on the SEC's website at http://www.sec.gov. QUARTERLY FUND HOLDINGS Commencing with the fiscal quarter ending July 31, 2004, the Funds file their complete schedule of portfolio holdings with the SEC for the first and third quarter of each fiscal year on Form N-Q. Forms N-Q are available online on the Funds' website at http://www.alger.com or on the SEC's website at http://www.sec.gov. The Funds' Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330. A copy of the most recent quarterly holdings may also be obtained from the Funds by calling (800) 992-3863. [LOGO] SAA 61504 L1 The Alger Funds [LOGO] Boston Financial Data Services, Inc. P.O. Box 8480 Boston, MA 02266 SAA 61504 L2 ITEM 2. CODE OF ETHICS. (a) The Registrant has adopted a code of ethics (the "Code of Ethics") that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. (b) Not applicable. (c) The Registrant has not amended its Code of Ethics during the period covered by the shareholder report presented in Item 1 hereto. (d) The Registrant has not granted a waiver or an implicit waiver from a provision of its Code of Ethics during the period covered by the shareholder report presented in Item 1 hereto. (e) Not applicable. (f) The Registrant's Code of Ethics is attached as an Exhibit hereto. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. The Board of Trustees of the Registrant determined that Stephen E. O'Neil is an audit committee financial expert (within the meaning of that phrase specified in the instructions to Form N-CSR) on the Registrant's audit committee. Mr. O'Neil is an "independent" trustee - i.e., he is not an interested person of the Registrant as defined in the Investment Company Act of 1940, nor has he accepted directly or indirectly any consulting, advisory or other compensatory fee from the Registrant, other than in his capacity as Trustee. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. a) Audit Fees: October 31, 2004 $170,100 October 31, 2003 $154,000 b) Audit-Related Fees: NONE c) Tax Fees for tax advice, tax compliance and tax planning: October 31, 2004 $44,049 October 31, 2003 $21,200 d) All Other Fees: October 31, 2004 $14,500 October 31, 2003 $0 Other fees include a review and consent for Registrants registration statement filing and a review of the semi-annual financial statements. e) 1) Audit Committee Pre-Approval Policies And Procedures: Audit and non-audit services provided by the Registrant's independent registered public accounting firm (the "Auditors") on behalf the Registrant must be pre-approved by the Audit Committee. Non-audit services provided by the Auditors on behalf of the Registrant's Investment Adviser or any entity controlling, controlled by, or under common control with the Investment Adviser must be pre-approved by the Audit Committee if such non-audit services directly relate to the operations or financial reporting of the Registrant. 2) All fees in item 4(b) through 4(d) above were approved by the Registrants' Audit Committee. f) Not Applicable g) Non-Audit Fees: October 31, 2004 $157,449 and 82,300 Euros October 31, 2003 $61,400 and 113,827 Euros h) The audit committee of the board of trustees has considered whether the provision of the non-audit services that were rendered to the registrant's investment adviser and any entity controlling, controlled by, or under common control, with the adviser that provides ongoing services to the registrant that were not approved pursuant to (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principle accountant's independence. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable ITEM 6. SCHEDULE OF INVESTMENTS Not applicable ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED END MANAGEMENT INVESTMENT COMPANIES. Not applicable ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None ITEM 10. CONTROLS AND PROCEDURES. (a) The Registrant's principal executive officer and principal financial officer have concluded that the Registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended) are effective based on their evaluation of the disclosure controls and procedures as of a date within 90 days of the filing date of this document. (b) No changes in the Registrant's internal control over financial reporting occurred during the Registrant's second fiscal half-year that materially affected, or are reasonably likely to materially affect, the Registrant's internal control over financial reporting. ITEM 11. EXHIBITS. (a) (1) Code of Ethics as Exhibit 99.CODE ETH (a) (2) Certifications of principal executive officer and principal financial officer as required by rule 30a-2(a) under the Investment Company Act of 1940 are attached as Exhibit 99.CERT (b) Certifications of principal executive officer and principal financial officer as required by rule 30a-2(b) under the Investment Company Act of 1940 are attached as Exhibit 99.906CERT SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. The Alger Funds By: /s/Dan C. Chung Dan C. Chung President Date: January 5, 2005 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/Dan C. Chung Dan C. Chung President Date: January 5, 2005 By: /s/Frederick A. Blum Frederick A. Blum Treasurer Date: January 5, 2005 EX-99.CODE ETH 2 c34185_ex99-code.txt ALGER CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- I. COVERED OFFICERS/PURPOSE OF THE CODE This Code of Ethics (the "Code") is adopted by each investment company in the Alger Fund Complex, as set forth in Exhibit A hereto (collectively, "Funds" and each, "Company"). The Code applies to the Company's Principal Executive Officer and Principal Financial Officer, as set forth in Exhibit B hereto, and any other Company officers set forth therein (the "Covered Officers") for the purpose of promoting: o honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; o full, fair, accurate, timely and understandable disclosure in reports and documents that a registrant files with, or submits to, the Securities and Exchange Commission ("SEC") and in other public communications made by the Company; o compliance with applicable laws and governmental rules and regulations; o the prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and o accountability for adherence to the Code. Each Covered Officer should adhere to a high standard of business ethics and should be sensitive to situations that may give rise to actual as well as apparent conflicts of interest. II. COVERED OFFICERS SHOULD HANDLE ETHICALLY ACTUAL AND APPARENT CONFLICTS OF INTEREST OVERVIEW. A "conflict of interest" occurs when a Covered Officer's private interest interferes with the interests of, or his service to, the Company. For example, a conflict of interest would arise if a Covered Officer, or a member of his family, receives improper personal benefits as a result of his position with the Company. Certain conflicts of interest arise out of the relationships between Covered Officers and the Company and already are subject to conflict of interest provisions in the Investment Company Act of 1940 ("Investment Company Act") and the Investment Advisers Act of 1940 ("Investment Advisers Act"). For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with the Company because of their status as "affiliated persons" of the Company. The Company's and the investment adviser's compliance programs and procedures are designed to prevent, or identify and correct, violations of these provisions. This Code does not, and is not intended to, repeat or replace these programs and procedures, and such conflicts fall outside of the parameters of this Code. Although typically not presenting an opportunity for improper personal benefit, conflicts arise from, or as a result of, the contractual relationship between the Company and the investment adviser of which the Covered Officers are also officers or employees. As a result, this Code recognizes that the Covered Officers will, in the normal course of their duties (whether formally for the Company or for the adviser, or for both), be involved in establishing policies and implementing decisions that will have different effects on the adviser and the Company. The participation of the Covered Officers in such activities is inherent in the contractual relationship between the Company and the adviser and is consistent with the performance by the Covered Officers of their duties as officers of the Company. Thus, if performed in conformity with the provisions of the Investment Company Act and the Investment Advisers Act, such activities will be deemed to have been handled ethically. In addition, it is recognized by the Funds' Boards of Trustees/Directors ("Boards") that the Covered Officers may also be officers or employees of one or more other investment companies covered by this or other codes. Other conflicts of interest are covered by the Code, even if such conflicts of interest are not subject to provisions in the Investment Company Act and the Investment Advisers Act. The following list provides examples of conflicts of interest under the Code, but Covered Officers should keep in mind that these examples are not exhaustive. The overarching principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of the Company. Each Covered Officer must: o not use his personal influence or personal relationships improperly to influence investment decisions or financial reporting by the Company whereby the Covered Officer would benefit personally to the detriment of the Company; o not cause the Company to take action, or fail to take action, for the individual personal benefit of the Covered Officer rather than the benefit the Company; o not use material non-public knowledge of portfolio transactions made or contemplated for the Company to trade personally or cause others to trade personally in contemplation of the market effect of such transactions; o report at least annually in writing to the adviser's general counsel ("General Counsel") all affiliations or other relationships that might give rise to a conflict of interest between the Company and the Covered Officer.(1) . There are some conflict of interest situations that should be discussed with the General Counsel or other senior legal officer of the adviser. Examples of these include: o service as a director on the board of any public or private company; o the receipt of any non-nominal gifts; - ---------- (1) Any activity or relationship that would present a conflict for a Covered Officer would likely also present a conflict for the Covered Officer if a member of the Covered Officer's family engages in such an activity or has such a relationship. -2- o the receipt of any entertainment from any company with which the Company has current or prospective business dealings unless such entertainment is business- related, reasonable in cost, appropriate as to time and place, and not so frequent as to raise any question of impropriety; o any ownership interest in, or any consulting or employment relationship with, any of the Company's service providers, other than its investment adviser, principal underwriter, administrator or any affiliated person thereof; o a direct or indirect financial interest in commissions, transaction charges or spreads paid by the Company for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Officer's employment, such as compensation or equity ownership. III. DISCLOSURE AND COMPLIANCE o Each Covered Officer should familiarize himself with the disclosure requirements generally applicable to the Company; o each Covered Officer should not knowingly misrepresent, or cause others to misrepresent, facts about the Company to others, whether within or outside the Company, including to the Company's directors and auditors, and to governmental regulators and self-regulatory organizations; o each Covered Officer should, to the extent appropriate within his area of responsibility, consult with other officers and employees of the Funds and the adviser with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Funds file with, or submit to, the SEC and in other public communications made by the Funds; and o it is the responsibility of each Covered Officer to promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations. IV. REPORTING AND ACCOUNTABILITY Each Covered Officer must: o upon adoption of the Code, or as soon thereafter as applicable, upon becoming a Covered Officer, affirm in writing to the Board that he has received, read, and understands the Code; o annually thereafter affirm to the Board that he has complied with the requirements of the Code; o not retaliate against any other Covered Officer or any employee of the Funds or their affiliated persons for reports of potential violations that are made in good faith; and o notify the General Counsel promptly if he knows of any violation of this Code. Failure to do so is itself a violation of this Code. -3- The General Counsel or other designated senior legal officer of the adviser is responsible for applying this Code to specific situations in which questions are presented under it and has the authority to interpret this Code in any particular situation.(2) However, any approvals or waivers(3) sought by the Principal Executive Officer will be considered by the Audit Committee (the "Committee"). The Company and the Funds will follow these procedures in investigating and enforcing this Code: o the General Counsel or other designated senior legal officer will take all appropriate action to investigate any potential violations reported to him; o if, after such investigation, the General Counsel believes that no violation has occurred, the General Counsel is not required to take any further action; o any matter that the General Counsel believes is a violation will be reported to the Committee; o if the Committee concurs that a violation has occurred, it will inform and make a recommendation to the Board, which will consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures; notification to appropriate personnel of the investment adviser or its board; or a recommendation to dismiss the Covered Officer; o the Committee will be responsible for granting waivers, as appropriate; and o any changes to or waivers of this Code will, to the extent required, be disclosed as provided by SEC rules. V. OTHER POLICIES AND PROCEDURES This Code shall be the sole code of ethics adopted by the Funds for purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies thereunder. Insofar as other policies or procedures of the Funds, the Funds' adviser, principal underwriter, or other service providers govern or purport to govern the behavior or activities of the Covered Officers who are subject to this Code, they are superseded by this Code to the extent that they overlap or conflict with the provisions of this Code. The Funds' and their investment adviser's and principal underwriter's codes of ethics under Rule 17j-1 under the Investment Company Act and the adviser's more detailed policies and procedures set forth in its code of ethics are separate requirements applying to the Covered Officers and others, and are not part of this Code. - ---------- (2) The General Counsel or other designated senior legal officer is authorized to consult, as appropriate, with the chair of the Committee, counsel to the Company and counsel to the Independent Directors, and is encouraged to do so. (3) Item 2 of Form N-CSR defines "waiver" as "the approval by the registrant of a material departure from a provision of the code of ethics" and "implicit waiver," which must also be disclosed, as "the registrant's failure to take action within a reasonable period of time regarding a material departure from a provision of the code of ethics that has been made known to an executive officer" of the registrant. -4- VI. AMENDMENTS Any amendments to this Code, other than amendments to Exhibit B, must be approved or ratified by a majority vote of the Board, including a majority of independent directors. VII. CONFIDENTIALITY All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the appropriate Board and its counsel, the appropriate Company and its adviser and the Boards of other funds within the Alger Fund Complex and their counsel. VIII. INTERNAL USE The Code is intended solely for the internal use by the Funds and does not constitute an admission, by or on behalf of any Company, as to any fact, circumstance, or legal conclusion. Date: September 8, 2003 -5- EXHIBIT A INVESTMENT COMPANIES IN THE ALGER FUND COMPLEX The Alger Fund The Alger Institutional Fund The Alger American Fund The China-U.S. Growth Fund Spectra Fund Castle Convertible Fund, Inc. -6- EXHIBIT B PERSONS COVERED BY THIS CODE OF ETHICS THE ALGER FUND Chairman...................................................FRED M. ALGER President..................................................DAN C. CHUNG Treasurer..................................................FREDERICK BLUM -7- EX-99.CERT 3 c34185_ex99-cert.txt Rule 30a-2(a) CERTIFICATIONS I, Dan C. Chung, certify that: 1. I have reviewed this report on Form N-CSR of The Alger Funds; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: January 5, 2005 /s/ Dan C. Chung - ---------------------- Dan C. Chung President Rule 30a-2(a) CERTIFICATIONS I, Frederick A. Blum, certify that: 1. I have reviewed this report on Form N-CSR of The Alger Funds; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: January 5, 2005 /s/ Frederick A. Blum - ----------------- Frederick A. Blum Treasurer EX-99.906CERT 4 c34185_ex99-906cert.txt Rule 30a-2(b) CERTIFICATIONS Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code), each of the undersigned officers of The Alger Funds, do hereby certify, to such officer's knowledge, that: (1) The annual report on Form N-CSR of the Registrant for the period ended October 31, 2004 (the "Form N-CSR") fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) the information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of The Alger Funds. Dated: January 5, 2005 /s/Dan C. Chung - ---------------------------------------- Dan C. Chung President The Alger Funds Dated: January 5, 2005 /s/ Frederick A. Blum - ---------------------------------------- Frederick A. Blum Treasurer The Alger Funds This certification is being furnished solely pursuant to 18 U.S.C. ss. 1350 and is not being filed as part of the Report or as a separate disclosure document. -----END PRIVACY-ENHANCED MESSAGE-----