The Alger Fund
75 Maiden Lane
New York, N.Y. 10038
(800) 992-3863
- --------------------------------------------------------------------------------
Board of Trustees
Fred M. Alger, Chairman
David D. Alger
Arthur M. Dubow
Stephen E. O'Neil
Nathan E. Saint-Amand
John T. Sargent
- --------------------------------------------------------------------------------
Investment Manager
Fred Alger Management, Inc.
75 Maiden Lane
New York, N.Y. 10038
- --------------------------------------------------------------------------------
Distributor
Fred Alger & Company, Incorporated
30 Montgomery Street
Jersey City, N.J. 07302
- --------------------------------------------------------------------------------
Transfer Agent
Alger Shareholder Services, Inc.
30 Montgomery Street
Jersey City, N.J. 07302
- --------------------------------------------------------------------------------
Independent Public Accountants
Arthur Andersen LLP
1345 Avenue of the Americas
New York, N.Y. 10105
- --------------------------------------------------------------------------------
This report is submitted for the general information of the shareholders of The
Alger Fund. It is not authorized for distribution to prospective investors
unless accompanied by an effective Prospectus for the Fund, which contains
information concerning the Fund's investment policies, fees and expenses as well
as other pertinent information.
REP 106
================================================================================
THE |
ALGER | MEETING THE CHALLENGE
FUND | OF INVESTING
ALGER GROWTH PORTFOLIO
ALGER SMALL CAPITALIZATION PORTFOLIO
ALGER BALANCED PORTFOLIO
ALGER MIDCAP GROWTH PORTFOLIO
ALGER CAPITAL APPRECIATION PORTFOLIO
ALGER MONEY MARKET PORTFOLIO
ANNUAL |
REPORT | OCTOBER 31, 1996
<PAGE>
FELLOW SHAREHOLDERS:
A YEAR-TO-DATE REVIEW December 10, 1996
The fiscal year ended October 31, 1996 proved to be an interesting and turbulent
time in the market. As we started this period, our Portfolios were coming off an
extraordinary year, having significantly outperformed all relevant major market
indices. During the past twelve months, however, it has been much more difficult
to outperform the market. Although all of our Portfolios posted positive
returns, they did lag the relevant market indices to some degree. The good news
is that we feel that many of the factors which have contributed to our recent
performance are now behind us, setting the stage for a strong rebound next year.
In a sense, this past year has been almost a circle. We began with the
assumption that the economy was exceedingly weak, went through a period dating
from mid-March to late October during which the popular view was that the
economy was too strong, and are now moving back in the direction of closing the
year where we began it. During this time, the markets' volatility has been
exacerbated by several "fear factors," which I believe are now behind us. I
thought it might be useful to discuss these factors and explain why they are in
our past.
1. THE FEDERAL RESERVE
Since March, the worries concerning both the bond and stock markets have
been that the economy was growing too quickly, unemployment levels were
too low, and inflation was just around the corner. It was presumed that
these concerns would lead to an increase in Federal Reserve driven rates,
most likely the Fed Funds rate, but also possibly the discount rate. We
have maintained that the marketplace was exaggerating the extent of the
strength in the economy and, as a result, the Fed would not raise rates.
Thus far, we have been correct.
One of the points that we have consistently made has been that the
economy, in the second half, was going to slow dramatically from the rapid
pace of the second quarter. On October 30th, the GDP for the third quarter
was announced and it increased a scant 2.2%, now revised to 2%. Moreover,
consumer spending was up merely .6%, the smallest increase in almost five
years. Real final sales were up just .4%, the smallest gain since the
first quarter of 1993. Moreover, the implicit price deflator was 1.6%,
even lower than the diminutive 1.8% of the second quarter. Furthermore,
payroll employment growth slowed significantly in the third quarter of
1996. Average monthly gains amounted to 113,000, well below the rate of
gain in the first half of 1996.
All of this data leads us to the conclusion that there should be no more
concern about the Fed increasing interest rates during the remainder of
the year.
2. CLINTON-PHOBIA
One of the market's biggest concerns had been the prospect that the
Democrats would regain control of the political agenda. So intense was
this fear that health care stocks, thought to be especially vulnerable,
sold off dramatically prior to the election. As we now know, the reality
is far different. The Republicans retained control of the House of
Representatives. Additionally, they increased their control of the Senate
by two seats. This election essentially forces a moderate agenda on
President Clinton and probably dooms for a long time to come any return to
liberal issues. One can only conclude that the election was a great
triumph for investors.
3. VALUATION FEARS
I am frequently asked to address the question as to whether the market is
or is not over-valued at present. The answer emphatically is that it is
not. Contrast if you will, the present level of the S&P
<PAGE>
Industrials compared to 1987. In 1987, at its peak, the S&P Industrials
was selling in excess of 20x earnings, contrasted with the long-bond
yielding in excess of 9%. At present the S&P Industrials is selling at
18.5x consensus estimates for 1997, while the long-bond is yielding a mere
6.46%.
I am also asked whether or not the deceleration of the economy could put
downward pressure on earnings, thereby impacting the market. Growth stocks
tend to do their best during periods of relatively slack earnings. For
example, 1991 was a slow year in the economy, but one of the best years of
performance in our history. The reason for this is obvious. As the economy
slows down, investors turn away from large, cyclical stocks and
concentrate on smaller, growth stocks which can generate increased
earnings independent of the economy. This is made even more pronounced
when it is preceded by a period during which the multiples on growth
stocks have been compressed relative to the market as a whole. This is
certainly the case in the current environment. For example, we estimate
that the 5 year weighted average growth rate of the stocks in the Alger
Fund Portfolios currently ranges from 20.5% (Alger Balanced Portfolio) to
25.2% (Alger Small Capitalization Portfolio) as compared to a trend line
growth rate of 7% for the S&P Industrials. The P/E multiple on average,
based on 1997 estimates, ranges from 18.4x (Alger Balanced Portfolio) to
20.9x (Alger Small Capitalization Portfolio) which compares with the
multiple on the S&P Industrials at 18.5x. These numbers show that there is
very little premium in terms of valuation between our funds and the index
despite the fact that the growth rate on the stocks in the funds is 3
times faster than the index.
We believe, therefore, that we may have a trampoline effect next year. While our
target for the Dow in 1997 is in the 7200 to 7300 range, we believe that our
funds could do considerably better if everything works right.
PORTFOLIO MATTERS
ALGER SMALL CAPITALIZATION PORTFOLIO
The Portfolio's total return for the year was 3.17% versus a return of 13.33%
for the Russell 2000 Growth Index. In contrast, when we began November 1995, the
Portfolio had just produced a one year return through October 31, 1995 of 46.2%
versus 20.6% for the Russell 2000 Growth Index. These tremendous gains were
realized in large part by a substantial commitment to the technology sector.
Specifically, by the end of October 1995, the Portfolio had 19.3% of its assets
invested in semiconductors, 15.1% in communications, 8.7% in computer software,
6.5% in semiconductors capital equipment and 13.7% in other technology related
companies. It was with this allocation of assets that the Portfolio entered into
fiscal year 1996. The economy decelerated sharply in the fourth quarter of 1995,
and this had negative implications for certain technology stocks, especially
commodity-based semiconductors (DRAMs & SRAMs) which were also beset by a
build-up of capacity in Asia. At this point, significant sell-offs began to
occur. Our overweighting in this industry in the first half contributed to the
lackluster performance. At October 31, 1996, we had reduced our semiconductor
exposure to 3.1%.
Also noteworthy is that during the recent June-July correction, small cap growth
stocks seemed to catch the brunt of the negativity. Additionally, the Russell
2000 Growth had a substantial exposure to the financial and energy sectors, both
of which performed very well during the 12 month period. These were areas in
which the Portfolio had minimal weighting, which accounts in part for the
Portfolio's relative underperformance. At October 31, 1996, the Portfolio was
well diversified with computer software, communications equipment and retailing
representing 13.1%, 9.1% and 8.1% of the Portfolio, respectively.
<PAGE>
ALGER GROWTH PORTFOLIO
For the year ended October 31, 1996, the Alger Growth Portfolio's total return
was 8.08% compared to 24.10% for the S&P 500. The economic uncertainty which
prevailed throughout most of the year resulted in defensive positioning of
investors. As a result, there was a flight to larger, less volatile, blue-chip
type stocks. Stocks of companies which are expected to grow their earnings at a
faster rate (25%+), which are the types of stocks in which this Portfolio
typically invests, did not fare as well. Currently, good quality growth stocks,
which typically trade in a range of 1.5 to 2.5 times the market multiple, are
trading at around 1.3 times based on our 1997 estimated earnings per share:
below the low-end of the historical range. In other words, investors are paying
only a very small premium for quality growth stocks, such as those in the
Portfolio. As it becomes clearer in the months ahead that the economy is
expanding at a noninflationary, steady pace, we expect that investor confidence
will rebuild and premiums for growth stocks will expand.
This should translate into strong performance for the Portfolio.
ALGER MIDCAP GROWTH PORTFOLIO
For the year ended October 31, 1996, the Alger MidCap Growth Portfolio's total
return was 6.43% compared to 17.35% for the S&P MidCap 400 Index. In the
exceedingly volatile environment that prevailed over the last 12 months, it
proved very difficult to find the right group of stocks. Although activity in
the bond market made the economy look, at times, overheated, corporate profits
in the first half of the year were not that strong. As a result, earnings for
many of the stocks held in the Portfolio grew at rates which were below
expectations. Like the Alger Small Capitalization Portfolio, this portfolio was
also negatively impacted by its large technology exposure, most notably
semiconductors. At October 31, 1996, the three largest industries represented in
the Portfolio were retailing, computer software and financial services. The
Portfolio currently has a 5 year estimated EPS of 23.6% and, with a P/E multiple
(based on 1997 earnings estimates) of only 19.4x, demonstrates very attractive
valuations relative to the market.
ALGER BALANCED PORTFOLIO
The Alger Balanced Portfolio's total return for the year ended October 31, 1996
was 6.26%, while maintaining a ratio of approximately 55-65% common stocks and
35-45% debt securities. The Portfolio did not outperform the S&P 500, which
returned 24.10% over the same time period; however the performance relative to
the Lehman Brothers Gov't/Corp. Bond Index return of 5.39% was more favorable.
The Portfolio's total performance suffered as a result of the lackluster
performance in the more aggressive equity portion of the portfolio which
averaged roughly 60% of the Portfolio. Here as in some of the other Portfolios,
an overcommitment to technology coupled with relatively slack earnings for many
of the owned companies hurt the Portfolio. The Portfolio was impacted further by
its midyear exposure to health care related stocks, specifically HMO's, which
totaled as much as 3% of the Portfolio. During the June-July correction, these
stocks were especially hard-hit as increasing medical expenses hurt second
quarter earnings. Presently the equity portion of the Portfolio is well
positioned with diversified holdings in, among other industries, financial
services, pharmaceuticals, communications equipment, retailing and
semiconductors.
ALGER CAPITAL APPRECIATION PORTFOLIO
For the year ended October 31, 1996, the Alger Capital Appreciation Portfolio's
total return was 19.48%, compared to 24.10% for the S&P 500. This Portfolio's
performance during this time period is particularly gratifying given the
extremely challenging conditions which prevailed. The economic uncertainty which
existed throughout most of the year resulted in defensive positioning of
investors. As a result, there was a flight to larger, more predictable,
blue-chip type stocks. Therefore, the S&P 500 enjoyed a very strong year, driven
by the larger, stable companies in the index. This Portfolio employs an "allcap"
(i.e. small, medium and large capitalizations) portfolio management strategy,
and thus was relatively underweighted
<PAGE>
in these strong performing stocks. Additionally, as smaller and mid cap stocks
have been significantly lagging the larger averages, the Portfolio's exposure to
these types of stocks through its allcap strategy have caused it to underperform
the S&P 500, which has relatively little exposure in these areas.
LOOKING AHEAD
The longer term looks very bright. Recently I have found myself being asked the
same question, "How long can this bull market go on?" I never hesitate to tell
people that I expect the market, as measured by the Dow Jones Industrial
Average, to hit 10,000 by the end of the decade. I think this answer seems to
many to be either a bit far fetched or a number that I picked because it sounds
good for the media, a nice, big, round number. This is how the 10,000 was
derived: I believe that the earnings per share of the Dow will be approximately
$365 in 1996. If the economy is able to grow at a 3% rate in GDP (which it
should, on average), I believe the Dow can grow its earnings at a 10% rate. This
should bring earnings in the year 2000 to about $535 per share. The median
relationship between the earnings yield on the averages and the long-bond has
been 75% over fifteen years. Based on this number, given a 7% long-bond (which
would presume a 3% inflation rate and a 4% real rate of return), the market
should have a multiple of 19x. This, multiplied by its earnings, gives the Dow a
value of 10190: QED!
In conclusion, I don't want to seem Panglossian, but we seem to be in the best
of all possible worlds. Interest rates, politics, inflation, the economy and the
stock market all seem to be going in the right direction at the same time. The
result should be good performance for the Portfolios.
Respectfully submitted,
/s/ David D. Alger
------------------
David D. Alger
President
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
Alger Growth Portfolio:
Portfolio Highlights ......................................................................6
Schedule of Investments ...................................................................7
Financial Highlights ......................................................................9
Alger Small Capitalization Portfolio:
Portfolio Highlights......................................................................10
Schedule of Investments...................................................................11
Financial Highlights......................................................................14
Alger Balanced Portfolio:
Portfolio Highlights......................................................................15
Schedule of Investments...................................................................16
Financial Highlights......................................................................18
Alger MidCap Growth Portfolio:
Portfolio Highlights......................................................................19
Schedule of Investments...................................................................20
Financial Highlights......................................................................22
Alger Capital Appreciation Portfolio:
Portfolio Highlights......................................................................23
Schedule of Investments...................................................................24
Financial Highlights......................................................................26
Alger Money Market Portfolio:
Schedule of Investments...................................................................27
Financial Highlights......................................................................29
Statements of Assets and Liabilities....................................................................................30
Statements of Operations ...............................................................................................31
Statement of Cash Flows (Alger Capital Appreciation Portfolio)..........................................................32
Statements of Changes in Net Assets.....................................................................................33
Notes to Financial Statements ..........................................................................................34
Report of Independent Public Accountants................................................................................38
</TABLE>
<PAGE>
-6-
- --------------------------------------------------------------------------------
ALGER GROWTH PORTFOLIO
PORTFOLIO HIGHLIGHTS THROUGH OCTOBER 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
The Alger Growth Portfolio invests in companies which generally have broader
product lines, markets, financial resources and depth of management than
smaller, newer companies.
- --------------------------------------------------------------------------------
$10,000 HYPOTHETICAL INVESTMENT SINCE INCEPTION NOVEMBER 11, 1986
- --------------------------------------------------------------------------------
[CAPTION - CHART]
ALGER S&P
GROWTH 500 INDEX
------ -------
11-11-86 10,000 10,000
10-31-87 9,700 10,537
10-31-88 10,450 12,097
10-31-89 13,270 15,290
10-31-90 12,740 14,145
10-31-91 18,574 18,883
10-31-92 20,369 20,767
10-31-93 26,311 23,871
10-31-94 27,383 24,794
10-31-95 37,728 31,350
10-31-96 40,777 38,906
The chart above illustrates the growth in value of a hypothetical $10,000
investment made in the Alger Growth Portfolio and the S&P 500 Index on November
11, 1986, the inception date of the Alger Growth Portfolio. Figures for both the
Alger Growth Portfolio and the S&P 500 Index, an unmanaged index of common
stocks, include reinvestment of dividends.
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON THROUGH OCTOBER 31, 1996
- --------------------------------------------------------------------------------
Average Annual Return
Since Inception
1 Year 5 Years 11/11/86
---------------------------------------
Alger Growth Portfolio 8.08% 17.03% 15.13%
ASSUMING REDEMPTION AT THE
END OF EACH PERIOD 3.08% 16.82% 15.13%
S&P 500 Index 24.10% 15.55% 14.60%
---------------------------------------
THE PORTFOLIO'S AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE PRICE AND
REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS. PAST PERFORMANCE DOES NOT GUARANTEE
FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL WILL FLUCTUATE AND THE
PORTFOLIO'S SHARES WHEN REDEEMED MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST.
<PAGE>
-7-
THE ALGER FUND
ALGER GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1996
Common Stocks--93.4% Shares Value
------- ---------
AEROSPACE--3.5%
Boeing Company (The)........................ 55,500 $ 5,293,313
Gulfstream Aerospace Corp.*................. 54,000 1,275,750
Sundstrand Corp............................. 70,400 2,833,600
--------------
9,402,663
APPAREL--.8%
Tommy Hilfiger Corporation*................. 42,800 2,225,600
--------------
BIO-TECHNOLOGY--1.2%
Amgen Inc.*................................. 36,300 2,225,662
BioChem Pharma Inc.*........................ 20,200 861,025
--------------
3,086,687
BUILDING & CONSTRUCTION--.9%
Clayton Homes, Inc.......................... 136,000 2,295,000
--------------
CHEMICALS--2.8%
Monsanto Co................................. 188,600 7,473,275
--------------
COMMUNICATIONS--4.2%
Lucent Technologies Inc..................... 17,700 831,900
MFS Communications Co. Inc.*................ 31,000 1,553,875
PictureTel Corp.*........................... 39,600 1,069,200
Qualcomm Inc.*.............................. 29,700 1,180,575
Telecomunicacoes
Brasileiras S.A. ADR..................... 35,000 2,607,500
WorldCom Inc.*.............................. 166,100 4,048,688
--------------
11,291,738
--------------
COMMUNICATIONS EQUIPMENT--7.6%
Ascend Communications Inc.*................. 40,400 2,641,150
Cascade Communications Corp.*............... 18,100 1,314,513
Cisco Systems, Inc.*........................ 137,800 8,526,375
Glenayre Technologies Inc*.................. 62,000 1,596,500
Newbridge Networks Corp.*................... 40,000 1,265,000
Pairgain Technologies Inc.*................. 16,700 1,150,213
Tellabs, Inc.*.............................. 43,500 3,702,938
--------------
20,196,689
--------------
COMPUTER RELATED &
BUSINESS EQUIPMENT--3.5%
Sun Microsystems Inc.*...................... 62,300 3,800,300
3 Com Corp.*................................ 61,200 4,138,650
Xerox Corp.................................. 30,200 1,400,525
--------------
9,339,475
--------------
COMPUTER SOFTWARE--4.3%
Compuware Corp.*............................ 54,900 2,895,975
HBO & Company............................... 24,000 1,443,000
Informix Corporation*....................... 189,300 4,200,188
Microsoft Corporation*...................... 20,200 2,772,450
--------------
11,311,613
--------------
COMPUTER TECHNOLOGY--1.6%
Adaptec, Inc.*.............................. 70,200 4,273,425
--------------
CONSUMER PRODUCTS--3.5%
CUC International Inc.*..................... 107,100 2,623,950
Colgate Palmolive Co........................ 26,000 2,392,000
Nike, Inc. Cl. B............................ 45,800 2,696,475
Tyco International Ltd...................... 30,000 1,488,750
--------------
9,201,175
--------------
DEFENSE--3.5%
Lockheed Martin Corp........................ 28,789 2,580,214
McDonnell Douglas Corporation............... 124,000 6,758,000
--------------
9,338,214
--------------
ENERGY & ENERGY SERVICES--2.0%
Schlumberger Ltd............................ 53,000 5,253,625
--------------
FINANCIAL SERVICES--11.5%
Chase Manhattan Corp........................ 88,000 7,546,000
Citicorp.................................... 48,700 4,821,300
First Data Corporation ..................... 101,412 8,087,605
Green Tree Financial Corp................... 100,000 3,962,500
MBNA Corp. ................................. 34,000 1,283,500
Money Store Inc. (The)...................... 106,300 2,737,225
Schwab (Charles)
Corporation (The)........................ 90,600 2,265,000
--------------
30,703,130
--------------
FOOD CHAINS--.5%
Safeway Inc.*............................... 32,100 1,376,288
--------------
HEALTH CARE--9.3%
Boston Scientific Corp.*.................... 42,000 2,283,750
Columbia/HCA Healthcare
Corporation.............................. 67,500 2,413,125
Guidant Corp................................ 34,300 1,582,086
Johnson & Johnson........................... 22,808 1,123,294
Eli Lilly & Company......................... 91,400 6,443,700
Merck & Co., Inc............................ 104,200 7,723,825
SmithKline Beecham PLC ADS.................. 29,500 1,847,438
Warner-Lambert Co........................... 21,000 1,336,125
--------------
24,753,343
--------------
INSURANCE--3.8%
American International Group, Inc........... 73,100 7,940,485
Travelers/Aetna Property
Casualty Corp. Cl. A. ................... 70,000 2,100,000
--------------
10,040,485
--------------
LEISURE & ENTERTAINMENT--1.6%
International Game Technology............... 174,000 3,675,750
Mirage Resorts, Incorporated*............... 30,000 660,000
--------------
4,335,750
--------------
<PAGE>
-8-
THE ALGER FUND
ALGER GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS (Continued)
October 31, 1996
Common Stocks--(cont.) Shares Value
------ -----
MACHINERY--.8%
Case Corp................................... 43,800 $ 2,036,700
--------------
MEDICAL SERVICES--1.0%
Medtronic, Inc.............................. 42,000 2,703,750
--------------
OIL & GAS--2.3%
Global Marine Inc.*......................... 90,000 1,653,750
Halliburton Co.............................. 54,200 3,069,075
Tidewater Inc............................... 30,300 1,325,625
--------------
6,048,450
PHARMACEUTICALS--3.1%
Astra AB-Sponsored ADS Series A............. 89,500 4,105,813
Bristol Myers Squibb Co..................... 12,500 1,321,875
Pfizer Inc.................................. 33,500 2,772,125
8,199,813
--------------
POLLUTION CONTROL--1.4%
USA Waste Services, Inc.*................... 113,900 3,644,800
--------------
RESTAURANTS &
LODGING--3.0%
Boston Chicken Inc.*........................ 82,900 3,015,488
Lone Star Steakhouse & Saloon, Inc.*........ 173,900 4,456,188
Outback Steakhouse, Inc.*................... 24,700 572,744
--------------
8,044,420
--------------
RETAILING--7.1%
Cintas Corp................................. 35,000 2,038,750
Gucci Group N.V............................. 57,100 3,939,900
Home Depot, Inc............................. 126,500 6,925,875
Nine West Group Inc.*....................... 20,000 997,500
OfficeMax, Inc.*............................ 371,550 5,015,925
--------------
18,917,950
--------------
SEMI-CONDUCTORS--4.7%
Altera Corporation*......................... 44,600 2,765,200
Intel Corp.................................. 76,500 8,405,438
Maxim Integrated Products, Inc.*............ 40,400 1,414,000
--------------
12,584,638
--------------
MISCELLANEOUS--3.9%
Loewen Group Inc.......................... 97,000 3,843,625
Service Corp. International............... 232,600 6,629,100
--------------
10,472,725
--------------
Total Common Stocks
(Cost $208,704,348)..................... 248,551,421
--------------
WARRANTS
MANUFACTURING
Windmere Corp.,*
expire 1/19/98 (Cost $61)............... 81 678
--------------
PREFERRED STOCK--.5%
COMMUNICATIONS
Nokia Corporation, ADR
(Cost $1,495,416)....................... 31,700 1,470,088
--------------
SHORT-TERM CORPORATE PRINCIPAL
NOTES--4.5% AMOUNT
----------
Bancomer S.A.,
5.26%, 11/8/96.......................... $2,200,000 2,197,750
Barton Capital Corp.,
5.27%, 11/8/96 (a)...................... 1,400,000 1,398,565
Dynamic Funding Corp. Series A,
5.35%, 11/6/96.......................... 8,000,000 7,994,056
Merrill Lynch & Co. Inc.,
5.25%, 11/7/96.......................... 300,000 299,738
--------------
Total Short-Term Corporate Notes
(Cost $11,890,109)........................ 11,890,109
--------------
Total Investments
(Cost $222,089,934)(b).................... 98.4% 261,912,296
Other Assets in
Excess of Liabilities..................... 1.6 4,294,381
------ --------------
Net Assets.................................. 100.0% $266,206,677
====== =============
* Non-income producing security.
(a) Pursuant to Securities and Exchange Commission Rule 144A, these securities
may be sold prior to their maturity only to qualified institutional
buyers.
(b) At October 31, 1996, the net unrealized appreciation on investments, based
on cost for federal income tax purposes of $222,089,934, amounted to
$39,822,362 which consisted of aggregate gross unrealized appreciation of
$45,264,762 and aggregate gross unrealized depreciation of $5,442,400.
See Notes to Financial Statements.
<PAGE>
-9-
THE ALGER FUND
ALGER GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR A SHARE OUTSTANDING THROUGHOUT THE YEAR (I)
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year....... $ 9.38 $ 6.97 $ 7.43 $ 5.76 $ 5.77
-------- -------- -------- -------- -------
Net investment income (loss)............. (.08)(ii) (.02) (.07)(ii) (.02) (.06)(ii)
Net realized and unrealized gain (loss)
on investments........................ .78 2.59 .35 1.70 .61
-------- -------- -------- -------- -------
Total from investment operations......... .70 2.57 .28 1.68 .55
Distributions from net realized gains.... (.59) (.16) (.74) (.01) (.56)
-------- -------- -------- -------- -------
Net asset value, end of year............. $ 9.49 $ 9.38 $ 6.97 $ 7.43 $ 5.76
======== ======== ======== ======== =======
Total Return (iii)....................... 8.1% 37.8% 4.1% 29.2% 9.7%
======== ======== ======== ======== =======
Ratios and Supplemental Data:
Net assets, end of year
(000's omitted)..................... $266,207 $154,284 $ 76,390 $ 37,988 $19,379
======== ======== ======== ======== =======
Ratio of expenses to average
net assets.......................... 2.08%(iv) 2.09%(iv) 2.20%(v) 2.20%(v) 2.32%(v)
======== ======== ======== ======== =======
Ratio of net investment income (loss)
to average net assets............... (.84%) (1.03%) (1.01%) (1.16%) (1.07%)
======== ======== ======== ======== =======
Portfolio Turnover Rate................ 94.91% 118.16% 103.86% 108.54% 69.28%
======== ======== ======== ======== =======
Average Commission Rate Paid........... $ .0715
========
</TABLE>
(i) Per share data has been adjusted to reflect the effect of a 3 for 1 stock
split which occurred September 27, 1995.
(ii) Amount was computed based on average shares outstanding during the year.
(iii) Does not reflect contingent deferred sales charge.
(iv) Reflects total expenses, including fees offset by earnings credits. The
expense ratio net of earnings credits would have been 2.07% for both years
ended October 31, 1996 and 1995, respectively.
(v) Expense ratios for the years ended prior to October 31, 1995, do not
reflect the effect of fees offset by earnings credits, if any.
See Notes to Financial Statements.
<PAGE>
-10-
- --------------------------------------------------------------------------------
ALGER SMALL CAPITALIZATION PORTFOLIO
PORTFOLIO HIGHLIGHTS THROUGH OCTOBER 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
The Alger Small Capitalization Portfolio invests in small, fast-growing
companies that offer innovative products, services, or technologies to a rapidly
expanding marketplace.
- --------------------------------------------------------------------------------
$10,000 HYPOTHETICAL INVESTMENT SINCE INCEPTION NOVEMBER 11, 1986
- --------------------------------------------------------------------------------
[CAPTION - CHART]
ALGER RUSSELL
SMALL 2,000
CAP GROWTH INDEX
--- ------------
11-11-86 10,000 10,000
10-31-87 9,000 8,336
10-31-88 10,740 10,301
10-31-89 17,730 12,229
10-31-90 16,474 9,008
10-31-91 26,975 15,001
10-31-92 27,899 14,947
10-31-93 35,093 19,083
10-31-94 34,726 18,909
10-31-95 50,753 22,798
10-31-96 52,363 25,835
The chart above illustrates the growth in value of a hypothetical $10,000
investment made in the Alger Small Capitalization Portfolio and the Russell 2000
Growth Index on November 11, 1986, the inception date of the Alger Small
Capitalization Portfolio. The figures for both the Alger Small Capitalization
Portfolio and the Russell 2000 Growth Index, an unmanaged index of common
stocks, include reinvestment of dividends.
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON THROUGH OCTOBER 31, 1996
- --------------------------------------------------------------------------------
Average Annual Return
Since Inception
1 Year 5 Years 11/11/86
--------------------------------------
Alger Small Capitalization Portfolio 3.17% 14.19% 18.05%
ASSUMING REDEMPTION AT THE
END OF EACH PERIOD (1.71)% 13.95% 18.05%
Russell 2000 Growth Index 13.33% 11.49% 9.99%
--------------------------------------
THE PORTFOLIO'S AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE PRICE AND
REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS. PAST PERFORMANCE DOES NOT GUARANTEE
FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL WILL FLUCTUATE AND THE
PORTFOLIO'S SHARES WHEN REDEEMED MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST.
<PAGE>
-11-
THE ALGER FUND
ALGER SMALL CAPITALIZATION PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1996
Common Stocks--94.4% Shares Value
--------- --------
AEROSPACE--1.5%
Atlas Air, Inc.*........................ 74,700 $ 2,754,563
BE Aerospace Inc.*...................... 35,000 761,250
Greenwich Air Services Inc. Cl. A....... 34,100 767,250
Greenwich Air Services Inc. Cl. B.*..... 37,300 629,436
Wyman Gordon Co*........................ 143,200 3,150,400
-------------
8,062,899
-------------
AGRICULTURE--.5%
Delta and Pine Land Co.................. 73,850 2,658,600
-------------
APPAREL--4.7%
Designer Holdings Ltd.*................. 64,000 1,224,000
Harold's Stores, Inc.*.................. 30,900 432,600
Jones Apparel Group Inc.*............... 100,000 3,125,000
Liz Claiborne Inc....................... 84,800 3,582,800
Mens Wearhouse Inc...................... 87,500 1,804,686
Nautica Enterprises Inc.*............... 168,000 5,166,000
St. Johns Knits, Inc.................... 88,000 4,026,000
Tommy Hilf iger Corporation*............ 127,400 6,624,800
-------------
25,985,886
-------------
AUTOMOTIVE EQUIPMENT
& SERVICES--.4%
Cross-Continent Auto Retailers, Inc. ... *88,400 2,265,250
-------------
BIO-TECHNOLOGY--2.7%
BioChem Pharma Inc.*.................... 142,000 6,052,750
CellPro Incorporated*................... 208,700 2,452,225
Centocor, Inc.*......................... 35,100 1,031,061
Ergo Science Corp.*..................... 75,000 1,031,250
INCYTE Pharmaceuticals, Inc.*........... 67,000 2,713,500
Serologicals Corporation*............... 50,000 1,525,000
-------------
14,805,786
BUILDING &
CONSTRUCTION--.1%
Toll Brothers Inc.*..................... 25,000 428,125
-------------
CHEMICALS--.1%
Airgas Inc.*............................ 35,000 791,875
-------------
COMMUNICATIONS--2.0%
Asia Satellite Telecommunications
Holdings Limited ADS*................ 40,000 1,070,000
LCI International Inc.*................. 50,000 1,593,750
PictureTel Corp.*....................... 161,000 4,347,000
Saville Systems PLC ADR*................ 35,500 1,530,938
Telefonica del Peru S.A. ADS............ 73,100 1,507,688
Teleport Communications
Group Inc Cl. A.*.................... 36,600 896,700
-------------
10,946,076
-------------
COMMUNICATIONS
EQUIPMENT--9.1%
Ascend Communications, Inc.*............ 185,600 12,133,600
Cascade Communications Corp.*........... 71,600 5,199,950
Cisco Systems, Inc.*.................... 90,000 5,568,750
Glenayre Technologies Inc*.............. 194,625 5,011,594
Pairgain Technologies Inc.*............. 40,000 2,755,000
Shiva Corp.*............................ 25,500 1,045,500
Tellabs, Inc.*.......................... 212,300 18,072,038
-------------
49,786,432
-------------
COMPUTER RELATED &
BUSINESS EQUIPMENT--1.0%
Network Appliance Inc.*................. 141,500 4,952,500
Raster Graphics Inc..................... 55,000 460,625
-------------
5,413,125
-------------
COMPUTER SERVICES--6.2%
Acxiom Corp.*........................... 45,000 1,766,250
CKS Group Inc.*......................... 94,900 1,838,688
Cambridge Technology
Partners Inc.*....................... 20,000 660,000
Employee Solutions Inc.*................ 120,000 2,655,000
FactSet Research Systems Inc.*.......... 147,300 3,535,200
Keane Inc.*............................. 79,000 3,663,625
Logicon Inc............................. 38,500 1,592,938
National Data Corp...................... 42,300 1,739,588
Quick Response Service Inc.*............ 98,100 3,641,963
Sungard Data Systems*................... 66,800 2,855,700
Technology Solutions Co.*............... 70,000 2,721,250
Universal Outdoor Holdings Inc.*........ 85,000 2,496,875
Whittman-Hart, Inc.*.................... 85,000 4,037,500
XLConnect Solutions, Inc.*.............. 30,000 877,500
-------------
34,082,077
-------------
COMPUTER SOFTWARE--13.1%
Applix Inc.*............................ 95,200 2,308,600
Auspex Systems Inc.*.................... 207,400 2,125,850
Compuware Corp.*........................ 215,000 11,341,250
Electronics For Imaging Inc.*........... 165,000 11,880,000
HBO & Company........................... 192,200 11,556,025
Informix Corporation*................... 209,000 4,637,292
INSO Corp.*............................. 50,000 2,462,500
Learning Company Inc. (The)*............ 170,900 3,471,492
Medic Computer Systems, Inc.*........... 194,900 5,505,925
Parametric Technology
Corporation*......................... 75,000 3,665,625
S3 Incorporated*........................ 243,200 4,590,400
Structural Dynamics
Research Corp*....................... 339,600 6,027,900
Systemsoft Corp.*....................... 108,200 3,056,650
-------------
72,629,509
-------------
<PAGE>
-12-
THE ALGER FUND
ALGER SMALL CAPITALIZATION PORTFOLIO
SCHEDULE OF INVESTMENTS (Continued)
October 31, 1996
Common Stocks--(cont.) Shares Value
------ -----
COMPUTER
TECHNOLOGY--5.1%
Adaptec, Inc.*.......................... 118,800 $ 7,231,950
Checkpoint Systems Inc.*................ 50,000 1,118,750
Cirrus Logic, Inc.*..................... 243,000 4,617,000
Citrix Systems, Inc.*................... 98,000 5,414,500
Digital Microwave Corp.*................ 50,000 1,143,750
Sterling Commerce, Inc.*................ 120,400 3,386,250
Videoserver Inc.*....................... 116,400 5,514,450
-------------
28,426,650
-------------
CONSUMER PRODUCTS--1.2%
Blyth Industries Inc.*.................. 61,000 2,371,375
G & K Services Inc Cl. A................ 52,000 1,508,000
Fred Meyer, Inc.*....................... 25,500 895,686
Oakley, Inc.*........................... 140,000 2,082,500
-------------
6,857,561
-------------
DEFENSE--.2%
Rohr Inc.*.............................. 47,900 886,150
-------------
FINANCIAL SERVICES--3.5%
Concord EFS Inc.*....................... 145,000 4,205,000
Money Store Inc. (The).................. 360,000 9,270,000
PMT Services, Inc.*..................... 175,000 3,500,000
Schwab (Charles)
Corporation (The).................... 100,000 2,500,000
-------------
19,475,000
-------------
FOODS & BEVERAGES--.5%
Fine Host Corp*......................... 64,800 939,600
Interstate Bakeries Corp................ 47,200 2,000,100
-------------
2,939,700
-------------
HEALTH CARE--2.5%
Access Health, Inc.*.................... 94,000 3,102,000
Clintrials Research Inc.*............... 31,400 1,165,725
Omnicare, Inc........................... 70,000 1,907,500
Orthodontic Centers
of America Inc.*..................... 34,600 497,375
Physicians Sales & Service, Inc......... 260,200 5,529,250
United Dental Care, Inc.*............... 50,000 1,500,000
-------------
13,701,850
-------------
INDUSTRIAL EQUIPMENT--.3%
Waters Corporation*..................... 60,700 1,881,700
-------------
INSURANCE--.6%
Executive Risk Inc...................... 30,000 1,237,500
HCC Insurance Holdings Inc.............. 60,000 1,530,000
Vesta Insurance Group Inc............... 24,000 615,000
-------------
3,382,500
-------------
LEISURE &
ENTERTAINMENT--1.9%
Anchor Gaming*.......................... 80,000 4,000,000
Cinar Films, Inc. CI. B.*............... 41,500 1,016,750
LEISURE & ENTERTAINMENT--(cont.)
International Game Technology........... 269,500 5,693,188
-------------
10,709,938
-------------
MANUFACTURING--.7%
American Power Conversion
Corp.*............................... 180,600 3,860,325
-------------
MEDICAL DEVICES-- 4.9%
CONMED Corporation*..................... 170,500 2,941,125
Heartport Inc.*......................... 82,700 2,181,211
Hologic, Inc.*.......................... 197,000 4,481,750
Intercardia, Inc.*...................... 50,000 1,150,000
Mentor Corp............................. 120,000 2,655,000
Neuromedical Systems Inc.*.............. 158,500 2,694,500
Perclose, Inc.*......................... 10,000 165,000
STERIS Corp.*........................... 29,100 1,098,525
Target Therapeutics, Inc.*.............. 95,900 3,548,300
ESC Medical Systems Ltd................. 226,200 6,248,775
-------------
27,164,186
-------------
MEDICAL SERVICES--5.1%
ABR Information Services Inc.*.......... 26,500 1,835,125
American Medical Response Inc.*......... 86,300 2,589,000
Biopsys Medical Inc.*................... 100,000 1,712,500
CompDent Corp.*......................... 100,000 3,437,500
Lincare Holdings Inc.*.................. 181,700 6,813,750
National Surgery Centers, Inc.*......... 30,800 831,600
PhyCor, Inc.*........................... 214,187 6,639,797
Quintiles Transnational Corp.*.......... 61,500 4,043,625
-------------
27,902,897
-------------
METALS--.5%
Titanium Metals Corporation*............ 84,100 2,586,075
-------------
OIL & GAS--2.2%
B.J. Services Corp.*.................... 30,000 1,346,250
Benton Oil & Gas Co.*................... 45,000 1,102,500
CBT Group PLC ADS*...................... 72,300 3,976,500
Energy Ventures Inc.*................... 28,200 1,240,800
Input/Output Inc.*...................... 115,000 3,421,250
Varco International Inc................. 60,000 1,185,000
-------------
12,272,300
-------------
PAPER PACKAGING &
FOREST PRODUCTS--.4%
Sealed Air Corp.*....................... 49,400 1,920,425
-------------
PHARMACEUTICALS--.2%
Dura Pharmaceuticals, Inc.*............. 40,000 1,380,000
-------------
POLLUTION CONTROL--4.6%
Tetra Tech Inc.*........................ 80,900 1,800,025
USA Waste Services, Inc.*............... 275,100 8,803,200
U.S. Filter Corp.*...................... 118,250 4,079,625
United Waste Systems, Inc.*............. 318,000 10,931,250
-------------
25,614,100
-------------
<PAGE>
-13-
THE ALGER FUND
ALGER SMALL CAPITALIZATION PORTFOLIO
SCHEDULE OF INVESTMENTS (Continued)
October 31, 1996
Common Stocks--(cont.) Shares Value
------ -----
RESEARCH--.6%
Gartner Group Inc. Class A.*............ 110,500 $ 3,397,875
-------------
RESTAURANTS
& LODGING--2.2%
Apple South, Inc........................ 55,000 646,250
Landry's Seafood
Restaurants, Inc.*................... 69,200 1,418,600
Lone Star Steakhouse
& Saloon, Inc.*...................... 267,300 6,849,563
Outback Steakhouse, Inc.*............... 51,600 1,196,501
Prime Hospitality Corp.*................ 145,000 2,211,250
-------------
12,322,164
-------------
RETAILING--8.1%
Cintas Corp............................. 45,000 2,621,250
Eagle Hardware & Garden, Inc.*.......... 70,000 2,003,750
Gucci Group N.V......................... 110,700 7,638,300
Loehmann's, Inc.*....................... 79,600 2,139,250
Mossimo, Inc.*.......................... 77,100 1,667,288
Neiman Marcus
Group, Inc. (The)*................... 90,000 2,936,250
OfficeMax, Inc.*........................ 140,400 1,895,400
PetsMart Inc.*.......................... 136,600 3,688,200
Quicksilver Inc.*....................... 75,000 1,593,750
Saks Holdings, Inc.*.................... 30,800 1,078,000
Sothebys Holdings Inc., CL A............ 50,200 853,400
Sports Authority Inc. (The)*............ 299,600 7,265,300
Stage Stores, Inc.*..................... 100,000 1,825,000
TJX Companies, Inc...................... 97,700 3,908,000
Tiffany & Co............................ 90,000 3,330,000
West Marine Inc.*....................... 15,000 528,750
-------------
44,971,888
-------------
SEMI-CONDUCTORS--3.1%
Altera Corporation*..................... 95,000 5,890,000
Maxim Integrated Products, Inc.*........ 138,400 4,844,000
Microchip Technology
Incorporated*........................ 108,200 3,922,250
Xilinx, Inc.*........................... 80,200 2,626,550
-------------
17,282,800
-------------
TRANSPORTATION--.2%
Coach USA Inc*.......................... 33,500 912,875
Fritz Companies Inc*.................... 25,600 409,600
-------------
1,322,475
-------------
MISCELLANEOUS--4.4%
Central Parking Corp.*.................. 6,000 207,750
Loewen Group Inc........................ 215,000 8,519,375
Metromail Corporation*.................. 139,200 2,557,800
Outdoor Systems, Inc.*.................. 38,000 1,700,500
Rural/Metro Corporation*................ 117,500 4,288,750
Security Capital Atlantic
Incorporated*........................ 100,000 2,375,000
Sturm Ruger & Co. Inc.*................. 73,000 1,368,750
Uniphase Corp.*......................... 25,000 1,206,250
Veterinary Centers of
America Inc*......................... 136,700 2,511,863
-------------
24,736,038
-------------
Total Common Stocks
(Cost $435,149,374).................. 522,850,237
-------------
Warrants--.9%
SEMI-CONDUCTORS
Intel Corp Wts., expire 3/14/98*
(Cost $5,023,746).................... 70,000 4,962,370
-------------
SHORT-TERM PRINCIPAL
CORPORATE NOTES--3.9% AMOUNT
------------
Bancomer S.A.,
5.26%, 11/8/96........................ $10,050,000 10,039,721
Barton Capital Corp.,
5.27%, 11/8/96 (a).................... 6,200,000 6,193,647
Dynamic Funding Corp. Series A,
5.35%, 11/6/96........................ 750,000 749,443
5.40%, 11/12/96....................... 4,700,000 4,692,245
-------------
Total Short-Term Corporate Notes
(Cost $21,675,056)................... 21,675,056
-------------
Total Investments
(Cost $461,848,176)(b)............... 99.2% 549,487,663
Other Assets in Excess
of Liabilities....................... .8 4,384,183
----- ------------
Net Assets.............................. 100.0% $553,871,846
===== ============
* Non-income producing security.
(a) Pursuant to Securities and Exchange Commission Rule 144A, these securities
may be sold prior to their maturity only to qualified institutional buyers.
(b) At October 31, 1996, the net unrealized appreciation on investments, based
on cost for federal income tax purposes of $461,848,176, amounted to
$87,639,488 which consisted of aggregate gross unrealized appreciation of
$107,994,349 and aggregate gross unrealized depreciation of $20,354,861.
See Notes to Financial Statements.
<PAGE>
-14-
THE ALGER FUND
ALGER SMALL CAPITALIZATION PORTFOLIO
Financial Highlights
For a share outstanding throughout the year (i)
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
----------------------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year............ $ 11.13 $ 7.62 $ 8.65 $ 6.88 $ 6.97
-------- -------- -------- -------- --------
Net investment income (loss).................. (.09) (.13) (.09) (.08) (.11)(ii)
Net realized and unrealized gain (loss)
on investments............................. .42 3.64 (.02) 1.85 .37
-------- -------- -------- -------- --------
Total from investment operations.............. .33 3.51 (.11) 1.77 .26
Distributions from net realized gains......... (.60) -- (.92) -- (.35)
-------- -------- -------- -------- --------
Net asset value, end of year.................. $ 10.86 $ 11.13 $ 7.62 $ 8.65 $ 6.88
======== ======== ======== ======== ========
Total Return (iii)............................ 3.2% 46.2% (1.1%) 25.8% 3.4%
======== ======== ======== ======== ========
Ratios and Supplemental Data:
Net assets, end of year
(000's omitted).......................... $553,872 $463,718 $294,890 $300,108 $182,432
======== ======== ======== ======== ========
Ratio of expenses to average
net assets............................... 2.13%(iv) 2.11%(iv) 2.18%(v) 2.13%(v) 2.17%(v)
======== ======== ======== ======== ========
Ratio of net investment income (loss)
to average net assets.................... (1.59%) (1.75%) (1.51%) (1.52%) (1.64%)
======== ======== ======== ======== ========
Portfolio Turnover Rate..................... 153.35% 97.37% 131.86% 148.49% 121.00%
======== ======== ======== ======== ========
Average Commission Rate Paid................ $ .0611
========
</TABLE>
(i) Per share data has been adjusted to reflect the effect of a 3 for 1 stock
split which occurred September 27, 1995.
(ii) Amount was computed based on average shares outstanding during the year.
(iii) Does not reflect contingent deferred sales charge.
(iv) Reflects total expenses, including fees offset by earnings credits. The
expense ratio net of earnings credits would have been the same for the
years ended October 31, 1996 and 1995, respectively.
(v) Expense ratios for the years ended prior to October 31, 1995, do not
reflect the effect of fees offset by earnings credits, if any.
See Notes to Financial Statements.
<PAGE>
-15-
- --------------------------------------------------------------------------------
ALGER BALANCED PORTFOLIO
PORTFOLIO HIGHLIGHTS THROUGH OCTOBER 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
The Alger Balanced Portfolio invests in stocks of companies with growth
potential and fixed-income securities, with emphasis on income-producing
securities which appear to have some potential for capital appreciation.
- --------------------------------------------------------------------------------
$10,000 HYPOTHETICAL INVESTMENT SINCE INCEPTION June 1, 1992
- --------------------------------------------------------------------------------
[CAPTION - CHART]
LEHMAN BROTHERS
GOVT/CORP
ALGER S&P 500 BOND
BALANCED INDEX INDEX
-------- ------- -----------
6/1/92 10,000 10,000 10,000
10/31/92 9,950 10,196 10,479
10/31/93 11,180 11,722 11,911
10/31/94 10,736 12,175 11,356
10/31/95 13,500 15,395 13,193
10/31/96 14,358 19,105 13,905
The Chart Above Illustrates The Growth In Value Of A Hypothetical $10,000
Investment Made In The Alger Balanced Portfolio, The S&p 500 Index, And The
Lehman Brothers Government/corporate Bond Index On June 1, 1992, The Inception
Date Of The Alger Balanced Portfolio. Figures For The Alger Balanced Portfolio,
The S&p 500 Index, An Unmanaged Index Of Common Stocks, And The Lehman Brothers
Government/corporate Bond Index, An Unmanaged Index Of Government And Corporate
Bonds, Include Reinvestment Of Dividends And/or Interest.
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON THROUGH OCTOBER 31, 1996
- --------------------------------------------------------------------------------
Average Annual Return
Since Inception
1 Year 6/1/92
-------------------------------------------
Alger Balanced Portfolio 6.26% 8.87%
ASSUMING REDEMPTION AT THE
END OF EACH PERIOD 1.26% 8.53%
S&P 500 Index 24.10% 15.78%
Lehman Brothers Gov't/Corp. Bond Index 5.39% 7.75%
-------------------------------------------
THE PORTFOLIO'S AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE PRICE AND
REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS. PAST PERFORMANCE DOES NOT GUARANTEE
FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL WILL FLUCTUATE AND THE
PORTFOLIO'S SHARES WHEN REDEEMED MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST.
<PAGE>
16
THE ALGER FUND
ALGER BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS
OCTOBER 31, 1996
Common Stocks--54.9% Shares Value
------ -------
AEROSPACE--2.2%
Boeing Company (The)........................ 1,800 $ 171,675
Gulfstream Aerospace Corp.*................. 1,700 40,161
Sundstrand Corp............................. 2,100 84,525
----------
296,361
----------
APPAREL--.6%
Tommy Hilfiger Corporation*................. 1,400 72,800
----------
BIO-TECHNOLOGY--.6%
Amgen Inc.*................................. 1,100 67,444
----------
BUILDING &
CONSTRUCTION--.6%
Clayton Homes Inc........................... 4,300 72,563
----------
CHEMICALS--1.7%
Monsanto Co................................. 5,800 229,825
----------
COMMUNICATIONS--2.6%
EXCEL Communications, Inc.*................. 300 7,800
LCI International Inc.*..................... 1,500 47,811
Lucent Technologies Inc..................... 700 32,900
PictureTel Corp.*........................... 1,300 35,100
Telecomunicacoes
Brasileiras S.A. ADR..................... 1,000 74,500
WorldCom Inc.*.............................. 6,300 153,563
----------
351,674
----------
COMMUNICATIONS
EQUIPMENT--4.5%
Ascend Communications, Inc.*................ 1,300 84,988
Cisco Systems, Inc.*........................ 4,600 284,625
Glenayre Technologies Inc.*................. 3,037 78,203
Tellabs, Inc.*.............................. 1,800 153,225
----------
601,041
----------
COMPUTER RELATED &
BUSINESS EQUIPMENT--2.5%
Sun Microsystems Inc.*...................... 2,000 122,000
3 Com Corp.*................................ 2,400 162,300
Xerox Corp.................................. 1,000 46,375
----------
330,675
----------
COMPUTER SOFTWARE--2.1%
Compuware Corp.*............................ 1,900 100,225
Informix Corporation*....................... 4,600 102,065
Microsoft Corporation*...................... 600 82,350
----------
284,640
----------
COMPUTER TECHNOLOGY--.7%
Adaptec, Inc.*.............................. 1,600 97,400
----------
CONSUMER PRODUCTS--1.0%
CUC International Inc.*..................... 3,000 73,500
Colgate Palmolive Co........................ 700 64,400
----------
137,900
----------
DEFENSE--2.1%
Lockheed Martin Corp........................ 652 58,436
McDonnell Douglas Corporation............... 4,200 228,900
----------
287,336
----------
ENERGY & ENERGY SERVICES--1.2%
Schlumberger Ltd............................ 1,600 158,600
----------
FINANCIAL SERVICES--8.3%
Chase Manhattan Corp........................ 2,700 231,525
Citicorp.................................... 2,200 217,800
First Data Corporation...................... 2,968 236,698
Green Tree Financial Corp.*................. 4,100 162,463
MBNA Corp................................... 1,200 45,300
Money Store Inc. (The)...................... 6,000 154,500
Schwab (Charles) Corporation (The).......... 3,000 75,000
----------
1,123,286
----------
FOOD CHAINS--.3%
Safeway Inc.*............................... 1,000 42,875
----------
HEALTH CARE--6.1%
Boston Scientific Corp..................... 1,200 65,250
Columbia/HCA Healthcare
Corporation.............................. 2,250 80,436
Guidant Corp................................ 1,600 73,800
Johnson & Johnson........................... 676 33,293
Eli Lilly & Company......................... 3,200 225,600
Merck & Co., Inc............................ 3,200 237,200
SmithKline Beecham PLC ADS................. 1,000 62,625
Warner-Lambert Co........................... 700 44,538
----------
822,742
----------
INSURANCE--1.9%
American International Group, Inc........... 2,400 260,700
----------
LEISURE &
ENTERTAINMENT--.8%
International Game Technology............... 5,000 105,625
----------
MACHINERY--.4%
Case Corp................................... 1,300 60,450
----------
MEDICAL SERVICES--.6%
Medtronic, Inc.............................. 1,300 83,688
----------
OIL & GAS--1.2%
Halliburton Co.............................. 1,400 79,275
MGIC Investment Corp........................ 600 41,175
Tidewater Inc............................... 1,000 43,750
----------
164,200
----------
PHARMACEUTICALS--1.9%
Astra AB-Sponsored ADS Series A............. 2,500 114,688
Bristol Myers Squibb Co..................... 400 42,300
Pfizer Inc.................................. 1,200 99,300
----------
256,288
----------
POLLUTION CONTROL--.6%
USA Waste Services, Inc.*................... 2,700 86,400
----------
<PAGE>
-17-
THE ALGER FUND
ALGER BALANCED PORTFOLIO
SCHEDULE OF INVESTMENTS (Continued)
October 31, 1996
Common Stocks--(cont.) Shares Value
------ -----
RESTAURANTS & LODGING--1.1%
Lone Star Steakhouse & Saloon, Inc.*........ 5,300 $ 135,813
Outback Steakhouse, Inc.*................... 700 16,230
----------
152,043
----------
RETAILING--4.0%
Dollar General Corp......................... 2,000 55,500
Gucci Group N.V............................. 1,000 69,000
Home Depot, Inc............................. 3,900 213,525
Nine West Group Inc.*....................... 1,000 49,875
OfficeMax, Inc.*............................ 10,875 146,811
----------
534,711
----------
SEMI-CONDUCTORS--2.9%
Altera Corporation*......................... 1,600 99,200
Intel Corp.................................. 2,300 252,713
Maxim Integrated Products, Inc.*............ 1,200 42,000
----------
393,913
----------
MISCELLANEOUS--2.4%
Loewen Group Inc............................ 3,300 130,763
Service Corp International.................. 7,000 199,500
----------
330,263
----------
Total Common Stocks
(Cost $6,131,348)........................ 7,405,443
----------
PREFERRED STOCK--.3%
COMMUNICATIONS
Nokia Corporation, ADR
(Cost $47,170)........................... 1,000 46,375
----------
PRINCIPAL
CORPORATE BONDS--6.9% AMOUNT
---------
AUTOMOTIVE--2.7%
Ford Motor Capital B.V.,
9.50%, 6/1/10............................. $300,000 358,380
----------
BROKERAGE--.7%
Merrill Lynch & Co., Inc.,
6.375%, 9/8/06........................... 100,000 93,740
----------
ELECTRIC & GAS COMPANIES--1.3%
Pacific Gas & Electric Co.,
7.25%, 3/1/26............................ 182,000 170,803
----------
MANUFACTURING--2.2%
Allied Signal Inc.,
6.75%, 8/15/00........................... 300,000 303,558
----------
Total Corporate Bonds
(Cost $960,807).......................... 926,481
----------
U.S. Treasury Notes,
5.75%, 9/30/97........................... $250,000 250,548
U.S. Treasury Notes,
7.50%, 10/31/99.......................... 100,000 104,203
U.S. Treasury Notes,
6.375%, 1/15/00.......................... 100,000 101,203
U.S. Treasury Notes,
7.50%, 5/15/02........................... 100,000 106,328
U.S. Treasury Notes,
6.25%, 2/15/03........................... 250,000 250,703
U.S. Treasury Bonds,
7.625%, 11/15/22......................... 100,000 110,469
Federal Farm Credit Bank Corp.,
4.95%, 3/3/97............................ 250,000 249,723
Federal Home Loan Bank Corp.,
6.683%, 10/16/00......................... 250,000 249,960
Federal Home Loan Mortgage Corp.,
8.20%, 1/16/98........................... 100,000 100,582
Federal Home Loan Mortgage Corp.,
6.50%, 6/10/03........................... 150,000 145,851
Federal National Mortgage Assoc.,
7.11%, 4/16/01........................... 250,000 250,338
Federal National Mortgage Assoc.,
7.60%, 4/14/04........................... 300,000 300,000
Federal National Mortgage Assoc.,
8.50%, 2/01/05........................... 100,000 105,998
----------
Total U.S. Government
& Agency Obligations
(Cost $2,310,441)........................ 2,325,906
----------
SHORT-TERM CORPORATE NOTES--18.9%
Barton Capital Corp.,
5.27%, 11/8/96 (a)....................... 350,000 349,640
Commed Fuel Co. Inc.,
5.25%, 11/5/96........................... 250,000 249,854
MDU Resources Group Inc.,
5.33%, 11/7/96........................... 250,000 249,778
New England Power Co.,
5.24%, 11/4/96........................... 450,000 449,804
Potomac Electric Power Co.,
5.26%, 11/4/96........................... 300,000 299,868
SunAmerica Inc.,
5.28%, 11/6/96........................... 550,000 549,597
Triple-A One Funding Corp.,
5.28%, 11/12/96 (a)...................... 400,000 399,355
----------
Total Short-Term Corporate Notes
(Cost $2,547,896)........................ 2,547,896
----------
Total Investments
(Cost $11,997,662) (b)................... 98.2% 13,252,101
Other Assets in Excess of Liabilities....... 1.8 239,597
----- -----------
Net Assets.................................. 100.0% $13,491,698
===== ===========
* Non-income producing security.
(a) Pursuant to Securities and Exchange Commission Rule 144A, these securities
may be sold prior to their maturity only to qualified institutional
buyers.
(b) At October 31, 1996, the net unrealized appreciation on investments, based
on cost for federal income tax purposes of $11,997,662, amounted to
$1,254,438 which consisted of aggregate gross unrealized appreciation of
$1,457,353 and aggregate gross unrealized depreciation of $202,915.
See Notes to Financial Statements.
<PAGE>
-18-
THE ALGER FUND
ALGER BALANCED PORTFOLIO
Financial Highlights
For a share outstanding throughout the period
<TABLE>
<CAPTION>
From June 1, 1992
Year Ended October 31, (commencement of
------------------------------------------------------------ operations)
1996 1995 1994 1993 to October 31, 1992(iii)
----- ----- ----- ----- ------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning
of period.......................... $ 13.59 $ 10.65 $ 11.18 $ 9.95 $ 10.00
--------- -------- -------- -------- ------------
Net investment income (loss).......... .12 (.02)(i) (.05) (.01) (.12)
Net realized and unrealized
gain (loss) on investments......... .72 2.96 (.39) 1.24 .07
--------- -------- -------- -------- ------------
Total from investment
operations......................... .84 2.94 (.44) 1.23 (.05)
--------- -------- -------- -------- ------------
Dividends from net investment
income............................. (.01) -- -- -- --
Distributions from net realized
gains.............................. (.21) -- (.09) -- --
--------- -------- -------- -------- ------------
Total Distributions................... (.22) -- (.09) -- --
--------- -------- -------- -------- ------------
Net asset value, end of period........ $ 14.21 $ 13.59 $ 10.65 $ 11.18 $ 9.95
========= ======== ======== ======== ============
Total Return (ii)..................... 6.3% 27.6% (4.0%) 12.4% (0.5%)
========= ======== ======== ======== ============
Ratios and Supplemental Data:
Net assets, end of period
(000's omitted).................. $ 13,492 $ 6,214 $ 3,073 $ 3,125 $ 1,370
========= ======== ======== ======== ============
Ratio of expenses to average
net assets....................... 2.70%(iv) 3.34%(iv) 3.18%(vi) 3.82%(vi) 5.62%(vi)
========= ======== ======== ======== ============
Decrease reflected in above
expense ratios due to expense
reimbursements (v)............... -- .24% -- .75% .75%
========= ======== ======== ======== ============
Ratio of net investment income
(loss) to average net assets..... .47% (.13%) (.41%) (.97%) (3.07%)
========= ======== ======== ======== ============
Portfolio Turnover Rate............. 85.51% 84.06% 84.88% 115.17% 17.07%
========= ======== ======== ======== ============
Average Commission
Rate Paid........................ $ .0700
=========
</TABLE>
(i) Amount was computed based on average shares outstanding during the period.
(ii) Does not reflect contingent deferred sales charge.
(iii) Ratios have been annualized; total return has not been annualized.
(iv) Reflects total expenses, including fees offset by earnings credits. The
expense ratio net of earnings credits would have been 2.69% and 3.25% for
the years ended October 31, 1996 and 1995, respectively.
(v) Represents expense reimbursements made pursuant to applicable state
expense limits.
(vi) Expense ratios for the periods ended prior to October 31, 1995, do not
reflect the effect of fees offset by earnings credits, if any.
See Notes to Financial Statements.
<PAGE>
-19-
- --------------------------------------------------------------------------------
ALGER MIDCAP GROWTH PORTFOLIO
PORTFOLIO HIGHLIGHTS THROUGH OCTOBER 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
The Alger MidCap Growth Portfolio invests in mid-sized companies.
- --------------------------------------------------------------------------------
$10,000 HYPOTHETICAL INVESTMENT SINCE INCEPTION MAY 24, 1993
- --------------------------------------------------------------------------------
[CAPTION CHART]
ALGER
MIDCAP S&P MIDCAP 400
GROWTH INDEX
------ -----
5-24-93 10,000 10,000
10-31-93 12,480 10,714
10-31-94 13,062 10,969
10-31-95 19,073 13,296
10-31-96 20,418 15,600
The chart above illustrates the growth in value of a hypothetical $10,000
investment made in the Alger MidCap Growth Portfolio and the S&P MidCap 400
Index on May 24, 1993, the inception date of the Alger MidCap Growth
Portfolio. Figures for both the Alger MidCap Growth Portfolio and the S&P
MidCap 400 Index, an unmanaged index of common stocks, include reinvestment
of dividends.
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON THROUGH OCTOBER 31, 1996
- --------------------------------------------------------------------------------
Average Annual Return
Since Inception
1 Year 5/24/93
------------------------------------------
Alger MidCap Growth Portfolio 6.43% 23.40%
ASSUMING REDEMPTION AT THE
END OF EACH PERIOD 1.43% 23.05%
S&P MidCap 400 Index 17.35% 13.80%
------------------------------------------
THE PORTFOLIO'S AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE PRICE AND
REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS. PAST PERFORMANCE DOES NOT GUARANTEE
FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL WILL FLUCTUATE AND THE
PORTFOLIO'S SHARES WHEN REDEEMED MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST.
<PAGE>
-20-
THE ALGER FUND
ALGER MIDCAP GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1996
Common Stocks--92.1% Shares Value
------ -----
AEROSPACE--2.4%
Gulfstream Aerospace Corp.*................. 25,500 $ 602,438
Sundstrand Corp............................. 59,200 2,382,800
-------------
2,985,238
-------------
APPAREL--1.7%
Liz Claiborne Inc........................... 18,000 760,500
Tommy Hilfiger Corporation*................. 25,000 1,300,000
-------------
2,060,500
-------------
BIO-TECHNOLOGY--1.3%
BioChem Pharma Inc.*........................ 26,000 1,108,250
Centocor, Inc.*............................. 17,700 519,938
-------------
1,628,188
-------------
BUILDING &
CONSTRUCTION--.9%
Clayton Homes, Inc.......................... 63,400 1,069,875
-------------
COMMUNICATIONS--6.9%
EXCEL Communications Inc.*.................. 6,100 158,600
LCI International Inc.*..................... 37,500 1,195,313
MFS Communications Co. Inc.*................ 27,500 1,378,438
PictureTel Corp.*........................... 43,100 1,163,700
Qualcomm Inc.*.............................. 31,800 1,264,050
Telefonica del Peru S.A. ADS................ 26,000 536,250
Univision Communications Inc. Cl A.......... 25,000 843,750
WorldCom Inc.*.............................. 89,900 2,191,313
-------------
8,731,414
-------------
COMMUNICATIONS
EQUIPMENT--4.6%
Ascend Communications, Inc.*................ 21,000 1,372,875
Cascade Communications Corp.*............... 8,600 624,575
Cisco Systems, Inc.*........................ 20,000 1,237,500
Glenayre Technologies Inc.*................. 41,725 1,074,419
Pairgain Technologies Inc.*................. 7,900 544,113
Tellabs, Inc.*.............................. 11,500 978,938
-------------
5,832,420
-------------
COMPUTER RELATED &
BUSINESS EQUIPMENT--2.6%
Cable Design Technologies Corp.*............ 27,000 702,000
3 Com Corp.*................................ 37,100 2,508,888
-------------
3,210,888
-------------
COMPUTER SOFTWARE--8.9%
Compuware Corp.*............................ 37,800 1,993,950
Electronics For Imaging Inc.*............... 12,500 900,000
HBO & Company............................... 10,600 637,325
Informix Corporation*....................... 115,500 2,562,714
Learning Company Inc. (The)*................ 38,400 780,019
Medic Computer Systems, Inc.*............... 38,700 1,093,275
Parametric Technology Corporation*.......... 25,400 1,241,425
COMPUTER SOFTWARE--(cont.)
S3 Incorporated*............................ 50,000 943,750
Structural Dynamics Research Corp*.......... 60,000 1,065,000
-------------
11,217,458
-------------
COMPUTER TECHNOLOGY--3.5%
Adaptec, Inc.*.............................. 47,500 2,891,563
Citrix Systems, Inc.*....................... 14,500 801,125
Sterling Commerce, Inc.*.................... 24,500 689,063
----------
4,381,751
----------
CONSUMER PRODUCTS--2.7%
CUC International Inc.*..................... 88,500 2,168,250
Oakley, Inc.*............................... 39,000 580,125
Tyco International Ltd...................... 14,100 699,711
-------------
3,448,086
-------------
FINANCIAL SERVICES--7.1%
Equifax, Inc................................ 35,000 1,041,250
First Data Corporation...................... 19,644 1,566,609
Green Tree Financial Corp................... 37,000 1,466,125
MBNA Corp................................... 16,000 604,000
Money Store Inc. (The)...................... 110,500 2,845,375
Schwab (Charles)
Corporation (The)........................ 57,400 1,435,000
----------
8,958,359
----------
FOOD CHAINS--.5%
Safeway Inc.*............................... 15,000 643,125
----------
HEALTH CARE--3.0%
Access Health, Inc.*........................ 25,000 825,000
Boston Scientific Corp.*.................... 30,000 1,631,250
Guidant Corp................................ 27,900 1,286,888
----------
3,743,138
----------
INDUSTRIAL EQUIPMENT--.6%
Smith International Inc..................... 20,000 760,000
----------
INSURANCE--.7%
Travelers/Aetna Property
Casualty Corp Cl A....................... 27,900 837,000
----------
LEISURE &
ENTERTAINMENT--3.8%
International Game Technology............... 150,500 3,179,311
Mirage Resorts, Incorporated*............... 70,000 1,540,000
-------------
4,719,311
-------------
MACHINERY--.7%
Case Corp................................... 20,000 930,000
-------------
MANUFACTURING--.9%
American Power Conversion Corp.*............ 52,200 1,115,775
-------------
<PAGE>
-21-
THE ALGER FUND
ALGER MIDCAP GROWTH PORTFOLIO
SCHEDULE OF INVESTMENTS (Continued)
October 31, 1996
Common Stocks--(cont.) Shares Value
------ -----
MEDICAL DEVICES--1.1%
STERIS Corp.*............................... 15,500 $ 585,125
Target Therapeutics, Inc.*.................. 10,000 370,000
VISX, Incorporated*......................... 18,900 477,225
----------
1,432,350
----------
MEDICAL SERVICES--1.0%
American Medical Response Inc.*............. 18,000 540,000
PhyCor, Inc.*............................... 22,500 697,500
----------
1,237,500
----------
METALS--1.0%
Titanium Metals Corporation*................ 40,800 1,254,600
----------
OIL & GAS--4.9%
B.J. Services Corp.*........................ 14,800 664,150
Global Marine Inc.*......................... 55,000 1,010,625
Halliburton Co.............................. 27,000 1,528,875
Input/Output Inc.*.......................... 32,000 952,000
MGIC Investment Corp........................ 8,800 603,900
Tidewater Inc............................... 31,600 1,382,500
----------
6,142,050
----------
PAPER PACKAGING &
FOREST PRODUCTS--1.3%
Sealed Air Corp.*........................... 42,700 1,659,961
----------
POLLUTION CONTROL--4.2%
USA Waste Services, Inc.*................... 85,200 2,726,400
U.S. Filter Corp.*.......................... 24,000 828,000
United Waste Systems, Inc.*................. 50,000 1,718,750
----------
5,273,150
----------
RESEARCH--.5%
Gartner Group Inc. Cl A*.................... 18,700 575,025
-----------
RESTAURANTS & LODGING--3.5%
Boston Chicken Inc.*........................ 37,000 1,345,875
Lone Star Steakhouse & Saloon, Inc.*........ 92,300 2,365,188
Outback Steakhouse, Inc.*................... 28,800 667,814
----------
4,378,877
----------
RETAILING--13.2%
Cintas Corp................................. 30,700 1,788,275
Dollar General Corp......................... 63,000 1,748,250
Gucci Group N.V............................. 32,000 2,208,000
Loehmann's, Inc.*........................... 28,000 752,500
Neiman Marcus Group, Inc. (The)*............ 10,000 326,250
Nine West Group Inc.*....................... 39,000 1,945,125
OfficeMax, Inc.*............................ 170,250 2,298,375
PetsMart Inc.*.............................. 27,100 731,700
Rite Aid Corp............................... 18,700 635,800
Saks Holdings, Inc.*........................ 16,700 584,500
Sports Authority Inc. (The)*................ 80,850 1,960,611
TJX Companies, Inc.......................... 41,200 1,648,000
-------------
16,627,386
-------------
SEMI-CONDUCTORS--3.7%
Altera Corporation*......................... 33,500 2,077,000
Maxim Integrated Products, Inc.*............ 16,800 588,000
Microchip Technology Incorporated*.......... 15,800 572,750
Xilinx, Inc.*............................... 44,000 1,441,000
-------------
4,678,750
-------------
MISCELLANEOUS--4.9%
Loewen Group Inc. ......................... 73,600 2,916,400
Service Corp International.................. 113,200 3,226,200
-------------
6,142,600
-------------
Total Common Stocks
(Cost $102,439,322)...................... 115,674,775
-------------
Preferred Stock
COMMUNICATIONS--1.0%
Nokia Corporation, ADR
(Cost $1,300,208)........................ 28,300 1,312,413
-------------
PRINCIPAL
SHORT-TERM CORPORATE NOTES--7.3% AMOUNT
----------
Bancomer S.A.,
5.26%, 11/8/96....................... $2,500,000 2,497,443
Dynamic Funding Corp.,
5.35%, 11/6/96....................... 1,200,000 1,199,108
Merrill Lynch & Co. Inc.,
5.25%, 11/6/96....................... 2,200,000 2,198,075
SunAmerica Inc.,
5.28%, 11/6/96....................... 1,000,000 999,267
Triple-A One Funding Corp.,
5.28%, 11/12/96 (a).................. 2,300,000 2,296,289
-------------
Total Short-Term Corporate Notes
(Cost $9,190,182)........................ 9,190,182
-------------
Total Investments
(Cost $112,929,712) (b).................. 100.4% 126,177,370
Liabilities in Excess of Other Assets....... (.4) (491,124)
----- --------------
Net Assets.................................. 100.0% $125,686,494
===== ==============
* Non-income producing security.
(a) Pursuant to Securities and Exchange Commission Rule 144A, these securities
may be sold prior to their maturity only to qualified institutional
buyers.
(b) At October 31, 1996, the net unrealized appreciation on investments, based
on cost for federal income tax purposes of $112,929,712, amounted to
$13,247,658 which consisted of aggregate gross unrealized appreciation of
$16,617,043 and aggregate gross unrealized depreciation of $3,369,385.
See Notes to Financial Statements.
,
<PAGE>
-22-
THE ALGER FUND
ALGER MIDCAP GROWTH PORTFOLIO
Financial Highlights
For a share outstanding throughout the period
<TABLE>
<CAPTION>
From May 24, 1993
Year Ended October 31, (commencement of
------------------------------------------------- (operations)
1996 1995 1994 to October 31, 1993(i)
-------- -------- --------- ----------------------
<S> <C> <C> <C> <C>
Net asset value, beginning
of period....................... $ 18.94 $ 12.77 $ 12.48 $ 10.00
--------- -------- -------- --------
Net investment income (loss)....... (.25)(ii) (.08) (.11) (.09)
Net realized and unrealized
gain (loss) on investments...... 1.35 6.25 .68 2.57
--------- -------- -------- --------
Total from investment
operations...................... 1.10 6.17 .57 2.48
Distributions from net realized
gains........................... (1.17) -- (.28) --
--------- -------- -------- --------
Net asset value, end of period..... $ 18.87 $ 18.94 $ 12.77 $ 12.48
======== ======== ======== ========
Total Return (iii)................. 6.4% 48.3% 4.7% 24.8%
======== ======== ======== ========
Ratios and Supplemental Data:
Net assets, end of period
(000's omitted)............... $125,686 $ 54,016 $ 18,516 $ 3,836
======== ======== ======== ========
Ratio of expenses to average
net assets.................... 2.27%(iv) 2.39% (iv) 3.20%(vi) 3.73%(vi)
======== ======== ======== ========
Decrease reflected in above
expense ratio due to expense
reimbursements (v)............ -- -- .07% .80%
======== ======== ======== ========
Ratio of net investment income
(loss) to average net assets.. (1.33%) (1.71%) (2.32%) (2.86%)
======== ======== ======== ========
Portfolio Turnover Rate.......... 113.95% 121.60% 127.40% 57.64%
======== ======== ======== ========
Average Commission
Rate Paid..................... $ .0690
========
</TABLE>
(i) Ratios have been annualized; total return has not been annualized.
(ii) Amount was computed based on average shares outstanding during the period.
(iii) Does not reflect contingent deferred sales charge.
(iv) Reflects total expenses, including fees offset by earnings credits. The
expense ratio net of earnings credits would have been 2.26% and 2.34% for
the years ended October 31, 1996 and 1995, respectively.
(v) Represents expense reimbursements made pursuant to applicable state
expense limits.
(vi) Expense ratios for the periods ended prior to October 31, 1995, do not
reflect the effect of fees offset by earnings credits, if any.
See Notes to Financial Statements.
<PAGE>
-23-
- --------------------------------------------------------------------------------
ALGER CAPITAL APPRECIATION PORTFOLIO
PORTFOLIO HIGHLIGHTS THROUGH OCTOBER 31, 1996 (UNAUDITED)
- --------------------------------------------------------------------------------
The Alger Capital Appreciation Portfolio focuses on companies with promising
growth potential while using some special investment tools such as leveraging
and options and futures transactions.
- --------------------------------------------------------------------------------
$10,000 HYPOTHETICAL INVESTMENT SINCE INCEPTION NOVEMBER 1, 1993
- --------------------------------------------------------------------------------
[CHART - COPY]
ALGER CAPITAL S&P 500
APPRECIATION INDEX
------- -----
11-1-93 10,000 10,000
31-10-94 11,110 10,387
31-10-95 18,220 13,133
31-10-96 21,946 16,297
The chart above illustrates the growth in value of a hypothetical $10,000
investment made in the Alger Capital Appreciation Portfolio and the S&P 500
Index on November 1, 1993, the inception date of the Alger Capital Appreciation
Portfolio. Figures for the Alger Capital Appreciation Portfolio and the S&P 500
Index, an unmanaged index of common stocks, include reinvestment of dividends.
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON THROUGH OCTOBER 31, 1996
- --------------------------------------------------------------------------------
AVERAGE ANNUAL RETURN
SINCE INCEPTION
1 YEAR 11/1/93
-------------------------------------------
Alger Capital Appreciation Portfolio 19.48% 30.54%
ASSUMING REDEMPTION AT THE
END OF EACH PERIOD 14.48% 29.95%
S&P 500 Index 24.10% 17.69%
THE PORTFOLIO'S AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE PRICE AND
REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS. PAST PERFORMANCE DOES NOT GUARANTEE
FUTURE RESULTS. INVESTMENT RETURN AND PRINCIPAL WILL FLUCTUATE AND THE
PORTFOLIO'S SHARES WHEN REDEEMED MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST.
<PAGE>
-24-
THE ALGER FUND
ALGER CAPITAL APPRECIATION PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1996
Common Stocks--105.8% Shares Value
------ ------
AEROSPACE--3.4%
Boeing Company (The)+....................... 40,600 $ 3,872,225
Gulfstream Aerospace Corp.*................. 31,000 732,375
Wyman Gordon Co.*........................... 25,000 550,000
-----------
5,154,600
-----------
AGRICULTURE--0.3%
Delta and Pine Land Co...................... 12,500 450,000
-----------
APPAREL--1.1%
Designer Holdings Ltd.*..................... 30,000 573,750
Tommy Hilfiger Corporation*................. 21,000 1,092,000
-----------
1,665,750
-----------
BIO-TECHNOLOGY--2.1%
BioChem Pharma Inc.*........................ 24,600 1,048,575
CellPro Incorporated*....................... 84,000 987,000
Centocor, Inc.*............................. 36,600 1,075,125
-----------
3,110,700
-----------
CHEMICALS--2.7%
Monsanto Co................................. 103,200 4,089,300
-----------
COMMUNICATIONS--5.8%
EXCEL Communications, Inc.*................. 48,000 1,248,000
LCI International Inc.*..................... 19,000 605,625
Lucent Technologies Inc..................... 13,200 620,400
MFS Communications Co Inc.*................. 15,000 751,875
PictureTel Corp.*........................... 23,000 621,000
Telecomunicacoes
Brasileiras S.A. ADR..................... 19,200 1,430,400
Telefonica del Peru S.A. ADS................ 34,000 701,250
Univision Communications Inc. Cl. A......... 25,000 843,750
WorldCom Inc.*.............................. 76,100 1,854,936
-----------
8,677,236
-----------
COMMUNICATIONS
EQUIPMENT--15.7%
Ascend Communications, Inc.*................ 72,300 4,726,611
Cascade Communications Corp.*............... 19,300 1,401,663
Cisco Systems, Inc.*........................ 83,000 5,135,625
Glenayre Technologies Inc.*................. 53,450 1,376,338
Newbridge Networks Corp.*................... 20,000 632,500
Pairgain Technologies Inc.*................. 30,000 2,066,250
Shiva Corp.*................................ 44,600 1,828,600
Tellabs, Inc.*.............................. 74,800 6,367,350
-----------
23,534,937
-----------
COMPUTER RELATED &
BUSINESS EQUIPMENT--5.3%
Network Appliance Inc.* .................... 22,500 787,500
Sun Microsystems Inc.*...................... 36,600 2,232,600
3 Com Corp.*+............................... 60,400 4,084,550
Xerox Corp.................................. 18,000 834,750
-----------
7,939,400
-----------
COMPUTER SERVICES--1.2%
Paychex, Inc................................ 27,500 1,567,500
RMH Teleservices, Inc. ..................... 40,000 295,000
-----------
1,862,500
-----------
COMPUTER SOFTWARE--12.9%
Compuware Corp.*............................ 52,800 2,785,200
Electronics For Imaging Inc.*............... 41,500 2,988,000
HBO & Company............................... 49,600 2,982,200
Informix Corporation*....................... 135,400 3,004,255
Integrated Systems Inc.*.................... 50,100 1,352,700
Microsoft Corporation*...................... 11,400 1,564,650
Parametric Technology Corporation*.......... 32,100 1,568,886
Structural Dynamics Research Corp.*......... 75,000 1,331,250
Systemsoft Corp.*........................... 42,800 1,209,100
Wind River Systems, Inc.*................... 15,000 637,500
-----------
19,423,741
-----------
COMPUTER TECHNOLOGY--3.8%
Adaptec, Inc.*.............................. 34,600 2,106,275
Citrix Systems, Inc.*....................... 35,200 1,944,800
Kurzweil Applied Intelligence, Inc.*........ 144 540
Sterling Commerce, Inc.* ................... 56,500 1,589,063
-----------
5,640,678
-----------
CONSUMER PRODUCTS--1.2%
Colgate Palmolive Co........................ 15,500 1,426,000
Oakley, Inc.*............................... 24,000 357,000
-----------
1,783,000
-----------
DEFENSE--1.7%
Lockheed Martin Corp........................ 28,100 2,518,463
-----------
ENERGY & ENERGY
SERVICES--1.9%
Schlumberger Ltd............................ 29,300 2,904,363
-----------
FINANCIAL SERVICES--8.2%
Chase Manhattan Corp........................ 31,000 2,658,250
Citicorp.................................... 24,600 2,435,400
First Data Corporation+..................... 43,800 3,493,050
Green Tree Financial Corp................... 21,000 832,125
Money Store Inc. (The)...................... 92,200 2,374,150
Nova Corporation*........................... 25,700 558,975
-----------
12,351,950
-----------
FOOD CHAINS--.6%
Safeway Inc.*............................... 20,000 857,500
-----------
HEALTH CARE--3.9%
Access Health, Inc.*........................ 30,000 990,000
Eli Lilly & Company+........................ 25,600 1,804,800
Merck & Co., Inc............................ 25,000 1,853,125
SmithKline Beecham PLC ADS.................. 20,000 1,252,500
-----------
5,900,425
-----------
<PAGE>
-25-
THE ALGER FUND
ALGER CAPITAL APPRECIATION PORTFOLIO
SCHEDULE OF INVESTMENTS (Continued)
October 31, 1996
Common Stocks--(cont.) Shares Value
------ -----
INSURANCE--1.1%
American International
Group, Inc.+............................. 15,700 $ 1,705,413
-----------
LEISURE &
ENTERTAINMENT--3.1%
Anchor Gaming*.............................. 30,000 1,500,000
International Game Technology............... 86,000 1,816,750
Mirage Resorts, Incorporated*............... 60,000 1,320,000
-----------
4,636,750
-----------
MEDICAL DEVICES--2.9%
Heartport, Inc.*............................ 40,000 1,055,000
Hologic, Inc.*.............................. 55,500 1,262,625
Intercardia, Inc.*.......................... 2,500 57,500
Target Therapeutics, Inc.*.................. 20,000 740,000
ESC Medical Systems Ltd..................... 45,000 1,243,125
-----------
4,358,250
-----------
MEDICAL SERVICES--2.6%
ABR Information Services Inc.*.............. 20,000 1,385,000
Biopsys Medical Inc.*....................... 60,000 1,027,500
PhyCor, Inc.*............................... 47,100 1,460,100
-----------
3,872,600
-----------
METALS--.6%
Titanium Metals Corporation*................ 30,000 922,500
-----------
OIL & GAS--1.0%
Input/Output Inc.*.......................... 25,000 743,750
Tidewater Inc............................... 16,400 717,500
-----------
1,461,250
-----------
PHARMACEUTICALS--3.1%
Astra-AB-Sponsored ADS Ser A................ 52,000 2,385,500
Bristol Myers Squibb Co..................... 7,000 740,250
Pfizer Inc.................................. 18,200 1,506,050
-----------
4,631,800
-----------
POLLUTION CONTROL--1.4%
USA Waste Services, Inc.*................... 65,000 2,080,000
-----------
RESTAURANTS & LODGING--.7%
Lone Star Steakhouse & Saloon, Inc.*........ 30,300 776,438
Suburban Lodges of America, Inc.*........... 15,500 323,563
-----------
1,100,001
-----------
RETAILING--6.5%
Dollar General Corp......................... 44,500 1,234,875
Gucci Group N.V............................. 53,000 3,657,000
Home Depot, Inc............................. 38,600 2,113,350
Nine West Group Inc.*....................... 22,500 1,122,188
TJX Companies, Inc.......................... 41,500 1,660,000
-----------
9,787,413
-----------
RESEARCH--1.1%
Gartner Group Inc. Cl A*.................... 52,400 1,611,300
-----------
SEMI-CONDUCTORS--6.1%
Altera Corporation*......................... 48,700 3,019,400
Intel Corp.+................................ 41,900 4,603,762
Maxim Integrated Products, Inc.*............ 22,300 780,500
Xilinx, Inc.*............................... 25,000 818,750
-----------
9,222,412
-----------
MISCELLANEOUS--3.8%
Loewen Group Inc............................ 77,700 3,078,863
Service Corp. International................. 94,000 2,679,000
-----------
5,757,863
-----------
Total Common Stocks
(Cost $147,027,799)..................... 159,012,095
-----------
Preferred Stock--.6%
COMMUNICATIONS
Nokia Corporation, ADR
(Cost $858,564).......................... 18,200 844,025
-----------
Total Investments
(Cost $147,886,363) (a).................. 106.4% 159,856,120
Liabilities in Excess of Other Assets....... (6.4) (9,598,390)
---- ------------
Net Assets.................................. 100.0% $150,257,730
===== ============
* Non-income producing security.
+ Securities partially or fully on loan.
(a) At October 31, 1996, the net unrealized appreciation on investments, based
on cost for federal income tax purposes of $147,886,363, amounted to
$11,969,757 which consisted of aggregate gross unrealized appreciation of
$17,851,968 and aggregate gross unrealized depreciation of $5,882,211.
See Notes to Financial Statements.
<PAGE>
-26-
THE ALGER FUND
ALGER CAPITAL APPRECIATION PORTFOLIO (i)
Financial Highlights
For a share outstanding throughout the year
<TABLE>
<CAPTION>
Year Ended October 31,
-----------------------------------------------------------------
1996 1995 1994
--------------- --------------- ---------------
<S> <C> <C> <C>
Net asset value, beginning of year $ 18.62 $ 11.11 $ 10.00
------------ ------------ ------------
Net investment income (loss) (.34)(ii) (0.47)(ii) (0.47)
Net realized and unrealized gain on investments 3.88 7.98 1.58
------------ ------------ ------------
Total from investment operations 3.54 7.51 1.11
Distributions from net realized gains (.54) -- --
------------ ------------ ------------
Net asset value, end of year $ 21.62 $ 18.62 $ 11.11
============ ============ ============
Total Return (iii) 19.5% 67.6% 11.1%
============ ============ ============
Ratios and Supplemental Data:
Net assets, end of year (000's omitted) $ 150,258 $ 33,640 $ 2,369
============ ============ ============
Ratio of expenses excluding interest to
average net assets 2.44% 3.26% 4.13%
============ ============ ============
Ratio of expenses including interest to
average net assets 2.46%(iv) 3.54%(iv) 5.53%(vi)
============ ============ ============
Decrease reflected in above expense ratios
due to expense reimbursements (v) -- -- 0.85%
============ ============ ============
Ratio of net investment income (loss) to
average net assets (1.61%) (3.02%) (5.12%)
============ ============ ============
Portfolio Turnover Rate 162.37% 197.65% 231.99%
============ ============ ============
Average Commission Rate Paid $ .0647
============
Debt outstanding at end of year $ 7,700,000 -- $ 651,000
============ ============ ============
Average amount of debt outstanding during
the year $ 239,966 $ 293,153 $ 406,864
============ ============ ============
Average daily number of shares outstanding
during the year 4,852,286 543,270 191,676
============ ============ ============
Average amount of debt per share during
the year $ 0.05 $ 0.54 $ 2.12
============ ============ ============
</TABLE>
(i) Prior to March 27, 1995, the Alger Capital Appreciation Portfolio was the
Alger Leveraged AllCap Portfolio.
(ii) Amount was computed based on average shares outstanding during the year.
(iii) Does not reflect contingent deferred sales charge.
(iv) Reflects total expenses, including fees offset by earnings credits. The
expense ratio net of earnings credits would have been 2.45% and 3.43% for
the years ended October 31, 1996 and 1995, respectively.
(v) Represents expense reimbursements made pursuant to applicable state
expense limits.
(vi) Expense ratio does not reflect the effect of fees offset by earnings
credits.
See Notes to Financial Statements.
<PAGE>
-27-
THE ALGER FUND
ALGER MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS
October 31, 1996
Short-Term Corporate Principal
Notes--95.3% Amount Value
--------- -----
AUTOMOTIVE EQUIPMENT
& SERVICES--5.2%
Daimler-Benz North America Corp.,
5.55%, 1/16/97......................... $10,000,000 $ 9,882,833
Mitsubishi Motors Credit of
America, Inc.
Series C, 5.50%, 1/7/97................ 4,900,000 4,849,843
------------
14,732,676
------------
BANKS--22.2%
Banca CRT Financial Corp.,
5.35-5.40%, 1/15/97-3/27/97............ 14,000,000 13,736,417
Banco Inbursa S.A.,
5.26%, 11/5/96......................... 500,000 499,708
Bankers Trust New York Corp.,
5.35-5.38%, 2/10/97-3/12/97............ 14,500,000 14,249,473
Bank of America,
5.36%, 2/13/97......................... 11,700,000 11,518,832
Caisse Centrale Desjardins
Du Quebec,
5.48%, 12/27/96........................ 4,000,000 3,965,902
IMI Funding Corp. (USA),
5.28%, 11/25/96........................ 5,600,000 5,580,288
Societe Generale (Canada),
5.35%, 4/7/97.......................... 2,120,000 2,070,536
Strait Capital Corp.,
5.40%, 1/7/97.......................... 7,093,000 7,021,715
SunAmerica Inc.,
5.35%, 11/4/96......................... 4,700,000 4,697,905
------------
63,340,776
------------
BEVERAGES--2.1%
Anheuser-Busch Companies Inc.,
5.24%, 11/18/96(a)..................... 6,000,000 5,985,153
------------
BROKERAGE--4.7%
Merrill Lynch & Co., Inc.,
5.33-5.42%, 11/27/96-4/23/97........... 13,700,000 13,536,605
------------
CHEMICALS--2.3%
Engelhard Corp.,
5.32%, 1/15/97-1/24/97................. 6,700,000 6,621,086
------------
COMPUTER TECHNOLOGY--3.8%
CSC Enterprises,
5.32-5.37%, 11/5/96-12/2/96............ 10,900,000 10,877,160
------------
ELECTRONICS--1.9%
Toshiba International
Finance (U.K.) PLC,
5.48-5.51%, 11/14/96................... $5,400,000 5,389,266
------------
FINANCE--25.9%
BFCE US Finance Corp.,
5.31%, 1/7/97.......................... 4,800,000 4,752,564
Dynamic Funding Corp. Series B
5.34%, 12/2/96......................... 7,480,000 7,445,605
Gotham Funding Corp.,
5.32-5.40%, 12/17/96-1/15/97(a)........ 12,400,000 12,278,309
Industrial Funding Corp.,
5.30%, 11/4/96......................... 3,700,000 3,698,366
Sweden (Kingdom of),
5.58%, 1/29/97......................... 11,100,000 10,946,876
Oak Funding Corp.,
5.39%, 1/13/97(a)...................... 4,800,000 4,747,537
Progress Funding Corp., Series A,
5.45%, 1/31/97(a)...................... 3,100,000 3,057,293
Quebec (Province of),
5.52%, 12/27/96........................ 9,300,000 9,220,145
Sanwa Business Credit Corp.,
5.40, 1/7/97-1/8/97.................... 14,900,000 14,750,015
SRD Finance Inc.,
5.40%, 1/9/97.......................... 3,000,000 2,968,950
------------
73,865,660
------------
INSURANCE--1.8%
APC Funding Corp.,
5.28%, 12/3/96 ........................ 5,000,000 4,976,533
------------
LEASING--1.7%
Century International Credit Corp.,
5.50%, 1/7/97(a)....................... 5,000,000 4,948,819
------------
LEISURE & LODGING--5.1%
Accor, 5.43%, 1/7/97...................... 6,800,000 6,731,280
Walt Disney Co.,
5.27%, 11/20/96........................ 7,800,000 7,778,305
------------
14,509,585
------------
MORTGAGE COMPANIES--1.8%
Countrywide Funding Corporation,
5.26%, 12/5/96 ........................ 5,107,000 5,081,630
------------
<PAGE>
-28-
THE ALGER FUND
ALGER MONEY MARKET PORTFOLIO
SCHEDULE OF INVESTMENTS (Continued)
October 31, 1996
Short-Term Corporate Principal
Notes--(cont.) Amount Value
--------- -----
OIL--.6%
MDU Resources Group Inc.,
5.34%, 11/7/96......................... $1,800,000 $ 1,798,398
------------
RECEIVABLES COMPANIES--1.7%
Enterprise Funding Corp.,
5.28%, 12/5/96 (a)..................... 5,000,000 4,975,067
------------
REAL ESTATE--12.8%
Reliastar Mortgage Corp.,
5.29%, 12/11/96-12/19/96............... 9,300,000 9,239,695
U.S. Prime Property Inc.,
5.32%-5.35%, 11/13/96-4/22/97.......... 13,600,000 13,442,579
Yorkshire Building Society,
5.48%, 11/21/96........................ 14,000,000 13,957,378
------------
36,639,652
------------
TRADING COMPANIES--1.7%
Mitsubishi International Corp.,
5.26%, 12/2/96......................... $5,000,000 4,977,353
------------
Total Short-Term Corporate Notes
(Cost $272,255,419)..................... 272,255,419
------------
Certificates of Deposit--4.7%
Banco Espirito Santo E Commercial,
5.41-5.75%, 1/28/97-2/10/97
(Cost $13,400,000)..................... 13,400,000 13,400,000
------------
U.S. GOVERNMENT
AGENCY OBLIGATIONS--2.8%
Federal Farm Credit Bank Corp.,
4.95%, 3/3/97 (Cost $7,995,637)........ 8,000,000 7,995,637
------------
Total Investments
(Cost $293,651,056) (b)................ 102.8% 293,651,056
Liabilities In Excess of
Other Assets........................... (2.8) (7,948,955)
------ ------------
Net Assets................................ 100.0% $285,702,101
====== ============
(a) Pursuant to Securities and Exchange Commission Rule 144A, these securities
may be sold prior to their maturity only to qualified institutional
buyers.
(b) At October 31, 1996, the cost of investments for federal income tax
purposes was the same as the cost for financial reporting purposes.
See Notes to Financial Statements.
<PAGE>
-29-
THE ALGER FUND
ALGER MONEY MARKET PORTFOLIO
Financial Highlights
For a share outstanding throughout the year
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-----------------------------------------------------------------------------
1996 1995 1994 1993 1992
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year........... $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
-------- -------- -------- -------- --------
Net investment income........................ .0521 .0573 .0374 .0304 .0424
-------- -------- -------- -------- --------
Dividends from net investment
income.................................... (.0521) (.0573) (.0374) (.0304) (.0424)
Net asset value, end of year................. $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000 $ 1.0000
======== ======== ======== ======== ========
Total Return................................. 5.3% 5.9% 3.8% 3.1% 4.3%
======== ======== ======== ======== ========
Ratios and Supplemental Data:
Net assets, end of year
(000's omitted)......................... $285,702 $185,822 $163,170 $126,567 $135,288
======== ======== ======== ======== ========
Ratio of expenses to average
net assets.............................. .41%(i) .29%(i) .27%(ii) .41%(ii) .25%(ii)
======== ======== ======== ======== ========
Decrease reflected in above
expense ratios due to
expense reimbursements
and management fee
waivers-Note 3(a)....................... .38% .50% .50% .50% .60%
======== ======== ======== ======== ========
Ratio of net investment income
to average net assets................... 5.18% 5.73% 3.78% 3.04% 4.30%
======== ======== ======== ======== ========
</TABLE>
(i) Reflects total expenses, including fees offset by earnings credits. The
expense ratio net of earnings credits would have been .40% and .27% for
the years ended October 31, 1996 and 1995, respectively.
(ii) Expense ratios for the years ended prior to October 31, 1995, do not
reflect the effect of fees offset by earnings credits, if any.
See Notes to Financial Statements.
<PAGE>
-30-
THE ALGER FUND
STATEMENTS OF ASSETS AND LIABILITIES (in thousands, except per share amounts)
October 31, 1996
<TABLE>
<CAPTION>
SMALL CAPITAL
CAPITAL- MIDCAP APPRE- MONEY
GROWTH IZATION BALANCED GROWTH CIATION MARKET
ASSETS: PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Investments in securities, at value
(identified cost*)-see accompany-
ing schedules of investments ......... $261,912 $549,488 $13,252 $126,177 $159,856 $293,651
Cash .................................... 78 104 203 466 81 75
Receivable for investment
securities sold....................... 2,758 8,498 65 150 4,239 --
Receivable for shares of beneficial
interest sold........................ 2,816 8,021 25 962 1,543 1,038
Dividends and interest
receivable............................ 66 23 51 10 26 104
Prepaid expenses and other assets........ 21 25 11 14 3 49
------- ------- ------ ------- ------- -------
Total Assets......................... 267,651 566,159 13,607 127,779 165,748 294,917
------- ------- ------ ------- ------- -------
LIABILITIES:
Payable for investment
securities purchased.................. 663 9,648 -- 1,613 7,168 --
Bank loan payable........................ -- -- -- -- 7,700 --
Payable for shares of beneficial
interest redeemed..................... 148 1,359 61 155 193 8,831
Interest payable......................... -- -- -- -- 12 --
Accrued investment management fees....... 169 410 9 86 110 124
Accrued distribution fees ............... 169 361 9 81 97 --
Accrued shareholder servicing fees....... 56 120 3 27 34 --
Dividends payable-Note 2(c).............. -- -- -- -- -- 29
Accrued expenses......................... 239 389 33 131 176 231
------- ------- ------ ------- ------- -------
Total Liabilities.................... 1,444 12,287 115 2,093 15,490 9,215
------- ------- ------ ------- ------- -------
NET ASSETS .............................. $266,207 $553,872 $13,492 $125,686 $150,258 $285,702
======== ======== ======= ======== ======== ========
Net Assets Consist of:
Paid-in capital....................... $220,489 $386,903 $11,964 $110,330 $137,604 $285,766
Undistributed net investment
income (accumulated loss)........... (4,263) (25,830) (11) (2,014) (2,004) --
Undistributed net realized
gain (accumulated loss)............. 10,159 105,160 285 4,122 2,688 (64)
Net unrealized appreciation............ 39,822 87,639 1,254 13,248 11,970 --
------- ------- ------ ------- ------- -------
NET ASSETS .............................. $266,207 $553,872 $13,492 $125,686 $150,258 $285,702
======== ======== ======= ======== ======== ========
Shares of beneficial interest
outstanding-Note 7.................... 28,062 51,004 950 6,660 6,949 285,766
------- ------- ------ ------- ------- -------
NET ASSET VALUE PER SHARE................ $9.49 $10.86 $14.21 $18.87 $21.62 $1.00
======== ======== ======= ======== ======== ========
*Identified cost......................... $222,090 $461,848 $11,998 $112,930 $147,886 $293,651
======== ======== ======= ======== ======== ========
</TABLE>
See Notes to Financial Statements.
<PAGE>
-31-
THE ALGER FUND
STATEMENTS OF OPERATIONS (in thousands)
For the year ended October 31, 1996
<TABLE>
<CAPTION>
Small Capital
Capital- MidCap Appre- Money
Growth ization Balanced Growth ciation Market
INVESTMENT INCOME: Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
- ------------------ --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Income:
Dividends ................................. $ 1,332 $ 338 $ 38 $ 171 $ 389 $ --
Interest .................................. 1,381 2,500 307 667 459 13,553
------ ------ ------ ----- ------ -------
Total Income............................... 2,713 2,838 345 838 848 13,553
Expenses:
Management fees-Note 3(a).................. 1,654 4,478 82 721 862 1,215
Distribution fees-Note 3(b)................ 1,654 3,952 82 676 760 --
Shareholder servicing fees-Note 3(f)....... 551 1,317 27 225 253 --
Interest on line of credit utilized-Note 5. -- -- -- -- 17 --
Custodian fees............................. 30 103 10 22 28 32
Transfer agent fees and
expenses-Note 3(e)...................... 532 1,086 44 288 435 525
Professional fees.......................... 29 40 17 28 17 17
Trustees' fees............................. 5 5 5 5 5 5
Registration fees.......................... 81 107 22 54 90 78
Miscellaneous.............................. 54 126 7 23 25 47
------ ------ ------ ----- ------ -------
4,590 11,214 296 2,042 2,492 1,919
Less, earnings credits-Note 2(e)........... (20) (17) (2) (7) (13) (22)
Less, fee waivers-Note 3(a)................ -- -- -- -- -- (930)
------ ------ ------ ----- ------ -------
Total Net Expenses......................... 4,570 11,197 294 2,035 2,479 967
------ ------ ------ ----- ------ -------
NET INVESTMENT
INCOME (LOSS).............................. (1,857) (8,359) 51 (1,197) (1,631) 12,586
------ ------ ------ ----- ------ -------
REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS
Net realized gain (loss) on investments...... 8,966 94,157 280 3,375 2,538 (14)
Net change in unrealized appreciation
on investments............................. 10,513 (69,790) 399 3,534 10,813 --
------ ------ ------ ----- ------ ------
Net realized and unrealized
gain (loss) on investments................. 19,479 24,367 679 6,909 13,351 (14)
------ ------ ------ ----- ------ ------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS............... $17,622 $ 16,008 $ 730 $5,712 $11,720 $12,572
======= ======== ====== ====== ======= =======
</TABLE>
See Notes to Financial Statements.
<PAGE>
-32-
THE ALGER FUND
ALGER CAPITAL APPRECIATION PORTFOLIO STATEMENT OF CASH FLOWS (in thousands)
For the year ended October 31, 1996
<TABLE>
<CAPTION>
Increase (decrease) in cash:
Cash flows from operating activities:
<S> <C>
Dividends received ......................................................... $ 364
Interest received .......................................................... 460
Interest paid .............................................................. (9)
Operating expenses paid .................................................... (2,141)
Purchase of investment securities .......................................... (261,876)
Maturity of short-term securities, net ..................................... 1,548
Proceeds from disposition of investment securities ......................... 149,863
Other ...................................................................... 2
---------
Net cash used in operating activities .................................. (111,789)
---------
Cash flows from financing activities:
Dividends paid .......................................................... (1,331)
Proceeds from shares sold and dividends reinvested ......................... 187,720
Payments on shares redeemed ................................................ (82,914)
Increase in bank borrowings ................................................ 7,700
---------
Net cash provided by financing activities .............................. 111,175
Net decrease in cash ........................................................... (614)
Cash--beginning of year ........................................................ 695
---------
Cash--end of year .............................................................. $ 81
=========
Reconciliation of net increase in net assets to net cash used in operating
activities:
Net increase in net assets resulting from operations .................... $ 11,720
Increase in investments ................................................. (112,119)
Increase in interest and dividends receivable ........................... (25)
Increase in receivable for investment securities sold ................... (3,718)
Increase in payable for investment securities purchased ................. 5,373
Net realized gain ....................................................... (2,538)
Net increase in unrealized appreciation ................................. (10,813)
Increase in accrued expenses and other liabilities ...................... 329
Net decrease in other assets ............................................ 2
---------
Net cash used in operating activities ................................... $(111,789)
=========
</TABLE>
See Notes to Financial Statements.
<PAGE>
-33-
THE ALGER FUND
STATEMENTS OF CHANGES IN NET ASSETS (in thousands)
For the year ended October 31, 1996
<TABLE>
<CAPTION>
SMALL CAPITAL
CAPITAL- MIDCAP APPRE- MONEY
GROWTH IZATION BALANCED GROWTH CIATION MARKET
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net investment income (loss)............ $ (1,857) $ (8,359) $ 51 $ (1,197) $ (1,631) $ 12,586
Net realized gain (loss)
on investments....................... 8,966 94,157 280 3,375 2,538 (14)
Net change in unrealized appreciation
on investments....................... 10,513 (69,790) 399 3,534 10,813 --
-------- -------- ------- -------- -------- --------
Net increase in net assets
resulting from operations........ 17,622 16,008 730 5,712 11,720 12,572
Dividends to shareholders:
Net investment income................. -- -- (7) -- -- (12,586)
Net realized gains.................... (10,925) (26,253) (125) (3,809) (1,331) --
Net increase from shares of beneficial
interest transactions-Note 7......... 105,226 100,399 6,680 69,767 106,229 99,894
-------- -------- ------- -------- -------- --------
Total increase.................... 111,923 90,154 7,278 71,670 116,618 99,880
Net Assets:
Beginning of year.................... 154,284 463,718 6,214 54,016 33,640 185,822
======== ======== ======= ======== ======== ========
End of year........................... $266,207 $553,872 $13,492 $125,686 $150,258 $285,702
======== ======== ======= ======== ======== ========
Undistributed net investment
income (accumulated loss)............ $ (4,263) $(25,830) $ (11) $ (2,014) $ (2,004) $ --
======== ======== ======= ======== ======== ========
</TABLE>
THE ALGER FUND
STATEMENTS OF CHANGES IN NET ASSETS (in thousands)
For the year ended October 31, 1995
<TABLE>
<CAPTION>
SMALL CAPITAL
CAPITAL- MIDCAP APPRE- MONEY
GROWTH IZATION BALANCED GROWTH CIATION MARKET
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO* PORTFOLIO
--------- --------- --------- --------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net investment income (loss).............. $ (1,047) $ (6,433) $ (5) $ (522) $ (273) $ 9,507
Net realized gain (loss)
on investments......................... 11,826 32,765 215 4,286 1,551 (20)
Net change in unrealized appreciation
on investments......................... 22,002 114,070 644 8,407 826 --
-------- -------- ------- -------- -------- --------
Net increase in net assets resulting
from operations.................... 32,781 140,402 854 12,171 2,104 9,487
Dividends to shareholders:
Net investment income................... -- -- -- -- -- (9,507)
Net realized gains...................... (1,768) (170) -- -- -- --
Net increase from shares of beneficial
interest transactions-Note 7........... 46,881 28,596 2,287 23,329 29,167 22,672
-------- -------- ------- -------- -------- --------
Total increase...................... 77,894 168,828 3,141 35,500 31,271 22,652
Net Assets:
Beginning of year...................... 76,390 294,890 3,073 18,516 2,369 163,170
-------- -------- ------- -------- -------- --------
End of year............................. $154,284 $463,718 $ 6,214 $ 54,016 $ 33,640 $185,822
======== ======== ======= ======== ======== ========
Undistributed net investment
income (accumulated loss).............. $ (2,406) $(17,471) $ (55) $ (817) $ (373) $ --
======== ======== ======= ======== ======== ========
</TABLE>
* Prior to March 27, 1995, the Alger Capital Appreciation Portfolio was the
Alger Leveraged All Cap Portfolio.
See Notes to Financial Statements.
<PAGE>
-34-
THE ALGER FUND
NOTES TO FINANCIAL STATEMENTS
NOTE 1- General:
The Alger Fund (the "Fund") is a diversified, open-end registered
investment company organized as an unincorporated business trust under the laws
of the Commonwealth of Massachusetts. The Fund operates as a series company
currently issuing six classes of shares of beneficial interest--Growth
Portfolio, Small Capitalization Portfolio, Balanced Portfolio, MidCap Growth
Portfolio, Capital Appreciation Portfolio and Money Market Portfolio (the
"Portfolios").
NOTE 2- Significant Accounting Policies:
(a) INVESTMENT VALUATION: Investments of the Portfolios, other than the Money
Market Portfolio, are valued on each day the New York Stock Exchange (the
"NYSE") is open as of the close of the NYSE (currently 4:00 p.m. Eastern time).
Listed and unlisted securities for which such information is regularly reported
are valued at the last reported sales price or, in the absence of reported
sales, at the mean between the bid and asked price or, in the absence of a
recent bid or asked price, the equivalent as obtained from one or more of the
major market makers for the securities to be valued.
Securities for which market quotations are not readily available are valued
at fair value, as determined in good faith pursuant to procedures established by
the Board of Trustees.
The investments of the Money Market Portfolio, and short-term securities
held by the other Portfolios having a remaining maturity of sixty days or less,
are valued at amortized cost which approximates market value.
(b) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are
recorded on a trade date basis. Realized gains and losses from securities
transactions are recorded on the identified cost basis. Dividend income is
recognized on the ex-dividend date and interest income is recognized on the
accrual basis.
(c) DIVIDENDS TO SHAREHOLDERS: Dividends payable to shareholders are recorded on
the ex-dividend date.
The Money Market Portfolio declares dividends daily from net investment
income; such dividends are paid monthly. The dividends from net investment
income of the other Portfolios are declared and paid annually.
With respect to all Portfolios, dividends from net realized gains, offset
by any loss carryforward, are declared and paid annually after the end of the
fiscal year in which earned.
(d) FEDERAL INCOME TAXES: It is each Portfolio's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders. To
the extent a Portfolio maintains such compliance, no federal income tax
provision is required. Each Portfolio is treated as a separate entity for the
purpose of determining such compliance. At October 31, 1996, the net capital
loss carryforwards of the Money Market Portfolio which may be used to offset
future net realized gains were approximately $62,000, and expire between 1997
and 2004.
(e) EXPENSES: The Fund accounts separately for the assets, liabilities and
operations of each Portfolio. Expenses directly attributable to each Portfolio
are charged to that Portfolio's operations; expenses which are applicable to all
Portfolios are allocated among them. The Fund's custodian fees have been reduced
as a result of earnings credits received on overnight cash balances. Balances
left on deposit with the custodian preclude their use elsewhere
(f) OTHER: These financial statements have been prepared using estimates and
assumptions that affect the reported amounts therein. Actual results may differ
from those estimates.
<PAGE>
-35-
THE ALGER FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
NOTE 3- Investment Management Fees and Other Transactions with Affiliates:
(a) Investment Management Fees: Fees incurred by each Portfolio, pursuant to the
provisions of Investment Management Agreements (the "Agreements") with Fred
Alger Management, Inc. ("Alger Management"), are payable monthly and computed
based on the value of the average daily net assets of each Portfolio at the
following annual rates:
Growth Portfolio............................................ .75%
Small Capitalization Portfolio.............................. .85
Balanced Portfolio.......................................... .75
MidCap Growth Portfolio..................................... .80
Capital Appreciation Portfolio.............................. .85
Money Market Portfolio...................................... .50
With respect to the Money Market Portfolio, Alger Management undertook to
waive its management fee of $929,673 for the period from November 1, 1995
through August 21, 1996. Subsequent to August 21, 1996, Alger Management
discontinued its voluntary waiver of the management fee.
(b) DISTRIBUTION FEES: The Fund has adopted an Amended and Restated Plan of
Distribution (the "Plan") pursuant to which each Portfolio, other than the Money
Market Portfolio, has agreed to reimburse Fred Alger & Company, Incorporated,
the Fund's distributor (the "Distributor"), for costs and expenses incurred by
the Distributor in connection with advertising and marketing shares of the
Fund's Portfolios. The distribution fee is not to exceed .75% of the average
daily net assets of each of the designated Portfolios. If in any month, the
costs incurred by the Distributor are in excess of the distribution fees charged
to the Portfolios, the excess may be carried forward, with interest, and sought
to be reimbursed in future periods. As of October 31, 1996, such excess carried
forward was approximately $7,877,000, $16,225,000, $282,000, $3,069,000 and
$2,130,000 for the Growth Portfolio, the Small Capitalization Portfolio, the
Balanced Portfolio, the MidCap Growth Portfolio, and the Capital Appreciation
Portfolio, respectively. Contingent deferred sales charges imposed on
redemptions will reduce the amount of distribution expenses for which
reimbursement may be sought. See Note 3(c) below. The Distributor has entered
into arrangements with broker/dealers for the sale of shares of certain of the
Fund's Portfolios. In connection with these arrangements, the Distributor has
agreed to pay these broker/dealers, with respect to the shares sold, from its
distribution fee received from the Portfolios.
(c) CONTINGENT DEFERRED SALES CHARGE: A contingent deferred sales charge is
imposed if an investor redeems an amount which causes the current value of the
investor's account of any Portfolio to fall below the total dollar amount of
investments made during the past six years, except that no sales charge is
imposed on the amount of the investment redeemed which is attributable to
reinvested dividends or capital gain distributions or is derived from increases
in the value of the investor's account above the amount invested during the past
six years. The amount of the charge is 5% of the purchase payment for
redemptions made in the first year. For redemptions made in the second, third,
fourth, fifth and sixth years, the amount of the charge is 4%, 3%, 2%, 2% and
1%, respectively. In addition, no charge is imposed on the redemption of shares
of the Money Market Portfolio, except for redemptions of shares acquired in
exchange for shares of the other Portfolios. Any sales charges imposed on
redemptions are paid to the Distributor. During the year ended October 31, 1996,
such charges amounted to approximately $2,188,000.
(d) BROKERAGE COMMISSIONS: During the year ended October 31, 1996, the Growth
Portfolio, the Small Capitalization Portfolio, the Balanced Portfolio, the
MidCap Growth Portfolio and the Capital Appreciation Portfolio paid the
Distributor commissions of $429,337, $693,735, $14,435, $195,922 and $220,833,
respectively, in connection with securities transactions.
<PAGE>
-36-
THE ALGER FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
(e) TRANSFER AGENT FEES: Alger Shareholder Services, Inc. ("Alger Services"), an
affiliate of Alger Management, serves as transfer agent for the Fund. During the
year ended October 31, 1996, the Growth Portfolio, the Small Capitalization
Portfolio, the Balanced Portfolio, the MidCap Growth Portfolio, the Capital
Appreciation Portfolio and the Money Market Portfolio incurred fees of $412,800,
$841,460, $34,285, $239,547, $363,480 and $336,630, respectively, for services
provided by Alger Services. In addition, during the year ended October 31, 1996,
the Growth Portfolio, the Small Capitalization Portfolio, the Balanced
Portfolio, the MidCap Growth Portfolio, the Capital Appreciation Portfolio and
the Money Market Portfolio reimbursed Alger Services $119,220, $244,345, $9,784,
$48,865, $71,095 and $187,970, respectively, for transfer agent related expenses
paid by Alger Services on behalf of the Portfolios.
(f) SHAREHOLDER SERVICING FEES: The Fund has entered into a shareholder
servicing agreement with the Distributor whereby the Distributor provides each
Portfolio, other than the Money Market Portfolio, with ongoing servicing of
shareholder accounts. As compensation for such services, each designated
Portfolio pays the Distributor a monthly fee at an annual rate equal to .25% of
the Portfolios' average daily net assets.
(g) OTHER TRANSACTIONS WITH AFFILIATES: Certain trustees and officers of the
Fund are directors and officers of Alger Management, the Distributor and Alger
Services. At October 31, 1996, Alger Management and its affiliates owned 779,536
shares, 753,334 shares, 103,418 shares, 230,084 shares, 102,899 shares and
740,543 shares of the Growth Portfolio, the Small Capitalization Portfolio, the
Balanced Portfolio, the MidCap Growth Portfolio, the Capital Appreciation
Portfolio and the Money Market Portfolio, respectively.
NOTE 4- Securities Transactions:
The following summarizes the securities transactions by the Fund, other
than short-term securities, for the year ended October 31, 1996:
PURCHASES SALES
--------- -----
Growth Portfolio.................. $ 277,632,501 $ 186,474,658
Small Capitalization
Portfolio....................... 800,246,870 741,942,811
Balanced Portfolio................ 12,730,192 7,689,809
MidCap Growth
Portfolio....................... 151,773,158 89,626,920
Capital Appreciation
Portfolio....................... 267,248,920 153,582,680
NOTE 5- Short-Term Borrowings:
The Capital Appreciation Portfolio has a line of credit with a bank whereby
it may borrow up to 1/3 of its assets, as defined, up to a maximum of
$20,000,000. Such borrowings have a variable interest rate and are payable on
demand. For the year ended October 31, 1996, the Portfolio had borrowings which
averaged $239,966 at a weighted average interest rate of 6.97%.
NOTE 6- Subsequent Event:
Subsequent to year end, the Fund, subject to approval of the Board of
Trustees, intends to offer a second class of shares for each Portfolio of the
Fund, excluding the Money Market Portfolio. The new class of shares ("Class A
shares") will differ from the current class primarily in the manner fees are
charged. The Class A shares will be not be subject to either the contingent
deferred sales charge or the distribution fee of the Plan but will, however, be
subject to an initial sales charge at the time of purchase.
<PAGE>
-37-
THE ALGER FUND
NOTES TO FINANCIAL STATEMENTS (Continued)
NOTE 7- Share Capital:
The Fund has an unlimited number of authorized shares of beneficial interest of
$.001 par value which were divided into six different classes of shares during
the year ended October 31, 1996. Transactions of shares of beneficial interest
were as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED FOR THE YEAR ENDED
OCTOBER 31, 1996 OCTOBER 31, 1995
SHARES AMOUNT SHARES AMOUNT
------ ------ ------ ------
<S> <C> <C> <C> <C>
Alger Growth Portfolio*
Shares sold.......................... 20,439,840 $185,976,149 14,201,363 $ 76,768,669
Dividends reinvested................. 1,233,917 10,587,010 266,844 1,726,486
------------ ------------ ------------ ------------
21,673,757 196,563,159 14,468,207 78,495,155
Shares redeemed...................... (10,053,996) (91,337,193) (1,678,400) (31,613,563)
------------ ------------ ------------ ------------
Net increase......................... 11,619,761 $105,225,966 12,789,807 $ 46,881,592
=========== =========== =========== ============
Alger Small Capitalization Portfolio*
Shares sold.......................... 65,877,346 $715,329,513 42,344,546 $322,359,498
Dividends reinvested................. 2,431,612 25,264,448 22,836 161,233
------------ ------------ ------------ ------------
68,308,958 740,593,961 42,367,382 322,520,731
Shares redeemed...................... (58,979,523) (640,194,617) (13,590,168) (293,925,307)
------------ ------------ ------------ ------------
Net increase......................... 9,329,435 $100,399,344 28,777,214 $ 28,595,424
=========== =========== =========== ============
Alger Balanced Portfolio
Shares sold.......................... 1,054,356 $ 14,459,376 274,506 $ 3,523,634
Dividends reinvested................. 9,599 129,105 -- --
------------ ------------ ------------ ------------
1,063,955 14,588,481 274,506 3,523,634
Shares redeemed...................... (571,454) (7,908,926) (105,829) (1,237,116)
------------ ------------ ------------ ------------
Net increase......................... 492,501 $ 6,679,555 168,677 $ 2,286,518
=========== ============ =========== ============
Alger MidCap Growth Portfolio
Shares sold.......................... 5,967,864 $109,772,851 2,932,971 $ 47,462,566
Dividends reinvested................. 208,813 3,587,405 -- --
------------ ------------ ------------ ------------
6,176,677 113,360,256 2,932,971 47,462,566
Shares redeemed...................... (2,369,463) (43,593,307) (1,530,303) (24,133,228)
------------ ------------ ------------ ------------
Net increase......................... 3,807,214 $ 69,766,949 1,402,668 $ 23,329,338
=========== ============ =========== ============
Alger Capital Appreciation Portfolio
Shares sold.......................... 9,017,193 $187,170,688 2,155,985 $ 38,975,452
Dividends reinvested................. 69,287 1,293,585 -- --
------------ ------------ ------------ ------------
9,086,480 188,464,273 2,155,985 38,975,452
Shares redeemed...................... (3,944,113) (82,235,369) (562,915) (9,808,970)
Net increase......................... 5,142,367 $106,228,904 1,593,070 $ 29,166,482
=========== =========== =========== ============
Alger Money Market Portfolio
Shares sold.......................... 903,938,157 $903,938,157 354,232,048 $354,232,048
Dividends reinvested................. 11,911,938 11,911,938 9,136,546 9,136,546
------------ ------------ ------------ ------------
915,850,095 915,850,095 363,368,594 363,368,594
Shares redeemed...................... (815,956,070) (815,956,070) (340,696,846) (340,696,846)
------------ ------------ ------------ ------------
Net increase......................... 99,894,025 $ 99,894,025 22,671,748 $22,671,748
=========== ============= ============ ===========
</TABLE>
* For the year ended October 31, 1995, the number of shares were adjusted to
reflect the effect of a 3 for 1 stock split which occurred on September 27,
1995.
<PAGE>
-38-
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and
Board of Trustees of The Alger Fund:
We have audited the accompanying statements of assets and liabilities,
including the schedules of investments, of The Alger Fund (a Massachusetts
business trust comprising, respectively, the Growth Portfolio, Small
Capitalization Portfolio, Balanced Portfolio, MidCap Growth Portfolio, Capital
Appreciation Portfolio and Money Market Portfolio) as of October 31, 1996, and
the related statements of operations and cash flows for the year then ended, the
statements of changes in net assets for each of the two years in the period then
ended and the financial highlights for each of the five years in the period then
ended. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1996, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
each of the respective portfolios constituting The Alger Fund as of October 31,
1996, the results of their operations and cash flows for the year then ended,
the changes in their net assets for each of the two years in the period then
ended, and the financial highlights for each of the five years in the period
then ended in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
New York, New York
December 4, 1996
