N-CSR 1 c34181_ncsr.txt ------------------------ OMB APPROVAL ------------------------ OMB Number: 3235-0570 Expires: Nov. 30, 2005 Estimated average burden hours per response: 5.0 ------------------------ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-7986 The Alger Institutional Funds (Exact name of registrant as specified in charter) 111 Fifth Avenue New York, New York 10003 (Address of principal executive offices) (Zip code) Mr. Frederick A. Blum Fred Alger Management, Inc. 111 Fifth Avenue New York, New York 10003 (Name and address of agent for service) Registrant's telephone number, including area code: 212-806-8800 Date of fiscal year end: October 31 Date of reporting period: October 31, 2004 ITEM 1: REPORT(S) TO STOCKHOLDERS. THE ALGER INSTITUTIONAL FUNDS (FORMERLY THE ALGER INSTITUTIONAL FUND) ALGER LARGECAP GROWTH INSTITUTIONAL FUND ALGER SMALLCAP GROWTH INSTITUTIONAL FUND ALGER MIDCAP GROWTH INSTITUTIONAL FUND ALGER CAPITAL APPRECIATION INSTITUTIONAL FUND ALGER BALANCED INSTITUTIONAL FUND ALGER SOCIALLY RESPONSIBLE GROWTH INSTITUTIONAL FUND ANNUAL REPORT OCTOBER 31, 2004 [LOGO] TABLE OF CONTENTS THE ALGER FUNDS Letter to Our Shareholders............................................... 1 Shareholder Expense Example.............................................. 5 Portfolio Summary........................................................ 7 Fund Highlights and Schedules of Investments............................. 8 Financial Highlights..................................................... 40 Statements of Assets and Liabilities..................................... 44 Statements of Operations................................................. 46 Statements of Changes in Net Assets...................................... 48 Notes to Financial Statements............................................ 50 Report of Independent Registered Public Accounting Firm.................. 61 Trustees and Officers of the Funds....................................... 62 Tax Information.......................................................... 65 Dear Shareholders, December 6, 2004 THE YEAR IN REVIEW It was an unusual year for investing. Corporate profit growth has rarely been better, and both the U.S. and global economies expanded at a steady, stable clip with very low inflation for most of the year. But a tight presidential race, war in Iraq, rising energy and commodity prices, and continued investor skepticism kept the markets muted until November. The fiscal year began on a positive note, and through March, the markets responded positively to strong manufacturing activity and growing consumer confidence. In April the mood started to shift. Energy prices were on the rise, economic growth led to speculation (correct as it turned out) that the Fed would soon raise interest rates, and the situation in Iraq was not improving. Perhaps just as unsettling to the markets, job growth lagged the broader economic recovery. As a result, the markets retreated from their March peak and progressively moved lower until August. By autumn, manufacturing activity and consumer spending had slowed. The price of oil continued to rise and the Fed increased the short-term rate from 1.00% to 1.75% by fiscal year end (October 31, 2004). The close presidential race generated passion but also created uncertainty, and the markets remained range-bound until election day. It may be a cliche, but investors truly dislike uncertainty, and the markets only moved up significantly after the election was over. As a result, for the 12 months ended October 31, 2004, the equity markets experienced modest gains with the Dow gaining 4.46%, the Nasdaq up 2.68% and the S&P 500 up 9.42%. The yield on the U.S. Treasury 10-year note was 4.05% on October 31, compared to 4.30% a year earlier. PORTFOLIO MATTERS Alger SmallCap Growth Institutional Fund The Alger SmallCap Growth Institutional Fund gained 6.42% for the year ended October 31, 2004 while the Russell 2000 Growth Index returned 5.54%. Our holdings in the health care sector significantly outperformed the benchmark. Intuitive Surgical, a leader in surgical robotics, was among the top-performing holdings. Other top health care holdings included Immucor, which develops blood diagnostics, and Tularik Inc., whose primary focus is on oral drugs that use gene regulation to fight cancer, immune disorders and metabolic diseases. Dade Behring Holdings, which makes diagnostic testing kits, also contributed to the sector's positive performance. Our holdings in the financial sector outperformed the benchmark with the help of First Marblehead Corp., which provides services for student loan originators. Top-performing energy holdings included oil and natural gas exploration and production company Tom Brown, Inc. and drilling equipment maker Varco International. Although our holdings in the industrials sector did quite well, we underperformed the benchmark. The Fund also suffered from a number of underperforming stocks in the information technology sector including Fairchild Semiconductor, Intelligroup, Inc. and Chordiant Software. -2- Alger MidCap Growth Institutional Fund For the year ended October 31, 2004, the Alger MidCap Growth Institutional Fund posted a return of 4.06%, while the Russell Midcap Growth Index increased 8.77%. Holdings in the consumer discretionary sector significantly underperformed the benchmark. The Fund suffered from DVD rental service Netflix, which felt the effect of increased competition and was forced to lower its subscription price. Sharper Image Corporation also detracted from Fund performance. However, XM Satellite Radio had an exceptional year and was a top contributor. Our technology holdings were down with disappointing returns from Teradyne, which develops semiconductor testing equipment, and Novellus Systems, a manufacturer of semiconductor production equipment. Health care stocks did quite well and outperformed the benchmark. Top performers included pharmaceutical firms Elan Corporation and Sepracor. Industrial sector holdings significantly outperformed the benchmark with strong returns from defense communications equipment supplier L-3 and freight shipper Yellow Roadway. Alger LargeCap Growth Institutional Fund The Alger LargeCap Growth Institutional Fund gained 1.40% for the fiscal year ended October 31, 2004, compared with a gain of 3.39% for the Russell 1000 Growth Index. Information technology holdings averaged above market weight and underperformed the benchmark. The semiconductor and software industries performed poorly, notably Applied Materials, a developer of semiconductor production equipment, and Veritas, a provider of data management software. The exception was Google, which was the top-performing holding in the Fund. In the consumer discretionary sector, we were above market weight at 22% of the Fund and we outperformed the benchmark, with Starwood Hotels and Target two of the top contributors. Media companies also performed well with the highest returns coming from XM Satellite Radio. In Internet retail, online auctioneer eBay was a top performer. A notable exception was online DVD rental service Netflix, which was hit hard after lowering its subscription price due to increased competition. In health care, we were below market weight and performed poorly. Our biotech holdings were particularly weak, with losses in ImClone, ICOS, and Millennium Pharmaceuticals. In financials, we were just below market weight and significantly outperformed the benchmark with a strong showing from investment management firms T. Rowe Price and Affiliated Managers Group. Alger Balanced Institutional Fund For the year ended October 31, 2004, the Alger Balanced Institutional Fund returned 1.27% while the Russell 1000 Growth Index returned 3.39% and the Lehman Brothers Government/Credit Bond Index rose 5.59%. Information technology stocks represented approximately a third of the equity portion of the portfolio. We significantly underperformed the benchmark in the health care sector because of our holdings in ImClone Systems and Millennium Pharmaceuticals. In consumer discretionary we were on par with the Russell benchmark. However, eBay's solid performance was not enough to offset the loss sustained by our position in Netflix. Although our holdings -3- in industrials were below market weight, the Fund outperformed the benchmark in this sector largely due to Tyco International. The fixed-income portion of the portfolio benefited from its overweight in corporate bonds. As the yield curve flattened, the Fund's overweighting in longer-dated Treasuries also added significantly to returns. The Fund was able to capitalize not only on shrinking credit spreads, but falling long-term interest rates. Alger Socially Responsible Growth Institutional Fund The Alger Socially Responsible Growth Institutional Fund gained 0.30% for the year ended October 31, 2004 while the Russell 3000 Growth Index returned 3.53% In consumer discretionary holdings we were above market weight and slightly underperformed the benchmark. Contributors to performance were Sirius Satellite Radio and eBay, both of which had an impressive year. The exception here was online DVD rental service Netflix, which detracted from overall performance. Although we were underweight in the financials sector, we outperformed the benchmark due to First Marblehead's strong showing. While we fared better than the benchmark in the information technology sector, our holdings were still down for the year. Semiconductor stocks were hit hardest, notably Kulicke & Soffa Industries, Novellus Systems, and Applied Materials. In software, Red Hat and Veritas also took big hits. Research in Motion Ltd., the creator of the widely-used, handheld Blackberry communication product, was an exception. Alger Capital Appreciation Institutional Fund For the fiscal year ended October 31, 2004, the Alger Capital Appreciation Institutional Fund lost .09% compared with a gain of 3.53% for the Russell 3000 Growth Index. Much of the underperformance was the result of being heavily overweighted in information technology. While we fared better than the benchmark in the information technology sector, our holdings were still down for the year. Semiconductor stocks were hit hardest, notably Kulicke & Soffa Industries, Novellus Systems, and Applied Materials. In software, Red Hat and Veritas also took big hits. Research in Motion Ltd., the creator of the widely-used handheld Blackberry communication product, was an exception. Our holdings in consumer discretionary did better, and we were above market weight. Satellite radio companies XM Satellite and Sirius both had an impressive year, and online retailer eBay was among the top performers in the Fund. The exception here was online DVD rental service Netflix, which detracted from overall performance. LOOKING AHEAD For the first time in many years, we believe that the market is no longer gripped by the irrational exuberance of the late 1990s or the irrational pessimism of the first years of the new millennium. Instead, we think that this market will reward or penalize companies based on how well those companies perform. As a result, heading into 2005, we expect to see steady and rational gains with less volatility than in past years. In light of impressive corporate earnings growth and low interest rates, we believe -4- that much of the market is undervalued, and that companies achieving solid, double-digit earnings should command better prices in the year ahead. At the same time, employment and wage gains are likely to be less impressive than corporate profit growth. Productivity remains high by historic averages, and companies have not needed to initiate substantial new hiring. In addition, higher energy prices look to be a mild check on what is otherwise a very robust economy. While the pace of growth should slow from its pace a year ago, corporate profits overall should grow in the high single-digits, with many companies significantly exceeding that. GDP growth should be at least 3%. Alger is celebrating its 40th anniversary of managing money, and our investment philosophy and process remain the same. This year, however, was a bit disappointing to us. Uncertainty trumped fundamentals, and our stocks didn't do as well as we had expected. Looking back, perhaps this was simply the "pause that refreshes." In the rally following the election, both the markets and our performance have picked up considerably. We think this is a positive harbinger for 2005. As always, we will continue to use our time-tested, disciplined approach in order to identify dynamic companies and invest in them. We value the trust you have placed in us, and we thank you. We look forward to the year ahead. Respectfully submitted, /s/ Dan C. Chung Dan C. Chung Chief Investment Officer -5- THE ALGER INSTITUTIONAL FUNDS SHAREHOLDER EXPENSE EXAMPLE (UNAUDITED) As a shareholder of the Fund, you incur two types of costs: transaction costs, if applicable, and ongoing costs, including management fees, distribution (12b-1) fees, if applicable, and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The example below is based on an investment of $1,000 invested at the beginning of the six-month period starting May 1, 2004 and ending October 31, 2004. ACTUAL EXPENSES The first line for each class of shares in the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you would have paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During the Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line for each class of shares in the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratios for each class of shares and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs. Therefore, the second line under each class of shares in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. -6- THE ALGER INSTITUTIONAL FUNDS SHAREHOLDER EXPENSE EXAMPLE (UNAUDITED) (CONTINUED)
RATIO OF EXPENSES TO EXPENSES PAID AVERAGE BEGINNING ENDING DURING THE PERIOD NET ASSETS ACCOUNT VALUE ACCOUNT VALUE MAY 1, 2004 TO YEAR ENDED MAY 1, 2004 OCTOBER 31, 2004 OCTOBER 31, 2004(B) OCTOBER 31, 2004 ----------- ---------------- ------------------- ---------------- ALGER LARGECAP GROWTH INSTITUTIONAL FUND CLASS I: Actual ........................ $1,000.00 $ 994.50 $5.67 1.13% Hypothetical(a) ............... 1,000.00 1,019.46 5.74 1.13% CLASS R: Actual ........................ 1,000.00 991.70 8.21 1.64% Hypothetical(a) ............... 1,000.00 1,016.89 8.31 1.64% ALGER SMALLCAP GROWTH INSTITUTIONAL FUND Class I: Actual ........................ $1,000.00 $ 999.40 $6.28 1.25% Hypothetical(a) ............... 1,000.00 1,018.85 6.34 1.25% CLASS R: Actual ........................ 1,000.00 996.90 8.78 1.75% Hypothetical(a) ............... 1,000.00 1,016.34 8.87 1.75% ALGER MIDCAP GROWTH INSTITUTIONAL FUND CLASS I: Actual ........................ $1,000.00 $1,020.60 $5.84 1.15% Hypothetical(a) ............... 1,000.00 1,019.36 5.84 1.15% CLASS R: Actual ........................ 1,000.00 1,018.00 8.37 1.65% Hypothetical(a) ............... 1,000.00 1,016.84 8.36 1.65% ALGER CAPITAL APPRECIATION INSTITUTIONAL FUND CLASS I: Actual ........................ $1,000.00 $ 991.00 $6.16 1.23% Hypothetical(a) ............... 1,000.00 1,018.95 6.24 1.23% CLASS R: Actual ........................ 1,000.00 988.30 8.65 1.73% Hypothetical(a) ............... 1,000.00 1,016.44 8.77 1.73% ALGER BALANCED INSTITUTIONAL FUND CLASS I: Actual ........................ $1,000.00 $1,004.00 $6.80 1.35% Hypothetical(a) ............... 1,000.00 1,018.35 6.85 1.35% CLASS R: Actual ........................ 1,000.00 1,000.00 9.15 1.82% Hypothetical(a) ............... 1,000.00 1,015.99 9.22 1.82% ALGER SOCIALLY RESPONSIBLE GROWTH INSTITUTIONAL FUND CLASS I: Actual ........................ $1,000.00 $ 998.10 $6.73 1.34% Hypothetical(a) ............... 1,000.00 1,018.40 6.80 1.34% CLASS R: Actual ........................ 1,000.00 996.30 9.18 1.83% Hypothetical(a) ............... 1,000.00 1,015.94 9.27 1.83%
---------- (a) 5% annual return before expenses. (b) Expenses are equal to the annualized expense ratio of the respective share class, multiplied by the average account value over the period, multiplied by 184/366 (to reflect the one-half year period). -7- THE ALGER INSTITUTIONAL FUNDS PORTFOLIO SUMMARY* (UNAUDITED)
SOCIALLY LARGECAP SMALLCAP MIDCAP CAPITAL RESPONSIBLE GROWTH GROWTH GROWTH APPRECIATION GROWTH INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL SECTORS FUND FUND FUND FUND FUND ------- ------------- ------------- ------------- ------------- ------------- Consumer Discretionary ........... 21.6% 14.7% 16.1% 15.9% 14.3% Consumer Staples ................. 3.4 1.4 1.6 1.7 1.6 Energy ........................... 7.1 4.7 7.6 7.4 6.8 Financials ....................... 6.2 10.6 8.6 3.7 3.7 Health Care ...................... 18.5 21.7 21.4 23.2 20.7 Industrials ...................... 6.2 16.0 7.7 8.9 3.7 Information Technology ........... 31.5 26.3 28.6 32.4 32.1 Materials ........................ 1.9 2.4 2.8 3.1 3.1 Telecommunication Services ....... 2.2 1.0 2.1 0.9 0.7 Cash and Net Other Assets ........ 1.4 1.2 3.6 2.8 13.3 ----- ----- ----- ----- ----- 100.0% 100.0% 100.0% 100.0% 100.0% ===== ===== ===== ===== ===== BALANCED INSTITUTIONAL SECTORS/SECURITY TYPE FUND --------------------- ------------- Consumer Discretionary ................................................................. 11.8% Consumer Staples ....................................................................... 3.0 Energy ................................................................................. 5.1 Financials ............................................................................. 4.6 Health Care ............................................................................ 11.0 Industrials ............................................................................ 3.2 Information Technology ................................................................. 20.1 Materials .............................................................................. 2.8 Telecommunications Services ............................................................ 1.5 ------ Total Common Stocks .................................................................. 63.1 ------ Corporate Obligations .................................................................. 8,5 U.S. Agency Obligations ................................................................ 6.0 U.S. Treasury Obligations .............................................................. 14.3 ------ Total Obligations .................................................................... 28.8 ------ Cash and Net Other Assets .............................................................. 8.1 ------ 100.0% ======
---------- * Based on Net Assets -8- ALGER LARGECAP GROWTH INSTITUTIONAL FUND Fund Highlights Through October 31, 2004 (Unaudited) $10,000 HYPOTHETICAL INVESTMENT IN CLASS I SHARES--10 YEARS ENDED 10/31/04 [The following graph was depicted as a line chart in the printed materials.] [LINE CHART] Alger Russell 11/1/1994 10000 10000 10/31/1995 13710 12925 10/31/1996 14832 15774 10/31/1997 19110 20580 10/31/1998 23967 25649 10/31/1999 34032 34434 10/31/2000 37529 37646 10/31/2001 27199 22613 10/31/2002 20347 18177 10/31/2003 25047 22141 10/31/2004 25398 22891 The chart above illustrates the growth in value of a hypothetical $10,000 investment made in the Alger LargeCap Growth Institutional Class I shares and the Russell 1000 Growth Index for the ten years ended October 31, 2004. The figures for the Alger LargeCap Growth Institutional Class I shares and the Russell 1000 Growth Index (an unmanaged index of common stocks) include reinvestment of dividends. Performance for the Alger LargeCap Growth Institutional Class R shares may vary from the results shown above due to differences in expenses the class bears. PERFORMANCE COMPARISON AS OF OCTOBER 31, 2004 AVERAGE ANNUAL RETURNS 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION ------------------------------------------------ Class I (INCEPTION 11/8/93) 1.40% (5.68)% 9.77% 9.23% Russell 1000 Growth Index 3.39% 7.84% 8.63% 8.32% -------------------------------------------------------------------------------- Class R (INCEPTION 1/27/03) 0.94% * * 17.30% Russell 1000 Growth Index 3.39% * * 16.57% -------------------------------------------------------------------------------- THE FUND'S AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE PRICE AND REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS. THE GRAPH AND TABLE ABOVE DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD HAVE PAID ON FUND DISTRIBUTIONS OR ON THE REDEMPTION OF FUND SHARES. INVESTMENT RETURN AND PRINCIPAL WILL FLUCTUATE AND THE FUND'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. -9- THE ALGER INSTITUTIONAL FUNDS ALGER LARGECAP GROWTH INSTITUTIONAL FUND SCHEDULE OF INVESTMENTS October 31, 2004 SHARES COMMON STOCKS--98.6% VALUE -------- ------- BIOTECHNOLOGY--7.6% 24,700 Biogen Idec Inc.* .............................. $ 1,436,552 13,500 Genentech, Inc.* ............................... 614,655 13,000 Genzyme Corporation General Division* .......... 682,110 44,900 Gilead Sciences, Inc.* ......................... 1,554,887 19,250 ImClone Systems Incorporated* .................. 843,150 28,150 OSI Pharmaceuticals, Inc.* ..................... 1,829,187 ------------ 6,960,541 ------------ CAPITAL MARKETS--2.6% 16,350 Affiliated Managers Group, Inc.* ............... 912,984 14,950 Bank of New York Company, Inc. (The) ........... 485,277 18,100 T. Rowe Price Group Inc. ....................... 1,009,437 ------------ 2,407,698 ------------ CHEMICALS--1.9% 38,800 Dow Chemical Company (The) ..................... 1,743,672 ------------ COMMERCIAL BANKS--1.0% 15,350 Wells Fargo & Company .......................... 916,702 ------------ COMMUNICATION EQUIPMENT--7.5% 83,300 Avaya Inc.* .................................... 1,199,520 113,600 Cisco Systems, Inc.* ........................... 2,182,256 23,400 Ericsson(LM)Telephone Co., Cl. B ADR*# ......... 676,494 103,500 Motorola, Inc. ................................. 1,786,410 11,000 Research In Motion Limited* .................... 970,200 ------------ 6,814,880 ------------ COMPUTERS & PERIPHERALS--2.5% 14,500 Apple Computer, Inc.* .......................... 761,685 117,300 EMC Corporation* ............................... 1,509,651 ------------ 2,271,336 ------------ CONSUMER FINANCE--1.5% 25,650 American Express Company ....................... 1,361,246 ------------ DIVERSIFIED FINANCIAL SERVICES--1.0% 11,500 Lehman Brothers Holdings Inc. .................. 944,725 ------------ ELECTRONIC EQUIPMENT & INSTRUMENTS--1.3% 79,700 Symbol Technologies, Inc. ...................... 1,170,793 ------------ ENERGY EQUIPMENT & SERVICES--3.0% 27,700 National-Oilwell, Inc.* ........................ 933,767 29,000 Schlumberger Limited ........................... 1,825,260 ------------ 2,759,027 ------------ FOOD & STAPLES RETAILING--3.4% 37,900 CVS Corporation ................................ 1,647,134 25,950 Wal-Mart Stores, Inc. .......................... 1,399,224 ------------ 3,046,358 ------------ -10- THE ALGER INSTITUTIONAL FUNDS ALGER LARGECAP GROWTH INSTITUTIONAL FUND SCHEDULE OF INVESTMENTS (CONTINUED) October 31, 2004 SHARES COMMON STOCKS (CONTINUED) VALUE -------- ------- FREIGHT & LOGISTICS--1.6% 15,750 FedEx Corp. .................................... $ 1,435,140 ------------ HEALTH CARE EQUIPMENT & SUPPLIES--3.2% 24,050 Boston Scientific Corporation* ................. 848,965 16,900 Guidant Corporation ............................ 1,125,878 17,450 Medtronic, Inc. ................................ 891,869 ------------ 2,866,712 ------------ HEALTH CARE PROVIDERS & SERVICES--2.1% 20,800 Caremark Rx, Inc.* ............................. 623,376 17,650 UnitedHealth Group Incorporated ................ 1,277,860 ------------ 1,901,236 ------------ HOTELS, RESTAURANTS & LEISURE--3.0% 4,200 MGM MIRAGE* .................................... 225,960 26,700 Carnival Corporation ........................... 1,349,952 23,600 Starwood Hotels & Resorts Worldwide, Inc. ...... 1,126,428 ------------ 2,702,340 ------------ INDUSTRIAL CONGLOMERATES--4.6% 52,850 General Electric Company ....................... 1,803,242 76,000 Tyco International Ltd. ........................ 2,367,400 ------------ 4,170,642 ------------ INFORMATION TECHNOLOGY SERVICES--.9% 19,550 Automatic Data Processing, Inc. ................ 848,275 ------------ INTERNET & CATALOG RETAIL--5.8% 32,900 eBay Inc.* ..................................... 3,211,369 48,200 IAC/InterActiveCorp.* .......................... 1,042,084 101,800 Netflix Inc.* .................................. 964,046 ------------ 5,217,499 ------------ INTERNET SOFTWARE & SERVICES--6.7% 7,050 Google Inc. Cl. A* ............................. 1,344,470 49,000 VeriSign, Inc.* ................................ 1,314,670 93,200 Yahoo! Inc.* ................................... 3,372,908 ------------ 6,032,048 ------------ MACHINERY - OIL WELL EQUIPMENT & SERVICES--.5% 24,200 Patterson-UTI Energy, Inc. ..................... 465,366 ------------ MEDIA--6.7% 2,100 DreamWorks Animation SKG, Inc.* ................ 82,005 121,700 Time Warner Inc.* .............................. 2,025,088 52,200 Viacom Inc. Cl. B .............................. 1,904,778 62,250 XM Satellite Radio Holdings Inc. Cl. A* ........ 2,011,920 ------------ 6,023,791 ------------ MULTILINE RETAIL--3.2% 57,500 Target Corporation ............................. 2,876,150 ------------ -11- THE ALGER INSTITUTIONAL FUNDS ALGER LARGECAP GROWTH INSTITUTIONAL FUND SCHEDULE OF INVESTMENTS (CONTINUED) October 31, 2004 SHARES COMMON STOCKS (CONTINUED) VALUE -------- ------- OIL & GAS--3.6% 20,600 BP PLC Sponsored ADR # ......................... $ 1,199,950 11,875 Devon Energy Corporation ....................... 878,394 13,000 EOG Resources, Inc. ............................ 865,280 13,600 Sasol ADR # .................................... 273,768 ------------ 3,217,392 ------------ PHARMACEUTICALS--5.5% 45,000 Abbott Laboratories ............................ 1,918,350 97,300 IVAX Corporation* .............................. 1,761,130 29,300 Sepracor Inc.* ................................. 1,345,749 ------------ 5,025,229 ------------ SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--6.5% 20,100 Altera Corporation* ............................ 456,873 40,500 Analog Devices, Inc. ........................... 1,630,530 54,500 Applied Materials, Inc.* ....................... 877,450 56,500 Freescale Semiconductor Inc. Cl. A* ............ 878,010 56,350 Intel Corporation .............................. 1,254,351 20,250 Linear Technology Corporation .................. 767,070 ------------ 5,864,284 ------------ SOFTWARE--6.9% 5,000 Electronic Arts Inc.* .......................... 224,600 150,400 Microsoft Corporation .......................... 4,209,696 71,300 Oracle Corporation* ............................ 902,658 43,100 VERITAS Software Corporation* .................. 943,028 ------------ 6,279,982 ------------ SPECIALTY RETAIL--3.0% 33,900 Bed Bath & Beyond Inc.* ........................ 1,382,781 23,650 Lowe's Companies, Inc. ......................... 1,331,022 ------------ 2,713,803 ------------ WIRELESS TELECOMMUNICATION SERVICES--1.5% 62,500 Sprint Corporation ............................. 1,309,375 ------------ Total Common Stocks (Cost $83,003,979) ........................... 89,346,242 ------------ PRINCIPAL AMOUNT SHORT-TERM INVESTMENTS--3.0% ---------- U.S. AGENCY OBLIGATIONS $2,700,000 Federal Home Loan Banks, 1.65%, 11/1/04 (Cost $2,700,000) ............................ 2,700,000 ------------ Total Investments (Cost $85,703,979) (a) ........................... 101.6% 92,046,242 Liabilities in Excess of Other Assets .............. (1.6) (1,454,938) ----- ------------ Net Assets ......................................... 100.0% $90,591,304 ===== ============ ---------- * Non-income producing security. (#) American Depository Receipts. (a) At October 31, 2004, the net unrealized appreciation on investments, based on cost for federal income tax purposes of $86,327,450, amounted to $5,718,792 which consisted of aggregate gross unrealized appreciation of $8,659,825 and aggregate gross unrealized depreciation of $2,941,033. See Notes to Financial Statements. -12- ALGER SMALLCAP GROWTH INSTITUTIONAL FUND FUND HIGHLIGHTS THROUGH OCTOBER 31, 2004 (UNAUDITED) $10,000 HYPOTHETICAL INVESTMENT IN CLASS I SHARES--10 YEARS ENDED 10/31/04 [The following graph was depicted as a line chart in the printed materials.] [LINE CHART] Alger Russell 11/1/1994 10000 10000 10/31/1995 16619 12056 10/31/1996 18148 13663 10/31/1997 21596 16556 10/31/1998 21211 13932 10/31/1999 32396 18012 10/31/2000 35654 20932 10/31/2001 20016 14330 10/31/2002 15593 11240 10/31/2003 22640 16470 10/31/2004 24094 17382 The chart above illustrates the growth in value of a hypothetical $10,000 investment made in the Alger SmallCap Growth Institutional Class I shares and the Russell 2000 Growth Index for the ten years ended October 31, 2004. The figures for the Alger SmallCap Growth Institutional Class I shares and the Russell 2000 Growth Index (an unmanaged index of common stocks) include reinvestment of dividends. Performance for the Alger SmallCap Growth Institutional Class R shares may vary from the results shown above due to differences in expenses the class bears. PERFORMANCE COMPARISON AS OF OCTOBER 31, 2004 AVERAGE ANNUAL RETURNS 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION ---------------------------------------------- Class I (INCEPTION 11/8/93) 6.42% (5.75)% 9.19% 9.13% Russell 2000 Growth Index 5.54% (0.71)% 5.68% 5.17% -------------------------------------------------------------------------------- Class R (INCEPTION 1/27/03) 5.85% * * 25.17% Russell 2000 Growth Index 5.54% * * 28.10% -------------------------------------------------------------------------------- THE FUND'S AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE PRICE AND REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS. THE GRAPH AND TABLE ABOVE DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD HAVE PAID ON FUND DISTRIBUTIONS OR ON THE REDEMPTION OF FUND SHARES. INVESTMENT RETURN AND PRINCIPAL WILL FLUCTUATE AND THE FUND'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. -13- THE ALGER INSTITUTIONAL FUNDS ALGER SMALLCAP GROWTH INSTITUTIONAL FUND SCHEDULE OF INVESTMENTS October 31, 2004 SHARES COMMON STOCKS--98.8% VALUE -------- ------- AEROSPACE & DEFENSE--3.4% 16,150 Alliant Techsystems Inc.* ...................... $ 928,464 84,700 BE Aerospace, Inc.* ............................ 726,726 28,300 SI International Inc.* ......................... 733,819 ------------ 2,389,009 ------------ AIRLINES--1.2% 71,900 AirTran Holdings, Inc.* ........................ 835,478 ------------ BIOTECHNOLOGY--4.8% 65,700 Encysive Pharmaceuticals Inc.* ................. 573,561 40,750 Ligand Pharmaceuticals Incorporated Cl. B* ..... 363,286 37,800 QLT Inc.* ...................................... 629,370 22,400 Serologicals Corporation* ...................... 529,760 32,400 Theravance, Inc.* .............................. 549,828 51,100 Vicuron Pharmaceuticals Inc.* .................. 716,422 ------------ 3,362,227 ------------ BUSINESS SERVICES--.8% 9,700 MicroStrategy Incorporated* .................... 581,806 ------------ CAPITAL MARKETS--3.4% 15,000 Affiliated Managers Group, Inc.* ............... 837,600 28,800 National Financial Partners Corporation ........ 885,312 15,650 Piper Jaffray Companies, Inc.* ................. 684,375 ------------ 2,407,287 ------------ CHEMICALS--1.3% 25,700 Lubrizol Corporation ........................... 892,561 ------------ COMMERCIAL BANKS--3.4% 4,900 Boston Private Financial Holdings, Inc. ........ 120,246 26,000 East West Bancorp, Inc. ........................ 1,041,040 23,500 Southwest Bancorporation of Texas, Inc. ........ 550,840 17,250 Westcorp ....................................... 688,620 ------------ 2,400,746 ------------ COMMERCIAL SERVICES & SUPPLIES--4.7% 19,150 CoStar Group Inc.* ............................. 773,086 30,300 Education Management Corporation* .............. 812,646 9,900 First Marblehead Corporation (The)* ............ 530,640 18,200 FTI Consulting, Inc.* .......................... 341,432 45,300 Gevity HR, Inc. ................................ 806,793 ------------ 3,264,597 ------------ COMMUNICATION EQUIPMENT--1.9% 36,500 Foundry Networks, Inc.* ........................ 442,745 39,600 NETGEAR, Inc.* ................................. 539,748 49,200 Powerwave Technologies, Inc.* .................. 367,524 ------------ 1,350,017 ------------ -14- THE ALGER INSTITUTIONAL FUNDS ALGER SMALLCAP GROWTH INSTITUTIONAL FUND SCHEDULE OF INVESTMENTS (CONTINUED) October 31, 2004 SHARES COMMON STOCKS (CONTINUED) VALUE -------- ------- COMPUTERS & PERIPHERALS--2.5% 18,650 Avid Technology, Inc.* ......................... $ 988,077 53,000 Silicon Image, Inc.* ........................... 726,100 ------------ 1,714,177 ------------ COMPUTER SERVICES--1.3% 32,200 Open Solutions Inc.* ........................... 906,913 ------------ COMPUTER TECHNOLOGY--1.5% 18,300 Cogent Inc.* ................................... 350,152 17,700 NAVTEQ* ........................................ 713,487 ------------ 1,063,639 ------------ ELECTRIC AND ELECTRONIC EQUIPMENT--1.1% 12,200 Roper Industries, Inc. ......................... 752,252 ------------ ELECTRONIC EQUIPMENT & INSTRUMENTS--.5% 11,300 Trimble Navigation Limited* .................... 324,197 ------------ ENERGY--1.1% 23,600 Arch Coal, Inc. ................................ 767,472 ------------ ENERGY EQUIPMENT & SERVICES--2.0% 26,900 Core Laboratories N.V.* ........................ 667,120 25,500 Varco International, Inc.* ..................... 705,840 ------------ 1,372,960 ------------ FINANCIAL SERVICES--.8% 30,200 Calamos Asset Management, Inc.* ................ 588,900 ------------ FOOD & STAPLES RETAILING--1.4% 38,100 NeighborCare, Inc.* ............................ 976,503 ------------ HEALTH CARE EQUIPMENT & SUPPLIES--3.7% 29,800 Immucor, Inc.* ................................. 919,330 12,300 INAMED Corporation* ............................ 653,745 27,300 Intuitive Surgical, Inc.* ...................... 796,614 6,000 Mentor Corporation ............................. 208,800 ------------ 2,578,489 ------------ HEALTH CARE PROVIDERS & SERVICES--7.6% 14,800 Accredo Health, Incorporated* .................. 340,844 19,600 Centene Corporation* ........................... 929,628 34,550 Psychiatric Solutions, Inc.* ................... 879,297 22,700 Sierra Health Services, Inc.* .................. 1,083,244 27,600 Sunrise Senior Living Inc.* .................... 1,051,836 46,800 VCA Antech, Inc.* .............................. 1,049,256 ------------ 5,334,105 ------------ HOTELS, RESTAURANTS & LEISURE--3.7% 27,542 Applebee's International, Inc. ................. 629,885 28,600 Aztar Corporation* ............................. 885,170 19,550 Red Robin Gourmet Burgers Inc.* ................ 815,430 10,300 Texas Roadhouse, Inc. Cl. A* ................... 237,106 ------------ 2,567,591 ------------ -15- THE ALGER INSTITUTIONAL FUNDS ALGER SMALLCAP GROWTH INSTITUTIONAL FUND SCHEDULE OF INVESTMENTS (CONTINUED) October 31, 2004 SHARES COMMON STOCKS (CONTINUED) VALUE -------- ------- INFORMATION TECHNOLOGY SERVICES--2.8% 12,400 Alliance Data Systems Corporation* ............. $ 524,272 13,150 Global Payments Inc. ........................... 720,094 30,850 Kanbay International Inc.* ..................... 737,007 ------------ 1,981,373 ------------ INSURANCE--.7% 13,450 Arch Capital Group Ltd.* ....................... 505,316 ------------ INTERNET & CATALOG RETAIL--2.3% 2,000 Elong Inc.* .................................... 27,200 41,500 J. Jill Group Inc.* ............................ 729,570 43,300 Priceline.com Incorporated* .................... 863,402 ------------ 1,620,172 ------------ INTERNET SOFTWARE & SERVICES--3.5% 193,700 Chordiant Software Inc.* ....................... 476,502 59,300 IVillage Inc.* ................................. 303,913 43,500 Openwave Systems, Inc.* ........................ 511,995 109,300 SonicWALL, Inc.* ............................... 546,500 66,100 ValueClick, Inc.* .............................. 614,069 ------------ 2,452,979 ------------ LEISURE EQUIPMENT & PRODUCTS--1.1% 34,350 LIFE TIME FITNESS, Inc.* ....................... 800,355 ------------ MACHINERY--3.1% 17,200 Actuant Corporation Cl. A* ..................... 682,324 18,600 Joy Global Inc. ................................ 628,494 23,050 Terex Corporation* ............................. 875,900 ------------ 2,186,718 ------------ MEDIA--2.2% 11,340 Media General, Inc. Cl. A ...................... 661,122 90,000 Spanish Broadcasting System, Inc. Cl. A* ....... 910,800 ------------ 1,571,922 ------------ MEDICAL DEVICES--1.5% 27,300 Advanced Medical Optics, Inc.* ................. 1,067,430 ------------ MEDICAL PRODUCTS--.7% 11,100 Par Pharmaceutical Cos Inc.* ................... 437,895 ------------ OIL & GAS--2.7% 13,150 General Maritime Corporation* .................. 499,700 105,600 Grey Wolf, Inc.* ............................... 547,008 50,864 Todco Cl. A* ................................... 863,162 ------------ 1,909,870 ------------ PHARMACEUTICALS--2.3% 7,000 Eyetech Pharmaceuticals Inc.* .................. 297,080 52,600 Impax Laboratories, Inc.* ...................... 776,376 11,500 Pharmion Corp.* ................................ 528,425 ------------ 1,601,881 ------------ -16- THE ALGER INSTITUTIONAL FUNDS ALGER SMALLCAP GROWTH INSTITUTIONAL FUND SCHEDULE OF INVESTMENTS (CONTINUED) October 31, 2004 SHARES COMMON STOCKS (CONTINUED) VALUE -------- ------- ROAD & RAIL--.8% 8,100 Landstar Systems, Inc.* ........................ $ 550,314 ------------ SEMICONDUCTOR CAPITAL EQUIPMENT--.9% 52,800 SiRF Technology Holdings, Inc.* ................ 625,152 ------------ SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--5.0% 37,100 AMIS Holdings, Inc.* ........................... 563,920 66,700 Axcelis Technologies, Inc.* .................... 573,620 23,900 Brooks Automation, Inc.* ....................... 355,632 22,950 Integrated Circuit Systems, Inc.* .............. 517,523 42,900 Semtech Corporation* ........................... 895,752 20,200 Sigmatel Incorporated* ......................... 595,900 ------------ 3,502,347 ------------ SOFTWARE--6.8% 18,600 Cerner Corporation* ............................ 839,790 28,687 Fair Isaac Corporation ......................... 866,347 25,700 Hyperion Solutions Corporation* ................ 1,031,341 130,100 Micromuse Inc.* ................................ 558,129 41,100 Quest Software, Inc.* .......................... 602,937 27,150 Take-Two Interactive Software, Inc.* ........... 894,864 ------------ 4,793,408 ------------ SPECIALTY RETAIL--3.9% 37,650 AnnTaylor Stores Corporation* .................. 845,619 20,900 Guitar Center, Inc.* ........................... 932,767 26,400 PETCO Animal Supplies, Inc.* ................... 944,328 ------------ 2,722,714 ------------ TEXTILES, APPAREL & LUXURY GOODS--1.5% 37,950 Quiksilver, Inc.* .............................. 1,034,138 ------------ THRIFTS & MORTGAGE FINANCE--1.4% 81,083 Bank Mutual Corporation ........................ 995,699 ------------ TRADING COMPANIES & DISTRIBUTORS--1.4% 29,100 MSC Industrial Direct Co., Cl. A ............... 993,473 ------------ TRANSPORTATION SERVICES--1.1% 31,100 Sirva Inc.* .................................... 746,400 ------------ WIRELESS TELECOMMUNICATION SERVICES--1.0% 13,900 SpectraSite, Inc.* ............................. 713,070 ------------ Total Common Stocks (Cost $64,667,303) ........................... 69,243,552 ------------ -17- THE ALGER INSTITUTIONAL FUNDS ALGER SMALLCAP GROWTH INSTITUTIONAL FUND SCHEDULE OF INVESTMENTS (CONTINUED) October 31, 2004 PRINCIPAL AMOUNT SHORT-TERM INVESTMENTS--1.6% VALUE -------- ------- U.S. AGENCY OBLIGATIONS $1,100,000 Federal Home Loan Banks, 1.65%, 11/1/04 (Cost $1,100,000) ............................ $ 1,100,000 ------------ Total Investments (Cost $65,767,303)(a) ............................... 100.4% 70,343,552 Liabilities in Excess of Other Assets ................. (.4) (271,617) ----- ----------- Net Assets ............................................ 100.0% $70,071,935 ===== =========== ---------- * Non-income producing security. (a) At October 31, 2004, the net unrealized appreciation on investments, based on cost for federal income tax purposes of $65,982,035, amounted to $4,361,517 which consisted of aggregate gross unrealized appreciation of $7,366,420 and aggregate gross unrealized depreciation of $3,004,903. See Notes to Financial Statements. -18- ALGER MIDCAP GROWTH INSTITUTIONAL FUND FUND HIGHLIGHTS THROUGH OCTOBER 31, 2004 (UNAUDITED) $10,000 HYPOTHETICAL INVESTMENT IN CLASS I SHARES--10 YEARS ENDED 10/31/04 [The following graph was depicted as a line chart in the printed materials.] [LINE CHART] Alger Russell 11/1/1994 10000 10000 10/31/1995 15410 12423 10/31/1996 16371 14654 10/31/1997 21049 18260 10/31/1998 23470 18703 10/31/1999 33419 25750 10/31/2000 50558 35706 10/31/2001 40171 20430 10/31/2002 32401 16832 10/31/2003 44507 23447 10/31/2004 46314 25505 The chart above illustrates the growth in value of a hypothetical $10,000 investment made in the Alger MidCap Growth Institutional Class I shares and the Russell Midcap Growth Index for the ten years ended October 31, 2004. Figures for the Alger MidCap Growth Institutional Class I shares and the Russell Midcap Growth Index (an unmanaged index of common stocks) include reinvestment of dividends. Performance for the Alger MidCap Growth Institutional Class R shares may vary from the results shown above due to differences in expenses the class bears. PERFORMANCE COMPARISON AS OF OCTOBER 31, 2004 AVERAGE ANNUAL RETURNS 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION -------------------------------------------- Class I (INCEPTION 11/8/93) 4.06% 6.74% 16.57% 16.60% Russell Midcap Growth Index 8.77% (0.19)% 9.82% 9.20% -------------------------------------------------------------------------------- Class R (INCEPTION 1/27/03) 3.53% * * 25.25% Russell Midcap Growth Index 8.77% * * 26.27% -------------------------------------------------------------------------------- THE FUND'S AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE PRICE AND REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS. THE GRAPH AND TABLE ABOVE DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD HAVE PAID ON FUND DISTRIBUTIONS OR ON THE REDEMPTION OF FUND SHARES. INVESTMENT RETURN AND PRINCIPAL WILL FLUCTUATE AND THE FUND'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. -19- THE ALGER INSTITUTIONAL FUNDS ALGER MIDCAP GROWTH INSTITUTIONAL FUND SCHEDULE OF INVESTMENTS October 31, 2004 SHARES COMMON STOCKS--96.4% VALUE -------- ------- AEROSPACE & DEFENSE--2.0% 255,775 L-3 Communications Holdings, Inc. .............. $ 16,863,246 ------------ AIRLINES--.6% 241,750 JetBlue Airways Corporation* ................... 5,330,587 ------------ BIOTECHNOLOGY--4.9% 196,300 Genzyme Corporation General Division* .......... 10,299,861 258,250 ImClone Systems Incorporated* .................. 11,311,350 260,500 OSI Pharmaceuticals, Inc. ...................... 16,927,290 208,000 QLT Inc.* ...................................... 3,463,200 ------------ 42,001,701 ------------ BUILDING & CONSTRUCTION--1.0% 183,400 Toll Brothers, Inc.* ........................... 8,500,590 ------------ CAPITAL MARKETS--3.5% 305,193 Affiliated Managers Group, Inc.* ............... 17,041,977 201,450 Legg Mason, Inc. ............................... 12,834,379 ------------ 29,876,356 ------------ CHEMICALS--1.4% 547,800 Millennium Chemicals Inc.* ..................... 11,766,744 ------------ COMMERCIAL BANKS--3.8% 332,400 East West Bancorp, Inc. ........................ 13,309,296 193,400 North Fork Bancorporation, Inc. ................ 8,528,940 161,250 Zions Bancorporation ........................... 10,669,912 ------------ 32,508,148 ------------ COMMERCIAL SERVICES & SUPPLIES--2.4% 154,300 First Marblehead Corporation (The)* ............ 8,270,480 1,847,600 Service Corporation International* ............. 12,212,636 ------------ 20,483,116 ------------ COMMUNICATION EQUIPMENT--2.1% 776,600 Avaya Inc.* .................................... 11,183,040 998,800 Brocade Communications Systems, Inc.* .......... 6,781,852 ------------ 17,964,892 ------------ COMMUNICATION TECHNOLOGY--.9% 474,500 Nextel Partners, Inc. Cl. A* ................... 7,990,580 ------------ COMPUTERS & PERIPHERALS--5.0% 480,200 Apple Computer, Inc.* .......................... 25,224,906 601,350 PalmOne, Inc.* ................................. 17,421,109 ------------ 42,646,015 ------------ COMPUTER SERVICES--1.5% 950,000 Akamai Technologies Inc.* ...................... 13,157,500 ------------ COMPUTER TECHNOLOGY--.6% 119,350 NAVTEQ* ........................................ 4,810,998 ------------ ELECTRICAL EQUIPMENT--2.1% 424,200 Rockwell Automation, Inc. ...................... 17,684,898 ------------ -20- THE ALGER INSTITUTIONAL FUNDS ALGER MIDCAP GROWTH INSTITUTIONAL FUND SCHEDULE OF INVESTMENTS (CONTINUED) October 31, 2004 SHARES COMMON STOCKS (CONTINUED) VALUE -------- ------- ELECTRONIC EQUIPMENT & INSTRUMENTS--1.6% 912,900 Symbol Technologies, Inc. ...................... $ 13,410,501 ------------ ENERGY EQUIPMENT & SERVICES--2.9% 160,775 Cooper Cameron Corporation* .................... 7,773,471 488,300 National-Oilwell, Inc.* ........................ 16,460,593 ------------ 24,234,064 ------------ HEALTH CARE EQUIPMENT & SUPPLIES--3.6% 156,850 C.R. Bard, Inc. ................................ 8,909,080 186,700 Cytyc Corporation* ............................. 4,871,003 337,750 Kinetic Concepts, Inc.* ........................ 16,830,082 ------------ 30,610,165 ------------ HEALTH CARE PROVIDERS & SERVICES--4.8% 88,200 American Healthways, Inc.* ..................... 2,661,876 226,400 AMERIGROUP Corporation* ........................ 13,584,000 365,350 Covance Inc.* .................................. 14,511,702 267,700 Magellan Health Services, Inc.* ................ 10,011,980 ------------ 40,769,558 ------------ HOTELS, RESTAURANTS & LEISURE--4.3% 281,200 Applebee's International, Inc. ................. 6,431,044 167,600 Aztar Corporation* ............................. 5,187,220 179,000 Cheesecake Factory Incorporated (The)* ......... 7,770,390 13,000 International Speedway Corporation Cl. A ....... 611,520 167,500 Kerzner International Limited* ................. 8,495,600 174,600 Royal Caribbean Cruises Ltd. ................... 8,136,360 ------------ 36,632,134 ------------ HOUSEHOLD DURABLES--2.1% 351,100 Garmin Ltd. .................................... 17,555,000 ------------ INFORMATION TECHNOLOGY SERVICES--.7% 108,300 Global Payments Inc. ........................... 5,930,508 ------------ INSURANCE--.3% 79,500 UICI ........................................... 2,351,610 ------------ INTERNET & CATALOG RETAIL--1.4% 1,241,700 Netflix Inc.* .................................. 11,758,899 ------------ INTERNET SOFTWARE & SERVICES--1.6% 102,750 Netease.com Inc. ADR* # ........................ 4,778,903 121,400 SINA Corp.* .................................... 4,066,900 186,100 VeriSign, Inc.* ................................ 4,993,063 ------------ 13,838,866 ------------ LEISURE & ENTERTAINMENT--2.4% 663,100 Shanda Interactive Entertainment Ltd.* ......... 20,150,946 ------------ MACHINERY--2.0% 155,300 Joy Global Inc. ................................ 5,247,587 312,100 Pentair, Inc. .................................. 11,666,298 ------------ 16,913,885 ------------ -21- THE ALGER INSTITUTIONAL FUNDS ALGER MIDCAP GROWTH INSTITUTIONAL FUND SCHEDULE OF INVESTMENTS (CONTINUED) October 31, 2004 SHARES COMMON STOCKS (CONTINUED) VALUE -------- ------- MACHINERY - OIL WELL EQUIPMENT & SERVICES--1.9% 836,950 Patterson-UTI Energy, Inc. ..................... $ 16,094,549 ------------ MEDIA--2.2% 21,500 DreamWorks Animation SKG, Inc.* ................ 839,575 53,500 Univision Communications Inc. Cl. A* ........... 1,656,360 514,150 XM Satellite Radio Holdings Inc. Cl. A* ........ 16,617,328 ------------ 19,113,263 ------------ METALS & MINING--1.4% 188,800 Peabody Energy Corporation ..................... 12,041,664 ------------ MULTILINE RETAIL--1.0% 295,000 Dollar Tree Stores, Inc.* ...................... 8,525,500 ------------ OIL & GAS--2.9% 207,200 EOG Resources, Inc. ............................ 13,791,232 78,250 Frontline Limited .............................. 3,918,760 5,600 KFX Inc.* ...................................... 52,304 146,450 Teekay Shipping Corporation .................... 6,765,990 ------------ 24,528,286 ------------ PHARMACEUTICALS--6.6% 633,100 Elan Corporation PLC Sponsored ADR* # .......... 16,333,980 206,250 Eyetech Pharmaceuticals Inc.* .................. 8,753,250 915,550 IVAX Corporation* .............................. 16,571,455 321,250 Sepracor Inc.* ................................. 14,755,013 ------------ 56,413,698 ------------ RETAIL--1.4% 288,200 Estee Lauder Companies Inc. Cl. A .............. 12,378,190 ------------ ROAD & RAIL--1.0% 176,600 Yellow Roadway Corporation* .................... 8,475,034 ------------ SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--6.7% 290,250 Altera Corporation* ............................ 6,597,383 371,700 ATI Technologies Inc.* ......................... 6,709,185 428,400 Freescale Semiconductor Inc. Cl. A* ............ 6,657,336 142,600 KLA-Tencor Corporation* ........................ 6,492,578 156,000 Marvell Technology Group Ltd.* ................. 4,456,920 248,900 Rambus Inc.* ................................... 4,276,102 1,389,450 Semiconductor Manufacturing International Corporation ADR* # ........................... 14,992,166 751,000 Skyworks Solutions, Inc.* ...................... 6,676,390 ------------ 56,858,060 ------------ -22- THE ALGER INSTITUTIONAL FUNDS ALGER MIDCAP GROWTH INSTITUTIONAL FUND SCHEDULE OF INVESTMENTS (CONTINUED) October 31, 2004 SHARES COMMON STOCKS (CONTINUED) VALUE -------- ------- SOFTWARE--6.5% 547,400 Citrix Systems, Inc.* .......................... $ 13,208,762 172,250 Cognos, Inc.* .................................. 6,805,598 70,000 Fair Isaac Corporation ......................... 2,114,000 182,950 Intuit Inc.* ................................... 8,298,612 581,780 PalmSource, Inc.* .............................. 13,043,508 359,700 Take-Two Interactive Software, Inc.* ........... 11,855,712 ------------ 55,326,192 ------------ SPECIALTY RETAIL--1.8% 217,500 Chico's FAS, Inc.* ............................. 8,706,525 186,550 Tractor Supply Company* ........................ 6,768,034 ------------ 15,474,559 ------------ TEXTILES, APPAREL & LUXURY GOODS--2.3% 169,150 Coach, Inc.* ................................... 7,887,464 159,350 Polo Ralph Lauren Corporation Cl. A ............ 5,884,796 214,900 Quiksilver, Inc.* .............................. 5,856,025 ------------ 19,628,285 ------------ WIRELESS TELECOMMUNICATION SERVICES--1.2% 192,750 SpectraSite, Inc.* ............................. 9,888,075 ------------ Total Common Stocks (Cost $767,785,221) .......................... 820,486,862 ------------ PRINCIPAL AMOUNT SHORT-TERM INVESTMENTS--4.4% ---------- U.S. AGENCY OBLIGATIONS $37,300,000 Federal Home Loan Banks, 1.65%, 11/1/04 (Cost $37,300,000) ........................... 37,300,000 ------------ Total Investments (Cost $805,085,221)(a) ............................ 100.8% 857,786,862 Liabilities in Excess of Other Assets ............... (.8) (6,513,938) ------ ------------ Net Assets .......................................... 100.0% $851,272,924 ====== ============ ---------- * Non-income producing security. # American Depository Receipts. (a) At October 31, 2004, the net unrealized appreciation on investments, based on cost for federal income tax purposes of $810,444,584, amounted to $47,342,278 which consisted of aggregate gross unrealized appreciation of $75,848,680 and aggregate gross unrealized depreciation of $28,506,402. See Notes to Financial Statements. -23- ALGER CAPITAL APPRECIATION INSTITUTIONAL FUND FUND HIGHLIGHTS THROUGH OCTOBER 31, 2004 (UNAUDITED) $10,000 HYPOTHETICAL INVESTMENT IN CLASS I SHARES--10 YEARS ENDED 10/31/04 [The following graph was depicted as a line chart in the printed materials.] [LINE CHART] Alger Russell 11/1/1994 10000 10000 10/31/1995 15540 12835 10/31/1996 16384 15548 10/31/1997 20655 20157 10/31/1998 26461 24267 10/31/1999 48779 32494 10/31/2000 55189 35679 10/31/2001 35646 21642 10/31/2002 27422 17368 10/31/2003 33811 21422 10/31/2004 33781 22178 The chart above illustrates the growth in value of a hypothetical $10,000 investment made in the Alger Capital Appreciation Institutional Class I shares and the Russell 3000 Growth Index for the ten years ended October 31, 2004. Figures for the Alger Capital Appreciation Institutional Class I shares and the Russell 3000 Growth Index (an unmanaged index of common stocks) include reinvestment of dividends. Performance for the Alger Capital Appreciation Institutional Class R shares may vary from the results shown above due to differences in expenses the class bears. PERFORMANCE COMPARISON AS OF OCTOBER 31, 2004 AVERAGE ANNUAL RETURNS 1 YEAR 5 YEARS 10 YEARS SINCE INCEPTION -------------------------------------------- Class I shares (INCEPTION 11/8/93) (0.09)% (7.08)% 12.94% 11.80% Russell 3000 Growth Index 3.53% (7.35)% 8.29% 8.01% -------------------------------------------------------------------------------- Class R shares (INCEPTION 1/27/03) (0.54)% * * 16.53% Russell 3000 Growth Index 3.53% * * 17.32% -------------------------------------------------------------------------------- THE FUND'S AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE PRICE AND REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS. THE GRAPH AND TABLE ABOVE DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD HAVE PAID ON FUND DISTRIBUTIONS OR ON THE REDEMPTION OF FUND SHARES. INVESTMENT RETURN AND PRINCIPAL WILL FLUCTUATE AND THE FUND'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. -24- THE ALGER INSTITUTIONAL FUNDS ALGER CAPITAL APPRECIATION INSTITUTIONAL FUND SCHEDULE OF INVESTMENTS October 31, 2004 SHARES COMMON STOCKS--97.2% VALUE -------- ------- AEROSPACE & DEFENSE--3.4% 40,000 Lockheed Martin Corporation .................... $ 2,203,600 22,600 United Technologies Corporation ................ 2,097,732 ------------ 4,301,332 ------------ COMMERCIAL BANKS--.5% 11,500 Wells Fargo & Company .......................... 686,780 ------------ BIOTECHNOLOGY--7.8% 47,800 Biogen Idec Inc.* .............................. 2,780,048 28,800 Genentech, Inc.* ............................... 1,311,264 26,300 Genzyme Corporation General Division* .......... 1,379,961 86,000 Gilead Sciences, Inc.* ......................... 2,978,180 6,200 ImClone Systems Incorporated* .................. 271,560 15,800 OSI Pharmaceuticals, Inc.* ..................... 1,026,684 ------------ 9,747,697 ------------ BUSINESS SERVICES--.7% 16,000 MicroStrategy Incorporated* .................... 959,680 ------------ CAPITAL MARKETS--.8% 9,800 Bank of New York Company, Inc. (The) ........... 318,108 12,000 Merrill Lynch & Co., Inc. ...................... 647,280 ------------ 965,388 ------------ CHEMICALS--1.5% 55,200 Lubrizol Corporation ........................... 1,917,096 ------------ COMMERCIAL SERVICES & SUPPLIES--1.6% 36,800 First Marblehead Corporation (The)* ............ 1,972,480 ------------ COMMUNICATION EQUIPMENT--6.0% 50,100 Motorola, Inc. ................................. 864,726 143,700 Nokia Oyj ADR# ................................. 2,215,854 43,150 QUALCOMM Inc. .................................. 1,804,102 29,850 Research In Motion Limited* .................... 2,632,770 ------------ 7,517,452 ------------ COMPUTERS & PERIPHERALS--4.4% 45,900 Apple Computer, Inc.* .......................... 2,411,127 109,400 PalmOne, Inc.* ................................. 3,169,318 ------------ 5,580,445 ------------ COMPUTER SOFTWARE--1.0% 57,800 Check Point Software Technologies Ltd.* ........ 1,307,494 ------------ COMPUTER TECHNOLOGY--1.5% 46,700 NAVTEQ* ........................................ 1,882,477 ------------ DIVERSIFIED FINANCIAL SERVICES--.8% 12,500 Lehman Brothers Holdings Inc. .................. 1,026,875 ------------ ENERGY EQUIPMENT & SERVICES--2.4% 89,900 National-Oilwell, Inc.* ........................ 3,030,529 ------------ FOOD & STAPLES RETAILING--1.7% 50,200 CVS Corporation ................................ 2,181,692 ------------ -25- THE ALGER INSTITUTIONAL FUNDS ALGER CAPITAL APPRECIATION INSTITUTIONAL FUND SCHEDULE OF INVESTMENTS (CONTINUED) October 31, 2004 SHARES COMMON STOCKS (CONTINUED) VALUE -------- ------- FREIGHT & LOGISTICS--1.2% 15,800 FedEx Corp. .................................... $ 1,439,696 ------------ HEALTH CARE EQUIPMENT & SUPPLIES--3.9% 32,000 Kinetic Concepts, Inc.* ........................ 1,594,560 34,700 Fisher Scientific International Inc.* .......... 1,990,392 19,350 Guidant Corporation ............................ 1,289,097 ------------ 4,874,049 ------------ HEALTH CARE PROVIDERS & SERVICES--3.4% 30,700 AMERIGROUP Corporation* ........................ 1,842,000 45,500 Caremark Rx, Inc.* ............................. 1,363,635 11,600 Quest Diagnostics Incorporated ................. 1,015,464 ------------ 4,221,099 ------------ HOTELS, RESTAURANTS & LEISURE--.7% 19,300 Royal Caribbean Cruises Ltd. ................... 899,380 ------------ HOUSEHOLD DURABLES--.4% 9,700 Garmin Ltd. .................................... 485,000 ------------ INDUSTRIAL CONGLOMERATES--3.0% 48,200 General Electric Company ....................... 1,644,584 66,400 Tyco International Ltd. ........................ 2,068,360 ------------ 3,712,944 ------------ INFORMATION TECHNOLOGY SERVICES--1.3% 25,900 Accenture Ltd. Cl. A* .......................... 627,039 28,600 Cognizant Technology Solutions Corporation Cl. A* 972,400 ------------ 1,599,439 ------------ INTERNET & CATALOG RETAIL--4.0% 41,000 eBay Inc.* ..................................... 4,002,010 46,000 IAC/InterActiveCorp.* .......................... 994,520 ------------ 4,996,530 ------------ INTERNET SOFTWARE & SERVICES--3.9% 13,600 Netease.com Inc. ADR #* ........................ 632,536 119,400 Yahoo! Inc.* ................................... 4,321,086 ------------ 4,953,622 ------------ LEISURE & ENTERTAINMENT--.8% 33,700 Shanda Interactive Entertainment Ltd.* ......... 1,024,109 ------------ MACHINERY - OIL WELL EQUIPMENT & SERVICES--1.0% 66,100 Patterson-UTI Energy, Inc. ..................... 1,271,103 ------------ MEDIA--5.1% 2,900 DreamWorks Animation SKG, Inc.* ................ 113,245 295,700 Sirius Satellite Radio Inc.* ................... 1,153,230 203,500 Time Warner Inc.* .............................. 3,386,240 49,500 Viacom Inc. Cl. B .............................. 1,806,255 ------------ 6,458,970 ------------ MEDICAL DEVICES--1.0% 32,900 Advanced Medical Optics, Inc.* ................. 1,286,390 ------------ -26- THE ALGER INSTITUTIONAL FUNDS ALGER CAPITAL APPRECIATION INSTITUTIONAL FUND SCHEDULE OF INVESTMENTS (CONTINUED) October 31, 2004 SHARES COMMON STOCKS (CONTINUUED) VALUE -------- ------- METALS & MINING--1.6% 31,900 Peabody Energy Corporation ..................... $ 2,034,582 ------------ MULTILINE RETAIL--.8% 19,400 Kohl's Corporation* ............................ 984,744 ------------ OFFICE EQUIPMENT--1.1% 26,200 Zebra Technologies Corporation* ................ 1,388,338 ------------ OIL & GAS--4.0% 25,700 BP PLC Sponsored ADR # ......................... 1,497,025 21,400 EOG Resources, Inc. ............................ 1,424,384 42,800 Talisman Energy Inc. ........................... 1,150,036 19,600 Teekay Shipping Corporation .................... 905,520 ------------ 4,976,965 ------------ PHARMACEUTICALS--7.2% 22,100 Allergan, Inc. ................................. 1,581,476 101,775 IVAX Corporation* .............................. 1,842,127 6,700 Novartis AG ADR # .............................. 321,667 43,830 Pfizer Inc. .................................... 1,268,879 73,100 Schering-Plough Corporation .................... 1,323,841 14,100 Sepracor Inc.* ................................. 647,613 38,100 Teva Pharmaceutical Industries Ltd. ADR # ...... 990,600 25,200 Wyeth .......................................... 999,180 ------------ 8,975,383 ------------ ROAD & RAIL--1.3% 40,000 Burlington Northern Santa Fe Corporation ....... 1,672,400 ------------ SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--3.4% 59,300 Broadcom Corporation Cl. A* .................... 1,604,065 33,700 Intel Corporation .............................. 750,162 12,100 Novellus Systems, Inc.* ........................ 313,511 174,000 Skyworks Solutions, Inc.* ...................... 1,546,860 ------------ 4,214,598 ------------ SOFTWARE--8.2% 29,200 Cognos, Inc.* .................................. 1,153,692 73,800 Fair Isaac Corporation ......................... 2,228,760 33,600 Mercury Interactive Corporation* ............... 1,459,248 180,200 Microsoft Corporation .......................... 5,043,798 28,200 Red Hat, Inc.* ................................. 362,088 ------------ 10,247,586 ------------ SPECIALTY RETAIL--3.3% 40,300 Bed Bath & Beyond Inc.* ........................ 1,643,837 22,850 Lowe's Companies, Inc. ......................... 1,285,998 34,000 Tractor Supply Company* ........................ 1,233,520 ------------ 4,163,355 ------------ -27- THE ALGER INSTITUTIONAL FUNDS ALGER CAPITAL APPRECIATION INSTITUTIONAL FUND SCHEDULE OF INVESTMENTS (CONTINUED) October 31, 2004 SHARES COMMON STOCKS (CONTINUED) VALUE -------- ------- TEXTILES, APPAREL & LUXURY GOODS--1.6% 28,000 Coach, Inc.* .................................... $ 1,305,640 17,700 Polo Ralph Lauren Corporation Cl. A ............. 653,661 ------------ 1,959,301 ------------ WIRELESS TELECOMMUNICATION SERVICES--.9% 23,000 SpectraSite, Inc.* .............................. 1,179,900 ------------ Total Common Stocks (Cost $110,494,815) ........................... 122,096,900 ------------ PRINCIPAL AMOUNT SHORT-TERM INVESTMENTS--2.7% ---------- U.S. AGENCY OBLIGATIONS $3,350,000 Federal Home Loan Banks, 1.65% 11/1/04 (Cost $3,350,000) ............................. 3,350,000 ------------ Total Investments (Cost $113,844,815) (a) ............................. 99.9% 125,446,900 Other Assets in Excess of Liabilities ................. 0.1 148,035 ------ ------------ Net Assets ............................................ 100.0% $125,594,935 ====== ============ ---------- * Non-income producing security. (#) American Depository Receipts. (a) At October 31, 2004, the net unrealized appreciation on investments, based on cost for federal income tax purposes of $113,981,024, amounted to $11,465,876 which consisted of aggregate gross unrealized appreciation of $13,756,165 and aggregate gross unrealized depreciation of $2,290,289. See Notes to Financial Statements. -28- ALGER BALANCED INSTITUTIONAL FUND FUND HIGHLIGHTS THROUGH OCTOBER 31, 2004 (UNAUDITED) $10,000 HYPOTHETICAL INVESTMENT SINCE INCEPTION DECEMBER 4, 2000 [The following graph was depicted as a line chart in the printed materials.] [LINE CHART] Alger Lehman Russell 12/4/2000 10000 10000 10000 10/31/2001 8200 11317 7067 10/31/2002 6670 11937 5680 10/31/2003 7410 12674 6919 10/31/2004 7504 13382 7216 The chart above illustrates the change in value of a hypothetical $10,000 investment made in the Alger Balanced Institutional Class I shares, the Russell 1000 Growth Index and the Lehman Gov't/Credit Bond Index on December 4, 2000, the inception date of the Alger Balanced Institutional Class I shares, through October 31, 2004. Figures for the Alger Balanced Institutional Class I shares, the Russell 1000 Growth Index (an unmanaged index of common stocks) and the Lehman Gov't/Credit Bond Index (an unmanaged index of government and corporate bonds) include reinvestment of dividends and/or interest. Performance for the Alger Balanced Institutional Class R shares may vary from the results shown above due to differences in expenses the class bears. PERFORMANCE COMPARISON AS OF OCTOBER 31, 2004 AVERAGE ANNUAL RETURNS 1 YEAR SINCE INCEPTION ---------------------------- Class I shares (INCEPTION 12/4/00) 1.27% (7.08)% Russell 1000 Growth Index 3.39% (8.30)% Lehman Gov't/Credit Bond Index 5.59% 7.74% -------------------------------------------------------------------------------- Class R shares (INCEPTION 1/27/03) 0.68% 8.54% Russell 1000 Growth Index 3.39% 16.57% Lehman Gov't/Credit Bond Index 5.59% 5.34% -------------------------------------------------------------------------------- THE FUND'S AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE PRICE AND REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS. THE GRAPH AND TABLE ABOVE DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD HAVE PAID ON THE REDEMPTION OF FUND SHARES. INVESTMENT RETURN AND PRINCIPAL WILL FLUCTUATE AND THE FUND'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. -29- THE ALGER INSTITUTIONAL FUNDS ALGER BALANCED INSTITUTIONAL FUND SCHEDULE OF INVESTMENTS October 31, 2004 SHARES COMMON STOCKS--63.1% VALUE -------- ------- BIOTECHNOLOGY--4.9% 250 Biogen Idec Inc.* ................................ $ 14,540 150 Genentech, Inc.* ................................. 6,830 150 Genzyme Corporation General Division* ............ 7,871 500 Gilead Sciences, Inc.* ........................... 17,315 250 ImClone Systems Incorporated* .................... 10,950 325 OSI Pharmaceuticals, Inc.* ....................... 21,118 ------------ 78,624 ------------ CAPITAL MARKETS--1.6% 150 Affiliated Managers Group, Inc.* ................. 8,376 200 Bank of New York Company, Inc. (The) ............. 6,492 200 T. Rowe Price Group Inc. ......................... 11,154 ------------ 26,022 ------------ CHEMICALS--1.4% 500 Dow Chemical Company (The) ....................... 22,470 ------------ COMMERCIAL BANKS--1.5% 175 Wells Fargo & Company ............................ 10,451 200 Zions Bancorporation ............................. 13,234 ------------ 23,685 ------------ COMMUNICATION EQUIPMENT--4.3% 1,000 Avaya Inc.* ...................................... 14,400 530 Cisco Systems, Inc.* ............................. 10,181 300 Ericsson(LM)Telephone Co., Cl. B ADR*# ........... 8,673 1,250 Motorola, Inc. ................................... 21,575 150 Research In Motion Limited* ...................... 13,230 ------------ 68,059 ------------ COMPUTERS & PERIPHERALS--1.9% 150 Apple Computer, Inc.* ............................ 7,879 1,100 EMC Corporation* ................................. 14,157 300 PalmOne, Inc.* ................................... 8,691 ------------ 30,727 ------------ CONSUMER FINANCE--1.0% 300 American Express Company ......................... 15,921 ------------ DIVERSIFIED FINANCIAL SERVICES--.5% 100 Lehman Brothers Holdings Inc. .................... 8,215 ------------ ELECTRONIC EQUIPMENT & INSTRUMENTS--.9% 950 Symbol Technologies, Inc. ........................ 13,956 ------------ ENERGY EQUIPMENT & SERVICES--2.4% 500 National-Oilwell, Inc.* .......................... 16,855 350 Schlumberger Limited ............................. 22,029 ------------ 38,884 ------------ FOOD & STAPLES RETAILING--3.0% 450 CVS Corporation .................................. 19,557 300 Wal-Mart Stores, Inc. ............................ 16,176 150 Whole Foods Market, Inc. ......................... 12,214 ------------ 47,947 ------------ -30- THE ALGER INSTITUTIONAL FUNDS ALGER BALANCED INSTITUTIONAL FUND SCHEDULE OF INVESTMENTS (CONTINUED) October 31, 2004 SHARES COMMON STOCKS (CONTINUED) VALUE -------- ------- FREIGHT & LOGISTICS--.6% 100 FedEx Corp. ...................................... $ 9,112 ------------ HEALTH CARE EQUIPMENT & SUPPLIES--2.2% 320 Boston Scientific Corporation* ................... 11,296 200 Guidant Corporation .............................. 13,324 200 Medtronic, Inc. .................................. 10,222 ------------ 34,842 ------------ HEALTH CARE PROVIDERS & SERVICES--1.6% 250 Caremark Rx, Inc.* ............................... 7,493 250 UnitedHealth Group Incorporated .................. 18,100 ------------ 25,593 ------------ HOTELS, RESTAURANTS & LEISURE--1.1% 300 Carnival Corporation ............................. 15,168 50 MGM MIRAGE* ...................................... 2,690 ------------ 17,858 ------------ INDUSTRIAL CONGLOMERATES--2.6% 500 General Electric Company ......................... 17,060 800 Tyco International Ltd. .......................... 24,920 ------------ 41,980 ------------ INFORMATION TECHNOLOGY SERVICES--.9% 350 Automatic Data Processing, Inc. .................. 15,187 ------------ INTERNET & CATALOG RETAIL--3.8% 600 IAC/InterActiveCorp.* ............................ 12,972 380 eBay Inc.* ....................................... 37,092 1,200 Netflix Inc.* .................................... 11,364 ------------ 61,428 ------------ INTERNET SOFTWARE & SERVICES--4.3% 95 Google Inc. Cl. A* ............................... 18,117 550 VeriSign, Inc.* .................................. 14,756 1,000 Yahoo! Inc.* ..................................... 36,190 ------------ 69,063 ------------ MACHINERY - OIL WELL EQUIPMENT & SERVICES--.6% 500 Patterson-UTI Energy, Inc. ....................... 9,615 ------------ MEDIA--4.3% 25 DreamWorks Animation SKG, Inc.* .................. 976 1,450 Time Warner Inc.* ................................ 24,128 600 Viacom Inc. Cl. B ................................ 21,894 650 XM Satellite Radio Holdings Inc. Cl. A* .......... 21,008 ------------ 68,006 ------------ METALS & MINING--1.4% 350 Peabody Energy Corporation ....................... 22,323 ------------ -31- THE ALGER INSTITUTIONAL FUNDS ALGER BALANCED INSTITUTIONAL FUND SCHEDULE OF INVESTMENTS (CONTINUED) October 31, 2004 SHARES COMMON STOCKS (CONTINUED) VALUE -------- ------- OIL & GAS--2.1% 200 BP PLC Sponsored ADR# .......................... $ 11,650 100 Devon Energy Corporation ....................... 7,397 150 EOG Resources, Inc. ............................ 9,984 200 Sasol ADR# ..................................... 4,026 ------------ 33,057 ------------ PHARMACEUTICALS--2.4% 1,200 IVAX Corporation* .............................. 21,720 350 Sepracor Inc.* ................................. 16,075 ------------ 37,795 ------------ SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--3.7% 250 Altera Corporation* ............................ 5,683 500 Analog Devices, Inc. ........................... 20,130 550 Applied Materials, Inc.* ....................... 8,855 650 Freescale Semiconductor Inc. Cl. A* ............ 10,101 650 Intel Corporation .............................. 14,469 ------------ 59,238 ------------ SOFTWARE--4.6% 50 Electronic Arts Inc.* .......................... 2,246 1,800 Microsoft Corporation .......................... 50,382 300 Take-Two Interactive Software, Inc.* ........... 9,888 500 VERITAS Software Corporation* .................. 10,940 ------------ 73,456 ------------ SPECIALTY RETAIL--2.1% 400 Bed Bath & Beyond Inc.* ........................ 16,316 300 Lowe's Companies, Inc. ......................... 16,884 ------------ 33,200 ------------ TEXTILES, APPAREL & LUXURY GOODS--.5% 100 Coach, Inc.* ................................... 4,663 100 Polo Ralph Lauren Corporation Cl. A ............ 3,693 ------------ 8,356 ------------ WIRELESS TELECOMMUNICATION SERVICES--.9% 700 Sprint Corporation ............................. 14,665 ------------ Total Common Stocks (Cost $943,022) .............................. 1,009,284 ------------ PRINCIPAL AMOUNT CORPORATE BONDS--8.5% ---------- AEROSPACE & DEFENSE--.3% $ 5,000 United Technologies, 4.875%, 11/1/06 ........... 5,200 ------------ AUTOMOTIVE--1.1% 4,000 General Motors Acceptance Corp., 4.50%, 7/15/06 4,061 13,000 General Motors Acceptance Corp., 7.75%, 1/19/10 14,204 ------------ 18,265 ------------ -32- THE ALGER INSTITUTIONAL FUNDS ALGER BALANCED INSTITUTIONAL FUND SCHEDULE OF INVESTMENTS (CONTINUED) October 31, 2004 PRINCIPAL AMOUNT CORPORATE BONDS (CONTINUED) VALUE -------- ------- CAPITAL MARKETS--.2% $ 3,000 J.P. Morgan Chase & Co., 3.625%, 5/1/08 ........ $ 3,017 ------------ COMMERCIAL BANKS--.6% 4,000 Associates Corp. North America, 6.95%, 11/1/18 . 4,718 5,000 Bank of America Corp., 5.375%, 6/15/14 ......... 5,262 ------------ 9,980 ------------ COMMUNICATION SERVICES--1.0% 15,000 AT&T Wireless Services Inc., 7.50%, 5/1/07 ..... 16,544 ------------ COMPUTERS & PERIPHERALS--.3% 4,000 International Business Machines Corp., 8.375%, 11/1/19 .............................. 5,331 ------------ DIVERSIFIED FINANCIAL SERVICES--.5% 7,000 Household Finance Corp., 4.75%, 7/15/13 ........ 7,002 ------------ DIVERSIFIED TELECOMMUNICATION SERVICES--.4% 6,000 Verizon New York Inc. Series A, 6.875%, 4/1/12 . 6,787 ------------ FOOD CHAINS--.2% 3,000 Fred Meyer,Inc. Sr. Notes, 7.45%, 3/1/08 ....... 3,358 ------------ FOOD PRODUCTS--.6% 5,000 Kellogg Co. Senior Note, 2.875%, 6/1/08 ........ 4,905 3,000 Kraft Foods Inc., 6.25%, 6/1/12 ................ 3,307 ------------ 8,212 ------------ INDUSTRIAL CONGLOMERATES--1.2% 8,000 General Electric Company, 5.00%, 2/1/13 ........ 8,307 10,000 Tyco International Group SA, 6.00%, 11/15/13 ... 10,944 ------------ 19,251 ------------ MEDIA--.8% 3,000 Comcast Corporation, 6.50%, 1/15/15 ............ 3,287 5,000 Cox Enterprises, Inc., 4.375%, 5/1/08 (a) ...... 4,963 5,000 Liberty Media Corporation Floating Rate Note, 3.02%, 9/17/06 ............................... 5,058 ------------ 13,308 ------------ PAPER & FOREST PRODUCTS--1.0% 15,000 Domtar Inc., 8.75%, 8/1/06 ..................... 16,325 ------------ UTILITIES--.3% 4,000 Southern California Edison Co., 5.00%, 1/15/14 . 4,105 ------------ Total Corporate Bonds (Cost $135,665) .............................. 136,685 ------------ -33- THE ALGER INSTITUTIONAL FUNDS ALGER BALANCED INSTITUTIONAL FUND SCHEDULE OF INVESTMENTS (CONTINUED) October 31, 2004 PRINCIPAL AMOUNT VALUE -------- ------- U.S. GOVERNMENT & AGENCY OBLIGATIONS--20.3% Federal National Mortgage Association, $ 18,000 1.875%, 9/15/05 .............................. $ 17,928 10,000 2.30%, 1/20/06 ............................... 9,978 25,000 3.125%, 7/15/06 .............................. 25,194 7,000 3.25%, 8/15/08 ............................... 6,988 5,000 4.25%, 5/15/09 ............................... 5,152 15,000 4.125%, 4/15/14 .............................. 14,661 5,000 6.625%, 11/15/30 ............................. 5,958 Federal Home Loan Mortgage Corporation, 5,000 4.25%, 7/15/09 ............................... 5,150 5,000 6.25%, 7/15/32 ............................... 5,751 U.S. Treasury Notes, 17,000 3.50%, 11/15/06 .............................. 17,318 73,000 3.25%, 8/15/07 ............................... 73,967 5,000 3.125%, 9/15/08 .............................. 5,016 27,000 4.375%, 8/15/12 .............................. 28,015 10,000 4.75%, 5/15/14 ............................... 10,577 U.S. Treasury Bonds, 13,000 7.25%, 5/15/16 ............................... 16,495 5,000 7.50%, 11/15/16 .............................. 6,477 6,000 6.25%, 8/15/23 ............................... 7,089 41,000 6.875%, 8/15/25 .............................. 52,080 10,000 5.375%, 2/15/31 .............................. 10,864 ------------ Total U.S. Government & Agency Obligations (Cost $320,512) .............................. 324,658 ------------ Total Investments (Cost $1,399,199)(b) ............................... 91.9% 1,470,627 Other Assets in Excess of Liabilities ................ 8.1 130,065 ----- ------------ Net Assets ........................................... 100.0% $ 1,600,692 ===== ============ ---------- * Non-income producing security. (#) American Depository Receipts. (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, 2004, the net unrealized appreciation on investments, based on cost for federal income tax purposes of $1,414,809, amounted to $55,818 which consisted of aggregate gross unrealized appreciation of $98,570 and aggregate gross unrealized depreciation of $42,752. See Notes to Financial Statements. -34- ALGER SOCIALLY RESPONSIBLE GROWTH INSTITUTIONAL FUND FUND HIGHLIGHTS THROUGH OCTOBER 31, 2004 (UNAUDITED) $10,000 HYPOTHETICAL INVESTMENT SINCE INCEPTION DECEMBER 4, 2000 [The following graph was depicted as a line chart in the printed materials.] [LINE CHART] Alger Russell 12/4/2000 10000 10000 10/31/2001 6370 7305 10/31/2002 4430 5863 10/31/2003 5380 7232 10/31/2004 5396 7504 The chart above illustrates the change in value of a hypothetical $10,000 investment made in the Alger Socially Responsible Growth Institutional Class I shares and the Russell 3000 Growth Index on December 4, 2000, the inception date of the Alger Socially Responsible Growth Institutional Class I shares, through October 31, 2004. Figures for the Alger Socially Responsible Growth Institutional Class I shares and the Russell 3000 Growth Index (an unmanaged index of common stocks) include reinvestment of dividends. Performance for the Alger Socially Responsible Growth Institutional Class R shares may vary from the results shown above due to differences in expenses the class bears. PERFORMANCE COMPARISON AS OF OCTOBER 31, 2004 AVERAGE ANNUAL RETURNS 1 YEAR SINCE INCEPTION -------------------------- Class I (INCEPTION 12/4/00) 0.30% (14.59)% Russell 3000 Growth Index 3.53% (7.13)% -------------------------------------------------------------------------------- Class R (INCEPTION 1/27/03) (0.07)% 16.00% Russell 3000 Growth Index 3.53% 17.32% -------------------------------------------------------------------------------- THE FUND'S AVERAGE ANNUAL TOTAL RETURNS INCLUDE CHANGES IN SHARE PRICE AND REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS. THE GRAPH AND TABLE ABOVE DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD HAVE PAID ON THE REDEMPTION OF FUND SHARES. INVESTMENT RETURN AND PRINCIPAL WILL FLUCTUATE AND THE FUND'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS. -35- THE ALGER INSTITUTIONAL FUNDS ALGER SOCIALLY RESPONSIBLE GROWTH INSTITUTIONAL FUND SCHEDULE OF INVESTMENTS October 31, 2004 SHARES COMMON STOCKS--86.7% VALUE -------- ------- BIOTECHNOLOGY--7.5% 550 Biogen Idec Inc.* .............................. $ 31,988 300 Genentech, Inc.* ............................... 13,659 300 Genzyme Corporation General Division* .......... 15,741 900 Gilead Sciences, Inc.* ......................... 31,167 50 ImClone Systems Incorporated* .................. 2,190 150 OSI Pharmaceuticals, Inc.* ..................... 9,747 ------------ 104,492 ------------ BUSINESS SERVICES--.9% 200 MicroStrategy Incorporated* .................... 11,996 ------------ CAPITAL MARKETS--.8% 100 Bank of New York Company, Inc. (The) ........... 3,246 150 Merrill Lynch & Co., Inc. ...................... 8,091 ------------ 11,337 ------------ CHEMICALS--1.5% 600 Lubrizol Corporation ........................... 20,838 ------------ COMMERCIAL BANKS--.4% 100 Wells Fargo & Company .......................... 5,972 ------------ COMMERCIAL SERVICES & SUPPLIES--1.5% 400 First Marblehead Corporation (The)* ............ 21,440 ------------ COMMUNICATION EQUIPMENT--6.1% 550 Motorola, Inc. ................................. 9,493 1,600 Nokia Oyj ADR# ................................. 24,672 450 QUALCOMM Inc. .................................. 18,815 350 Research In Motion Limited* .................... 30,870 ------------ 83,850 ------------ COMPUTERS & PERIPHERALS--4.2% 500 Apple Computer, Inc.* .......................... 26,265 1,100 PalmOne, Inc.* ................................. 31,867 ------------ 58,132 ------------ COMPUTER SOFTWARE--1.1% 700 Check Point Software Technologies Ltd.* ........ 15,835 ------------ COMPUTER TECHNOLOGY--1.3% 450 NAVTEQ* ........................................ 18,139 ------------ DIVERSIFIED FINANCIAL SERVICES--.9% 150 Lehman Brothers Holdings Inc. .................. 12,322 ------------ ENERGY EQUIPMENT & SERVICES--2.1% 850 National-Oilwell, Inc.* ........................ 28,653 ------------ FOOD & STAPLES RETAILING--1.6% 525 CVS Corporation ................................ 22,816 ------------ FREIGHT & LOGISTICS--1.0% 150 FedEx Corp. .................................... 13,668 ------------ -36- THE ALGER INSTITUTIONAL FUNDS ALGER SOCIALLY RESPONSIBLE GROWTH INSTITUTIONAL FUND SCHEDULE OF INVESTMENTS (CONTINUED) October 31, 2004 SHARES COMMON STOCKS (CONTINUED) VALUE -------- ------- HEALTH CARE EQUIPMENT & SUPPLIES--3.7% 350 Fisher Scientific International Inc.* .......... $ 20,076 200 Guidant Corporation ............................ 13,324 350 Kinetic Concepts, Inc.* ........................ 17,440 ------------ 50,840 ------------ HEALTH CARE PROVIDERS & SERVICES--2.5% 350 AMERIGROUP Corporation* ........................ 21,000 150 Quest Diagnostics Incorporated ................. 13,131 ------------ 34,131 ------------ HOTELS, RESTAURANTS & LEISURE--.7% 200 Royal Caribbean Cruises Ltd. ................... 9,320 ------------ HOUSEHOLD DURABLES--.4% 100 Garmin Ltd. .................................... 5,000 ------------ INDUSTRIAL CONGLOMERATES--1.5% 650 Tyco International Ltd. ........................ 20,248 ------------ INFORMATION TECHNOLOGY SERVICES--1.3% 300 Accenture Ltd. Cl. A* .......................... 7,263 300 Cognizant Technology Solutions Corporation Cl. A* 10,200 ------------ 17,463 ------------ INTERNET & CATALOG RETAIL--3.6% 400 eBay Inc.* ..................................... 39,044 500 IAC/InterActiveCorp.* .......................... 10,810 ------------ 49,854 ------------ INTERNET SOFTWARE & SERVICES--4.1% 200 Netease.com Inc. ADR*# ......................... 9,302 1,300 Yahoo! Inc.* ................................... 47,047 ------------ 56,349 ------------ LEISURE & ENTERTAINMENT--.9% 400 Shanda Interactive Entertainment Ltd.* ......... 12,156 ------------ MACHINERY - OIL WELL EQUIPMENT & SERVICES--1.0% 700 Patterson-UTI Energy, Inc. ..................... 13,461 ------------ MEDIA--4.6% 25 DreamWorks Animation SKG, Inc.* ................ 976 3,250 Sirius Satellite Radio Inc.* ................... 12,675 1,900 Time Warner Inc.* .............................. 31,616 500 Viacom Inc. Cl. B .............................. 18,245 ------------ 63,512 ------------ MEDICAL DEVICES--1.0% 350 Advanced Medical Optics, Inc.* ................. 13,685 ------------ METALS & MINING--1.6% 350 Peabody Energy Corporation ..................... 22,323 ------------ -37- THE ALGER INSTITUTIONAL FUNDS ALGER SOCIALLY RESPONSIBLE GROWTH INSTITUTIONAL FUND SCHEDULE OF INVESTMENTS (CONTINUED) October 31, 2004 SHARES COMMON STOCKS (CONTINUED) VALUE -------- ------- MULTILINE RETAIL--.7% 200 Kohl's Corporation* ............................ $ 10,152 ------------ OFFICE EQUIPMENT--1.0% 275 Zebra Technologies Corporation* ................ 14,572 ------------ OIL & GAS--3.8% 250 BP PLC Sponsored ADR# .......................... 14,562 250 EOG Resources, Inc. ............................ 16,640 400 Talisman Energy Inc. ........................... 10,748 225 Teekay Shipping Corporation .................... 10,395 ------------ 52,345 ------------ PHARMACEUTICALS--6.0% 250 Allergan, Inc. ................................. 17,890 1,100 IVAX Corporation* .............................. 19,910 50 Novartis AG ADR# ............................... 2,401 450 Pfizer Inc. .................................... 13,028 700 Schering-Plough Corporation .................... 12,677 150 Sepracor Inc.* ................................. 6,890 400 Teva Pharmaceutical Industries Ltd. ADR# ....... 10,400 ------------ 83,196 ------------ ROAD & RAIL--1.2% 400 Burlington Northern Santa Fe Corporation ....... 16,724 ------------ SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT--3.2% 650 Broadcom Corporation Cl. A* .................... 17,583 300 Intel Corporation .............................. 6,678 150 Novellus Systems, Inc.* ........................ 3,887 1,900 Skyworks Solutions, Inc.* ...................... 16,891 ------------ 45,039 ------------ SOFTWARE--8.0% 300 Cognos, Inc.* .................................. 11,853 800 Fair Isaac Corporation ......................... 24,160 350 Mercury Interactive Corporation* ............... 15,200 2,000 Microsoft Corporation .......................... 55,980 300 Red Hat, Inc.* ................................. 3,852 ------------ 111,045 ------------ SPECIALTY RETAIL--3.1% 400 Bed Bath & Beyond Inc.* ........................ 16,316 250 Lowe's Companies, Inc. ......................... 14,070 350 Tractor Supply Company* ........................ 12,698 ------------ 43,084 ------------ TEXTILES, APPAREL & LUXURY GOODS--1.2% 200 Coach, Inc.* ................................... 9,326 200 Polo Ralph Lauren Corporation Cl. A ............ 7,386 ------------ 16,712 ------------ -38- THE ALGER INSTITUTIONAL FUNDS ALGER SOCIALLY RESPONSIBLE GROWTH INSTITUTIONAL FUND SCHEDULE OF INVESTMENTS (CONTINUED) October 31, 2004 SHARES COMMON STOCKS (CONTINUED) VALUE -------- ------- WIRELESS TELECOMMUNICATION SERVICES--.7% 200 SpectraSite, Inc.* ............................. $ 10,260 ------------ Total Common Stocks (Cost $1,079,290) ............................ 1,200,961 ------------ Total Investments (Cost $1,079,290)(a) ............................... 86.7% 1,200,961 Other assets in Excess of Liabilities ................ 13.3 183,455 ----- ----------- Net Assets ........................................... 100.0% $ 1,384,416 ===== =========== ---------- * Non-income producing security. # American Depository Receipts. (a) At October 31, 2004, the net unrealized appreciation on investments, based on cost for federal income tax purposes of $1,080,612, amounted to $120,349 which consisted of aggregate gross unrealized appreciation of $144,342 and aggregate gross unrealized depreciation of $23,993. See Notes to Financial Statements. (This Page Intentionally Left Blank) -40- THE ALGER INSTITUTIONAL FUNDS FINANCIAL HIGHLIGHTS FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
Income from Investment Operations -------------------------- Net Realized and Net Net Asset Net Unrealized Total Distributions Asset Value, Investment Gain from from Value, Beginning Income (Loss) on Investment Net Realized End of of Period (Loss)(iv) Investments Operations Gains Period --------- ---------- ------------ ---------- ------------- ------ ALGER LARGECAP GROWTH INSTITUTIONAL FUND (I) CLASS I Year ended 10/31/04 ............. $10.71 $(0.06) $ 0.21 $ 0.15 $ -- $10.86 Year ended 10/31/03 ............. 8.70 (0.03) 2.04 2.01 -- 10.71 Year ended 10/31/02 ............. 11.63 (0.03) (2.90) (2.93) -- 8.70 Year ended 10/31/01 ............. 17.15 (0.03) (4.50) (4.53) (0.99) 11.63 Year ended 10/31/00 ............. 17.17 (0.03) 1.92 1.89 (1.91) 17.15 CLASS R Year ended 10/31/04 ............. $10.66 $(0.12) $ 0.22 $ 0.10 $ -- $10.76 From 1/27/03 to 10/31/03(iii)(v) 8.12 (0.06) 2.60 2.54 -- 10.66 ALGER SMALLCAP GROWTH INSTITUTIONAL FUND (II) CLASS I Year ended 10/31/04 ............. $15.10 $(0.16) $ 1.13 $ 0.97 $ -- $16.07 Year ended 10/31/03 ............. 10.97 (0.12) 4.25 4.13 -- 15.10 Year ended 10/31/02 ............. 13.35 (0.13) (2.25) (2.38) -- 10.97 Year ended 10/31/01 ............. 23.78 (0.08) (10.35) (10.43) -- 13.35 Year ended 10/31/00 ............. 22.82 (0.06) 2.50 2.44 (1.48) 23.78 CLASS R Year ended 10/31/04 ............. $15.05 $(0.25) $ 1.13 $ 0.88 $ -- $15.93 From 1/27/03 to 10/31/03(iii)(v) 10.72 (0.14) 4.47 4.33 -- 15.05 ALGER MIDCAP GROWTH INSTITUTIONAL FUND (VI) CLASS I Year ended 10/31/04 ............. $14.78 $(0.13) $ 0.73 $ 0.60 $ -- $15.38 Year ended 10/31/03 ............. 10.76 (0.11) 4.13 4.02 -- 14.78 Year ended 10/31/02 ............. 13.34 (0.10) (2.48) (2.58) -- 10.76 Year ended 10/31/01 ............. 17.53 (0.08) (3.44) (3.52) (0.67) 13.34 Year ended 10/31/00 ............. 11.80 (0.04) 6.07 6.03 (0.30) 17.53 CLASS R Year ended 10/31/04 ............. $14.73 $(0.21) $ 0.73 $ 0.52 $ -- $15.25 From 1/27/03 to 10/31/03(iii)(v) 10.25 (0.14) 4.62 4.48 -- 14.73
---------- (i) Prior to February 28, 2004, the Alger LargeCap Growth Institutional Fund was the Alger LargeCap Growth Institutional Portfolio and prior to March 1, 2002 it was the Alger Growth Retirement Portfolio. (ii) Prior to February 28, 2004, the Alger SmallCap Growth Institutional Fund was the Alger Small Cap Institutional Portfolio. (iii) Commenced operations January 27, 2003. (iv) Amount was computed based on average shares outstanding during the period. (v) Ratios have been annualized; total return has not been annualized. (vi) Prior to February 28, 2004, the Alger MidCap Growth Institutional Fund was the Alger MidCap Growth Institutional Portfolio. See Notes to Financial Statements. -41-
Ratios/Supplemental Data -------------------------------------------------------- Net Ratio of Ratio of Net Assets, Expenses Investment End of to Income Period Average (Loss) to Portfolio Total (000's Net Average Turnover Return omitted) Assets Net Assets Rate ------ -------- -------- ------------ --------- 1.4% $ 88,098 1.13% (0.51)% 191.48% 23.1 91,588 1.14 (0.31) 255.49 (25.2) 108,660 1.14 (0.24) 202.07 (27.5) 97,308 1.09 (0.20) 89.54 10.3 126,573 1.06 (0.16) 101.29 0.9% $ 2,493 1.64% (1.05)% 191.48% 31.3 133 1.62 (0.84) 255.49 6.4% $ 69,788 1.25% (1.03)% 135.80% 37.7 93,300 1.24 (0.99) 139.97 (17.8) 62,780 1.25 (1.01) 138.01 (43.9) 86,790 1.19 (0.46) 191.89 10.1 187,973 1.17 (0.23) 242.45 5.8% $ 284 1.75% (1.55)% 135.80% 40.4 70 1.74 (1.49) 139.97 4.1% $839,273 1.15% (0.87)% 190.93% 37.4 540,742 1.17 (0.89) 217.33 (19.3) 215,727 1.17 (0.81) 284.69 (20.6) 217,153 1.13 (0.51) 130.93 51.3 177,566 1.12 (0.24) 113.14 3.5% $ 12,000 1.65% (1.37)% 190.93% 43.7 790 1.66 (1.40) 217.33
-42- THE ALGER INSTITUTIONAL FUNDS FINANCIAL HIGHLIGHTS FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
Income from Investment Operations ------------------------------ Net Realized and Net Net Asset Net Unrealized Total Distributions Asset Value, Investment Gain from from Value, Beginning Income (Loss) on Investment Net Realized End of of Period (Loss)(iii) Investments Operations Gains Period --------- ----------- ------------ ---------- ------------- ------ ALGER CAPITAL APPRECIATION INSTITUTIONAL FUND (IX) CLASS I Year ended 10/31/04 ...................... $11.06 $(0.10) $ 0.09 $ (0.01) $ -- $11.05 Year ended 10/31/03 ...................... 8.97 (0.06) 2.15 2.09 -- 11.06 Year ended 10/31/02 ...................... 11.66 (0.08) (2.61) (2.69) -- 8.97 Year ended 10/31/01 ...................... 18.12 (0.03) (6.37) (6.40) (0.06) 11.66 Year ended 10/31/00 ...................... 16.19 (0.09) 2.24 2.15 (0.22) 18.12 CLASS R Year ended 10/31/04 ...................... $11.01 $(0.16) $ 0.10 $ (0.06) $ -- $10.95 From 1/27/03 to 10/31/03(ii)(iv) ......... 8.36 (0.08) 2.73 2.65 -- 11.01 ALGER BALANCED INSTITUTIONAL FUND (X) CLASS I Year ended 10/31/04 ...................... $ 7.41 $ 0.02 $ 0.07 $ 0.09 $ -- $ 7.50 Year ended 10/31/03 ...................... 6.67 (0.01) 0.75 0.74 -- 7.41 Year ended 10/31/02 ...................... 8.20 (0.39) (1.14) (1.53) -- 6.67 From 12/4/00 to 10/31/01(i)(iv) .......... 10.00 (0.11) (1.69) (1.80) -- 8.20 CLASS R Year ended 10/31/04 ...................... $ 7.38 $(0.02) $ 0.07 $ 0.05 $ -- $ 7.43 From 1/27/03 to 10/31/03(ii)(iv) ......... 6.43 (0.04) 0.99 0.95 -- 7.38 ALGER SOCIALLY RESPONSIBLE GROWTH INSTITUTIONAL FUND (XI) CLASS I Year ended 10/31/04 ...................... $ 5.38 $(0.05) $ 0.07 $ 0.02 $ (0.03) $ 5.37 Year ended 10/31/03 ...................... 4.43 (0.09) 1.04 0.95 -- 5.38 Year ended 10/31/02 ...................... 6.37 (0.77) (1.17) (1.94) -- 4.43 From 12/4/00 to 10/31/01(i)(iv) .......... 10.00 (0.30) (3.33) (3.63) -- 6.37 CLASS R Year ended 10/31/04 ...................... $ 5.37 $(0.08) $ 0.08 $ -- $ (0.03) $ 5.34 From 1/27/03 to 10/31/03(ii)(iv) ......... 4.13 (0.08) 1.32 1.24 -- 5.37
---------- (i) Commenced operations December 4, 2000. (ii) Commenced operations January 27, 2003. (iii) Amount was computed based on average shares outstanding during the period. (iv) Ratios have been annualized; total return has not been annualized. (v) Amount has been reduced by 1.01% due to expense reimbursement. (vi) Amount has been reduced by 1.00% due to expense reimbursement. (vii) Amount has been reduced by .090% due to expense reimbursement. (viii) Amount has been reduced by .094% due to expense reimbursement. (ix) Prior to February 28, 2004 the Alger Capital Appreciation Institutional Fund was the Alger Capital Appreciation Institutional Portfolio. (x) Prior to February 28, 2004 the Alger Socially Responsible Growth Institutional Fund was the Alger Socially Responsible Growth Institutional Portfolio. (xi) Prior to February 28, 2004 the Alger Balanced Institutional Fund was the Alger Balanced Institutional Portfolio. See Notes to Financial Statements. -43-
Ratios/Supplemental Data ---------------------------------------------------------------- Net Ratio of Ratio of Net Assets, Expenses Investment End of to Income Period Average (Loss) to Portfolio Total (000's Net Average Turnover Return omitted) Assets Net Assets Rate ------ -------- -------- ------------ --------- (0.1)% $124,889 1.23% (0.87)% 160.00% 23.3 160,569 1.23 (0.59) 187.72 (23.1) 132,010 1.23 (0.73) 180.39 (35.4) 187,187 1.18 (0.21) 104.17 13.1 279,916 1.14 (0.43) 144.16 (0.5)% $ 706 1.73% (1.39)% 160.00% 31.7 66 1.72 (1.01) 187.72 1.3% $ 1,435 1.35%(v) 0.28% 184.21% 11.1 1,409 2.00 (0.15) 149.42 (18.7) 225 6.72 (5.21) 321.89 (18.0) 108 3.13 (1.44) 15.99 0.7% $ 166 1.82%(vi) (0.28)% 184.21% 14.8 58 2.56 (0.74) 149.42 0.3% $ 1,277 1.34%(vii) (1.04)% 166.03% 21.4 1,277 2.26 (1.69) 187.82 (30.5) 46 13.48 (13.17) 205.83 (36.3) 77 5.31 (4.75) 114.33 (0.1)% $ 107 1.83%(viii) (1.53)% 166.03% 30.0 66 2.92 (2.29) 187.82
-44- THE ALGER INSTITUTIONAL FUNDS STATEMENTS OF ASSETS AND LIABILITIES October 31, 2004
LargeCap SmallCap Growth Growth Fund Fund ------------- ------------- ASSETS: Investments in securities, at value (identified cost*) --see accompanying schedules of investments ....... $ 92,046,242 $ 70,343,552 Cash ................................................. 47,594 27,153 Receivable for investment securities sold ............ 633,751 2,363,343 Receivable for shares of beneficial interest sold .... 122,555 18,724 Dividends and interest receivable .................... 19,066 1,300 Receivable from Investment Manager--Note 3(a) ........ -- -- Prepaid expenses ..................................... 12,760 13,676 ------------- ------------- Total Assets ....................................... 92,881,968 72,767,748 ------------- ------------- LIABILITIES: Payable for investment securities purchased .......... 2,093,425 2,572,737 Payable for shares of beneficial interest redeemed ... 88,526 31,101 Accrued investment management fees ................... 57,127 50,452 Accrued transfer agent fees .......................... 3,808 2,968 Accrued expenses ..................................... 47,778 38,555 ------------- ------------- Total Liabilities .................................. 2,290,664 2,695,813 ------------- ------------- NET ASSETS ........................................... $ 90,591,304 $ 70,071,935 ============= ============= Net Assets Consist of: Paid-in capital .................................... $ 123,461,546 $ 140,569,199 Accumulated net investment loss .................... -- -- Undistributed net realized gain (accumulated loss) . (39,212,505) (75,073,513) Net unrealized appreciation (depreciation) ......... 6,342,263 4,576,249 ------------- ------------- NET ASSETS ........................................... $ 90,591,304 $ 70,071,935 ============= ============= Shares of beneficial interest outstanding--Note 6 Class I ........................................... 8,114,060 4,342,776 ============= ============= Class R ........................................... 231,673 17,795 ============= ============= Net Asset Value Per Share Class I ........................................... $ 10.86 $ 16.07 ============= ============= Class R ........................................... $ 10.76 $ 15.93 ============= ============= *Identified cost ..................................... $ 85,703,979 $ 65,767,303 ============= =============
See Notes to Financial Statements. -45-
Socially MidCap Capital Responsible Growth Appreciation Balanced Growth Fund Fund Fund Fund ------------- ------------- ------------- ------------- $ 857,786,862 $ 125,446,900 $ 1,470,627 $ 1,200,961 52,686 55,639 108,435 186,753 54,445,170 3,597,296 30,354 35,106 1,760,598 150,658 62 855 138,160 4,174 6,471 43 -- -- 2,152 1,079 109,573 19,828 300 607 ------------- ------------- ------------- ------------- 914,293,049 129,274,495 1,618,401 1,425,404 ------------- ------------- ------------- ------------- 61,501,490 3,241,305 9,421 33,825 588,342 283,562 -- -- 563,250 90,351 1,012 869 35,203 5,315 67 58 331,840 59,027 7,209 6,236 ------------- ------------- ------------- ------------- 63,020,125 3,679,560 17,709 40,988 ------------- ------------- ------------- ------------- $ 851,272,924 $ 125,594,935 $ 1,600,692 $ 1,384,416 ============= ============= ============= ============= $ 789,631,043 $ 237,551,496 $ 1,498,150 $ 1,200,226 -- -- 3,078 -- 8,940,240 (123,558,646) 28,036 62,519 52,701,641 11,602,085 71,428 121,671 ------------- ------------- ------------- ------------- $ 851,272,924 $ 125,594,935 $ 1,600,692 $ 1,384,416 ============= ============= ============= ============= 54,585,000 11,302,740 191,381 237,739 ============= ============= ============= ============= 787,039 64,438 22,274 20,030 ============= ============= ============= ============= $ 15.38 $ 11.05 $ 7.50 $ 5.37 ============= ============= ============= ============= $ 15.25 $ 10.95 $ 7.43 $ 5.34 ============= ============= ============= ============= $ 805,085,221 $ 113,844,815 $ 1,399,199 $ 1,079,290 ============= ============= ============= =============
-46- THE ALGER INSTITUTIONAL FUNDS STATEMENTS OF OPERATIONS For the year ended October 31, 2004
LargeCap SmallCap Growth Growth Fund Fund ------------ ------------ INVESTMENT INCOME Income: Dividends ............................. $ 569,956 $ 156,346 Interest .............................. 15,246 36,789 Security Lending ..................... 8,375 1,944 ------------ ------------ Total income ......................... 593,577 195,079 ------------ ------------ Expenses: Management fees--Note 3(a) ............ 722,861 759,625 Shareholder servicing fees ............ 240,953 223,419 Custodian fees ........................ 25,153 33,686 Transfer agent fees--Note 3(d) ........ 48,191 44,684 Professional Fees ..................... 11,870 11,991 Printing Fees ......................... 20,388 20,801 Distribution fees--Note 3(b) .......... 6,675 696 Trustees' fees ........................ 2,919 2,699 Interest expense ...................... 1,872 2,230 Miscellaneous ......................... 13,844 13,685 ------------ ------------ 1,094,726 1,113,516 Less expense reimbursement--Note 3(a) ... -- -- ------------ ------------ Total Expenses ........................ 1,094,726 1,113,516 ------------ ------------ NET INVESTMENT INCOME (LOSS) ............ (501,149) (918,437) ------------ ------------ REALIZED AND UNREALIZED GAIN ON INVESTMENTS: Net realized gain on investments ...... 8,360,426 19,348,420 Net change in unrealized appreciation (depreciation) on investments ........ (6,519,566) (13,191,873) ------------ ------------ Net realized and unrealized gain (loss) on investments ..................... 1,840,860 6,156,547 ------------ ------------ NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .................... $ 1,339,711 $ 5,238,110 ============ ============
See Notes to Financial Statements. -47-
Socially MidCap Capital Responsible Growth Appreciation Balanced Growth Fund Fund Fund Fund ------------ ------------ ------------ ------------ $ 1,607,559 $ 492,699 $ 5,457 $ 4,110 354,657 31,702 19,272 35 60,057 17,672 -- -- ------------ ------------ ------------ ------------ 2,022,273 542,073 24,729 4,145 ------------ ------------ ------------ ------------ 5,780,662 1,284,598 11,466 10,445 1,806,457 377,823 -- -- 97,750 27,281 11,875 9,318 361,291 75,565 764 696 42,648 12,889 9,121 8,016 130,640 31,810 1,072 1,103 32,805 2,651 386 457 21,936 4,582 46 42 379 19,815 -- -- 99,962 27,547 1,675 1,584 ------------ ------------ ------------ ------------ 8,374,530 1,864,561 36,405 31,661 -- -- (15,464) (12,530) ------------ ------------ ------------ ------------ 8,374,530 1,864,561 20,941 19,131 ------------ ------------ ------------ ------------ (6,352,257) (1,322,488) 3,788 (14,986) ------------ ------------ ------------ ------------ 38,265,061 10,282,251 45,169 62,678 (10,878,579) (8,886,695) (31,014) (41,602) ------------ ------------ ------------ ------------ 27,386,482 1,395,556 14,155 21,076 ------------ ------------ ------------ ------------ $ 21,034,225 $ 73,068 $ 17,943 $ 6,090 ============ ============ ============ ============
-48- THE ALGER INSTITUTIONAL FUNDS STATEMENTS OF CHANGES IN NET ASSETS For the year ended October 31, 2004
LargeCap SmallCap Growth Growth Fund Fund ------------- ------------- Net investment income (loss) .................... $ (501,149) $ (918,437) Net realized gain on investments ................ 8,360,426 19,348,420 Net change in unrealized appreciation (depreciation) on investments ................ (6,519,566) (13,191,873) ------------- ------------- Net increase in net assets resulting from operations .................... 1,339,711 5,238,110 ------------- ------------- Dividends and distributions to shareholders from: Net investment income Class I ...................................... -- -- Class R ...................................... -- -- Net realized gains Class I ...................................... -- -- Class R ...................................... -- -- ------------- ------------- Total Dividends and distributions to shareholders -- -- ------------- ------------- Increase (decrease) from shares of beneficial interest transactions: Class I ...................................... (4,892,989) (28,739,464) Class R ...................................... 2,423,531 203,378 ------------- ------------- Net increase (decrease) from shares of beneficial interest transactions--Note 6 ......................... (2,469,458) (28,536,086) ------------- ------------- Total increase (decrease) ................... (1,129,747) (23,297,976) Net Assets: Beginning of year ............................. 91,721,051 93,369,911 ------------- ------------- End of year ................................... $ 90,591,304 $ 70,071,935 ============= ============= Undistributed net investment income (accumulated loss) ........................... $ (501,149) $ (918,437) ============= =============
THE ALGER INSTITUTIONAL FUNDS STATEMENTS OF CHANGES IN NET ASSETS For the year ended October 31, 2003
LargeCap SmallCap Growth Growth Fund Fund ------------- ------------- Net investment income (loss) ................. $ (261,009) $ (710,692) Net realized gain on investments ............. 1,152,603 6,987,791 Net change in unrealized appreciation (depreciation) on investments ............. 15,611,686 18,406,668 ------------- ------------- Net increase in net assets resulting from operations ........................... 16,503,280 24,683,767 Increase (decrease) from shares of beneficial interest transactions: Class I ................................... (33,554,980) 5,856,223 Class R ................................... 113,202 50,000 ------------- ------------- Net increase (decrease) from shares of beneficial interest transactions--Note 6 (33,441,778) 5,906,223 ------------- ------------- Total increase (decrease) ................ (16,938,498) 30,589,990 Net Assets: Beginning of year .......................... 108,659,549 62,779,921 ------------- ------------- End of year ................................ $ 91,721,051 $ 93,369,911 ============= ============= Accumulated net investment loss .............. $ -- $ -- ============= =============
See Notes to Financial Statements. -49-
Socially MidCap Capital Responsible Growth Appreciation Balanced Growth Fund Fund Fund Fund ------------- ------------- ------------- ------------- $ (6,352,257) $ (1,322,488) $ 3,788 $ (14,986) 38,265,061 10,282,251 45,169 62,678 (10,878,579) (8,886,695) (31,014) (41,602) ------------- ------------- ------------- ------------- 21,034,225 73,068 17,943 6,090 ------------- ------------- ------------- ------------- -- -- (756) -- -- -- -- -- -- -- -- (6,181) -- -- -- (397) ------------- ------------- ------------- ------------- -- -- (756) (6,578) ------------- ------------- ------------- ------------- 277,510,949 (35,772,587) 11,547 951 11,195,628 659,615 105,281 40,664 ------------- ------------- ------------- ------------- 288,706,577 (35,112,972) 116,828 41,615 ------------- ------------- ------------- ------------- 309,740,802 (35,039,904) 134,015 41,127 541,532,122 160,634,839 1,466,677 1,343,289 ------------- ------------- ------------- ------------- $ 851,272,924 $ 125,594,935 $ 1,600,692 $ 1,384,416 ============= ============= ============= ============= $ (6,352,257) $ (1,322,488) $ 1,274 $ (14,986) ============= ============= ============= =============
Socially MidCap Capital Responsible Growth Appreciation Balanced Growth Fund Fund Fund Fund ------------- ------------- ------------- ------------- $ (2,845,362) $ (810,731) $ (2,146) $ (19,332) 56,150,560 6,960,195 38,966 71,228 62,853,285 24,157,024 99,718 164,707 ------------- ------------- ------------- ------------- 116,158,483 30,306,488 136,538 216,603 208,938,090 (1,731,344) 1,055,634 1,029,125 708,160 50,000 50,000 51,231 ------------- ------------- ------------- ------------- 209,646,250 (1,681,344) 1,105,634 1,080,356 ------------- ------------- ------------- ------------- 325,804,733 28,625,144 1,242,172 1,296,959 215,727,389 132,009,695 224,505 46,330 ------------- ------------- ------------- ------------- $ 541,532,122 $ 160,634,839 $ 1,466,677 $ 1,343,289 ============= ============= ============= ============= $ -- $ -- $ (1,758) $ -- ============= ============= ============= =============
-50- THE ALGER INSTITUTIONAL FUNDS NOTES TO FINANCIAL STATEMENTS NOTE 1--GENERAL: The Alger Institutional Funds (formerly The Alger Institutional Fund) (the "Trust"), is a diversified, open-end registered investment company organized as a business trust under the laws of the Commonwealth of Massachusetts. The Trust operates as a series company and currently issues an unlimited number of shares of beneficial interest in six funds--LargeCap Growth Fund, SmallCap Growth Fund, MidCap Growth Fund, Capital Appreciation Fund, Balanced Fund and Socially Responsible Growth Fund (the "Funds"). Prior to February 28, 2004, the LargeCap Growth Fund was the LargeCap Growth Portfolio, the SmallCap Growth Fund was the Small Cap Portfolio, the MidCap Growth Fund was the MidCap Growth Portfolio, the Capital Appreciation Fund was the Capital Appreciation Portfolio, the Balanced Fund was the Balanced Portfolio and the Socially Responsible Growth Fund was the Socially Responsible Growth Portfolio. The LargeCap Growth Fund, SmallCap Growth Fund, MidCap Growth Fund, Capital Appreciation Fund and Socially Responsible Growth Fund normally invest primarily in equity securities and each has an investment objective of long-term capital appreciation. The Balanced Fund's investment objectives are current income and long-term capital appreciation which it seeks to achieve through investing in equity and fixed income securities. Each Fund offers Class I and Class R shares. Class R shares were first offered January 27, 2003. Each class has identical rights to assets and earnings except that only Class R shares have a plan of distribution and bear the related expenses. NOTE 2--SIGNIFICANT ACCOUNTING POLICIES: (A) INVESTMENT VALUATION: Investments of the Funds 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 securities for which such information is regularly reported are valued at the last reported sales price or, in the absence of reported sales, at the mean between the bid and asked price or, in the absence of a recent bid or asked price, the equivalent as obtained from one or more of the major market makers for the securities to be valued. Securities included within the Nasdaq market shall be valued at the Nasdaq official closing price (NOCP) on the day of valuation, or if there be no NOCP issued, at the last sale price on such day. Securities included within the Nasdaq market for which there is no NOCP and no last sale price on the day of valuation shall be valued at the mean between the last bid and asked prices on such day. Securities for which market quotations are not readily available are valued at fair value, as determined in good faith pursuant to procedures established by the Board of Trustees. -51- THE ALGER INSTITUTIONAL FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) Short-term securities having a remaining maturity of sixty days or less are valued at amortized cost which approximates market value. Shares of mutual funds are valued at the net asset value of the underlying mutual fund. (B) SECURITIES TRANSACTIONS AND INVESTMENT INCOME: Securities transactions are recorded on a trade date basis. Realized gains and losses from securities transactions are recorded on the identified cost basis. Dividend income is recognized on the ex-dividend date and interest income is recognized on the accrual basis. Premiums and discounts on debt securities purchased are amortized or accreted over the lives of the respective securities. (C) REPURCHASE AGREEMENTS: The Funds enter into repurchase agreements with approved institutions. The repurchase agreements are collateralized by U.S. Government securities, which are either received and held in physical possession by the custodian or received by such custodian in book-entry form through the Federal Reserve book-entry system. The collateral is valued on a daily basis during the term of the agreement to ensure that its value equals or exceeds the agreed-upon repurchase price to be repaid to the Funds. Additional collateral is obtained when necessary. (D) LENDING OF FUND SECURITIES: The Funds lend their securities to financial institutions, provided that the market value of the securities loaned will not at any time exceed one third of a Fund's total assets, as defined. The Funds earn fees on the securities loaned. In order to protect against the risk of failure by the borrower to return the securities loaned or any delay in the delivery of such securities, the loan is collateralized by cash, letters of credit or U.S. Government securities that are maintained in an amount equal to at least 100 percent of the current market value of the loaned securities. The market value of the loaned securities is determined at the close of business of the Funds and any required additional collateral is delivered to the Funds on the next business day. As of October 31, 2004, there were no securities on loan. (E) DIVIDENDS TO SHAREHOLDERS: Dividends payable to shareholders are recorded on the ex-dividend date. With respect to all Funds, dividends from net investment income and distributions from net realized gains, offset by any loss carry forward, are declared and paid annually after the end of the fiscal year in which earned. Each class is treated separately in determining the amounts of dividends of net investment income and capital gains payable to holders of its shares. The characterization of distributions to shareholders for financial reporting purposes is determined in accordance with federal income tax rules. Therefore, the source of the Funds' distributions may be shown in the accompanying financial statements as either from, or in excess of net investment income, net realized gain on investment transactions or return of capital, depending on the type of book/tax differences that may exist. Capital accounts within the -52- THE ALGER INSTITUTIONAL FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) financial statements are adjusted for permanent book/tax differences. Reclassifications result primarily from the differences in tax treatment of net operating losses and amortization adjustments on debt securities. The reclassifications had no impact on the net asset values of the Funds and are designed to present the Funds' capital accounts on a tax basis. (F) FEDERAL INCOME TAXES: It is each Fund's policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its investment company taxable income to its shareholders. Provided a Fund maintains such compliance, no federal income tax provision is required. Each Fund is treated as a separate entity for the purpose of determining such compliance. (G) ALLOCATION METHODS: The Trust accounts separately for the assets, liabilities and operations of each Fund. Expenses directly attributable to each Fund are charged to that Fund's operations; expenses which are applicable to all Funds are allocated among them based on net assets. Income, realized and unrealized gains and losses, and expenses of each Fund, are allocated among the Fund's classes based on relative net assets, with the exception of distribution fees, which are only applicable to Class R shares. (H) INDEMNIFICATION: The Trust enters into contracts that contain a variety of indemnification provisions. The Trust's maximum exposure under these arrangements is unknown. The Trust does not anticipate recognizing any loss related to these arrangements. (I) OTHER: These financial statements have been prepared using estimates and assumptions that affect the reported amounts therein. Actual results may differ from those estimates. NOTE 3--INVESTMENT MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES: (A) INVESTMENT MANAGEMENT FEES: Fees incurred by each Fund, pursuant to the provisions of its Investment Management Agreement with Fred Alger Management, Inc. ("Alger Management"), are payable monthly and are computed based on the value of the average daily net assets of each Fund at the following annual rates: LargeCap Growth Fund .................................................. .75% SmallCap Growth Fund .................................................. .85 MidCap Growth Fund .................................................... .80 Capital Appreciation Fund ............................................. .85 Balanced Fund ......................................................... .75 Socially Responsible Growth Fund ...................................... .75 Alger Management has established an expense cap for the Balanced Fund and the Socially Responsible Growth Fund effective March 1, 2004. Alger Management will reimburse these Funds if annualized operating expenses exceed 1.25% and 1.75% for Class I Shares and Class R Shares, respectively, -53- THE ALGER INSTITUTIONAL FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) of average daily net assets. For the period ended October 31, 2004, Alger Management reimbursed the Balanced Fund and the Socially Responsible Growth Fund $15,464 and $12,530, respectively. (B) DISTRIBUTION FEES: Class R Shares--The Funds have adopted a Distribution Plan pursuant to which Class R shares of each Fund pays Fred Alger & Company, Incorporated, the Trust's distributor and an affiliate of Alger Management (the "Distributor"), a fee at the annual rate of .50% of the respective average daily net assets of the Class R shares of the designated Funds to compensate the Distributor for its activities and expenses incurred in distributing the Class R shares. The fees charged may be more or less than the expenses incurred by the Distributor. (C) BROKERAGE COMMISSIONS: During the year ended October 31, 2004, the LargeCap Growth Fund, the Small Cap Fund, the MidCap Growth Fund, the Capital Appreciation Fund, the Balanced Fund and the Socially Responsible Growth Fund paid the Distributor commissions of $319,749, $145,918, $2,125,793, $395,242, $3,578 and $3,375, respectively, in connection with securities transactions. (D) TRANSFER AGENT FEES: Alger Shareholder Services, Inc. ("Alger Services"), an affiliate of Alger Management, serves as transfer agent for the Trust. During the year ended October 31, 2004, the LargeCap Growth Fund, the Small Cap Fund, the MidCap Growth Fund, the Capital Appreciation Fund, the Balanced Fund and the Socially Responsible Growth Fund incurred fees of $48,191, $44,684, $361,291, $75,565, $764 and $696, respectively, for services provided by Alger Services. Effective November 22, 2004, State Street Bank and Trust Company replaced Alger Services as the Funds' transfer agent. Transfer agent services are provided by State Street Bank and Trust Company's affiliate, Boston Financial Data Services, Inc. (E) OTHER TRANSACTIONS WITH AFFILIATES: Certain trustees and officers of the Trust are directors and officers of Alger Management, the Distributor and Alger Services. At October 31, 2004, Alger Management and its affiliates owned 7,330 shares, 4,815 shares, 8,077 shares, 7,349 shares, 171,926 shares and 233,848 shares of the LargeCap Growth Fund, the SmallCap Growth Fund, the MidCap Growth Fund, the Capital Appreciation Fund, the Balanced Fund and the Socially Responsible Growth Fund, respectively. NOTE 4--SECURITIES TRANSACTIONS: The following summarizes the securities transactions by the Funds, other than short-term securities, for the year ended October 31, 2004: PURCHASES SALES --------- ----- LargeCap Growth Fund ....................... $ 182,068,360 $ 185,206,610 SmallCap Growth Fund ....................... 116,670,600 142,007,392 MidCap Growth Fund ......................... 1,635,993,978 1,321,840,835 Capital Appreciation Fund .................. 238,460,266 278,767,562 Balanced Fund .............................. 2,791,750 2,692,086 Socially Responsible Growth Fund ........... 2,181,841 2,324,661 -54- THE ALGER INSTITUTIONAL FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 5--LINES OF CREDIT: The Trust has both committed and uncommitted lines of credit with banks. All borrowings have variable interest rates and are payable on demand. With the exception of the Capital Appreciation Fund, the Trust borrows under such lines of credit exclusively for temporary or emergency purposes. The Capital Appreciation Fund may borrow up to 1/3 of the value of its assets, as defined, to purchase additional securities. To the extent the Capital Appreciation Fund borrows under these lines, it must pledge securities with a total value of at least twice the amount borrowed. For the year ended October 31, 2004, the Fund had borrowings which averaged $1,262,500 at a weighted average interest rate of 1.57%. NOTE 6--SHARE CAPITAL: The Trust has an unlimited number of authorized shares of beneficial interest of $.001 par value which are presently divided into six series. Each series is divided into two separate classes. -55- THE ALGER INSTITUTIONAL FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) During the year ended October 31, 2004, transactions of shares of beneficial interest were as follows: SHARES AMOUNT ------ ------ LargeCap Growth Fund Class I Shares sold ........................ 3,182,162 $ 35,531,451 Shares redeemed .................... (3,622,713) (40,424,440) ------------- ------------- Net decrease ....................... (440,551) $ (4,892,989) ============= ============= Class R Shares sold ........................ 262,650 $ 2,902,113 Shares redeemed .................... (43,434) (478,582) ------------- ------------- Net increase ....................... 219,216 $ 2,423,531 ============= ============= SmallCap Growth Fund Class I Shares sold ........................ 2,187,748 $ 35,342,244 Shares redeemed .................... (4,022,745) (64,081,708) ------------- ------------- Net decrease ....................... (1,834,997) $ (28,739,464) ============= ============= Class R Shares sold ........................ 21,118 $ 328,354 Shares redeemed .................... (7,987) (124,976) ------------- ------------- Net increase ....................... 13,131 $ 203,378 ============= ============= MidCap Growth Fund Class I Shares sold ........................ 34,583,348 $ 531,972,510 Shares redeemed .................... (16,573,777) (254,461,561) ------------- ------------- Net increase ....................... 18,009,571 $ 277,510,949 ============= ============= Class R Shares sold ........................ 936,539 $ 14,301,063 Shares redeemed .................... (203,152) (3,105,435) ------------- ------------- Net increase ....................... 733,387 $ 11,195,628 ============= ============= Capital Appreciation Fund Class I Shares sold ........................ 5,719,480 $ 65,521,012 Shares redeemed .................... (8,939,452) (101,293,599) ------------- ------------- Net decrease ....................... (3,219,972) $ (35,772,587) ============= ============= Class R Shares sold ........................ 72,246 $ 816,970 Shares redeemed .................... (13,789) (157,355) ------------- ------------- Net increase ....................... 58,457 $ 659,615 ============= ============= -56- THE ALGER INSTITUTIONAL FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) SHARES AMOUNT ------ ------ Balanced Fund Class I Shares sold ................................ 12,405 $ 93,926 Dividends reinvested ....................... 100 756 Shares redeemed ............................ (11,277) (83,135) --------- --------- Net increase ............................... 1,228 $ 11,547 ========= ========= Class R Shares sold ................................ 14,498 $ 105,281 Shares redeemed ............................ -- -- --------- --------- Net increase ............................... 14,498 $ 105,281 ========= ========= Socially Responsible Growth Fund Class I Shares sold ................................ 632 $ 3,477 Dividends reinvested ....................... 1,124 6,014 Shares redeemed ............................ (1,613) (8,540) --------- --------- Net increase ............................... 143 $ 951 ========= ========= Class R Shares sold ................................ 9,021 $ 47,809 Dividends reinvested ....................... 74 398 Shares redeemed ............................ (1,400) (7,543) --------- --------- Net increase ............................... 7,695 $ 40,664 ========= ========= During the year ended October 31, 2003, transactions of shares of beneficial interest were as follows: SHARES AMOUNT ------ ------ LargeCap Growth Fund Class I Shares sold ........................ 3,441,255 $ 31,652,971 Shares redeemed .................... (7,375,519) (65,207,951) ------------ ------------ Net decrease ....................... (3,934,264) $(33,554,980) ============ ============ Class R* Shares sold ........................ 12,585 $ 114,463 Shares redeemed .................... (128) (1,261) ------------ ------------ Net increase ....................... 12,457 $ 113,202 ============ ============ SmallCap Growth Fund Class I Shares sold ........................ 2,571,061 $ 32,428,232 Shares redeemed .................... (2,118,720) (26,572,009) ------------ ------------ Net increase ....................... 452,341 $ 5,856,223 ============ ============ Class R* Shares sold ........................ 4,664 $ 50,000 ============ ============ -57- THE ALGER INSTITUTIONAL FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) SHARES AMOUNT ------ ------ MidCap Growth Fund Class I Shares sold ............................ 25,008,417 $ 310,763,082 Shares redeemed ........................ (8,479,728) (101,824,992) ------------- ------------- Net increase ........................... 16,528,689 $ 208,938,090 ============= ============= Class R* Shares sold ............................ 56,993 $ 754,543 Shares redeemed ........................ (3,341) (46,383) ------------- ------------- Net increase ........................... 53,652 $ 708,160 ============= ============= Capital Appreciation Fund Class I Shares sold ............................ 5,572,926 $ 54,110,955 Shares redeemed ........................ (5,763,698) (55,842,299) ------------- ------------- Net decrease ........................... (190,772) $ (1,731,344) ============= ============= Class R* Shares sold ............................ 5,981 $ 50,000 ============= ============= Balanced Fund Class I Shares sold ............................ 167,211 $ 1,126,128 Shares redeemed ........................ (10,703) (70,494) ------------- ------------- Net increase ........................... 156,508 $ 1,055,634 ============= ============= Class R* Shares sold ............................ 7,776 $ 50,000 ============= ============= Socially Responsible Growth Fund Class I Shares sold ............................ 254,629 $ 1,157,804 Shares redeemed ........................ (27,498) (128,679) ------------- ------------- Net increase ........................... 227,131 $ 1,029,125 ============= ============= Class R* Shares sold ............................ 12,335 $ 51,231 ============= ============= ---------- * Initially offered January 27, 2003. -58- THE ALGER INSTITUTIONAL FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 7--DISTRIBUTIONS TO SHAREHOLDERS: Distributions paid by the Funds during the year ended October 31, 2004, consisted entirely of ordinary income. There were no distributions paid for the year ended October 31, 2003. As of October 31, 2004, the components of distributable earnings on a tax basis were as follows: LargeCap Growth Fund Undistributed ordinary income ......................... -- Undistributed long-term gain .......................... -- Unrealized appreciation ............................... $ 5,718,792 SmallCap Growth Fund Undistributed ordinary income ......................... -- Undistributed long-term gain .......................... -- Unrealized appreciation ............................... $ 4,361,517 MidCap Growth Fund Undistributed ordinary income ......................... -- Undistributed long-term gain .......................... $14,299,602 Unrealized appreciation ............................... 47,342,278 Capital Appreciation Fund Undistributed ordinary income ......................... -- Undistributed long-term gain .......................... -- Unrealized appreciation ............................... $11,465,876 Balanced Fund Undistributed ordinary income ......................... $ 11,953 Undistributed long-term gain .......................... 34,771 Unrealized appreciation ............................... 55,818 Socially Responsible Growth Fund Undistributed ordinary income ......................... -- Undistributed long-term gain .......................... $ 63,841 Unrealized appreciation ............................... 120,349 The differences between book basis and tax basis unrealized appreciation is attributable primarily to the tax deferral of losses on wash sales. At October 31, 2004, the Funds, for federal income tax purposes, had capital loss carryforwards which expire as set forth in the table below. These amounts may be applied against future net realized gains until the earlier of their utilization or expiration. -59- THE ALGER INSTITUTIONAL FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) LARGECAP SMALLCAP CAPITAL GROWTH GROWTH APPRECIATION EXPIRATION DATE FUND FUND FUND ----------- ----------- ------------ 2009 $10,902,646 $62,515,944 $ 76,937,585 2010 22,615,727 12,342,837 46,484,857 2011 5,070,663 -- -- ----------- ----------- ------------ $38,589,036 $74,858,781 $123,422,442 =========== =========== ============ NOTE 8--REGULATORY MATTERS AND LEGAL PROCEEDINGS: Alger Management has been responding to inquiries, document requests and/or subpoenas from regulatory authorities, including the United States Securities and Exchange Commission ("SEC"), the Office of the New York State Attorney General, and the Attorney General of New Jersey, in connection with their investigation of practices in the mutual fund industry identified as "market timing" and "late trading." Alger Management has assured the board of the Trust that if it be determined that improper trading practices in the Trust detrimentally affected its performance, Alger Management will make appropriate restitution. At the present time, Alger Management is unable to estimate the impact, if any, that the outcome of these investigations may have on the Trust's results of operations or financial condition. Certain civil actions have developed out of the regulatory investigations. Several purported class actions and shareholder derivative suits have been filed against various parties, including, depending on the lawsuit, Alger Management, certain of the mutual funds managed by Alger Management (the "Alger Mutual Funds"), and certain current and former Alger Mutual Fund trustees and officers, alleging wrongful market-timing and late-trading activities. These cases have been transferred to the U.S. District Court of Maryland by the Judicial Panel on Multidistrict Litigation for consolidated pre-trial proceedings. On September 29, 2004, consolidated amended complaints involving these cases -- a Consolidated Amended Fund Derivative Complaint (the "Derivative Complaint") and two substantially identical Consolidated Amended Class Action Complaints (together, the "Class Action Complaint") -- were filed in the Maryland federal district court under the caption number 1:04-MD-15863 (JFM). The Derivative Complaint, brought on behalf of the Alger Mutual Funds and Castle Convertible Fund, Inc., a registered closed-end fund managed by Alger Management, alleges (i) violations, by Alger Management and, depending on the specific offense alleged, by its immediate parent the Distributor (Fred Alger & Company, Incorporated) and/or the fund trustee defendants, of Sections 36(a), 36(b), 47, and 48 of the Investment Company Act of 1940 and of Sections 206 and 215 of the Investment Advisers Act of 1940, breach of fiduciary duty, and breach of contract, (ii) various offenses by other, unrelated, third-party defendants, and (iii) unjust enrichment by all the named defendants, all by virtue of -60- THE ALGER INSTITUTIONAL FUNDS NOTES TO FINANCIAL STATEMENTS (CONTINUED) the alleged wrongful market-timing and late-trading activities. The complaint seeks, among other things, removal of the trustee defendants and of Alger Management, certain rescissory relief, disgorgement of management fees and allegedly unlawful profits, compensatory and punitive monetary damages, and plaintiffs' fees and expenses (including attorney and expert fees). The Class Action Complaint names the Alger-related defendants named in the Derivative Complaint as well as certain defendants not named in the Derivative Complaint, including certain entities affiliated with Alger Management, certain Alger Mutual Funds, including the Trust, and certain additional former trustees and a former officer of the defendant Alger Mutual Funds. It alleges, on the basis of factual allegations similar to those of the Derivative Complaint with respect to the Alger defendants, (i) offenses by Alger defendants similar to those alleged in the Derivative Complaint, (ii) violations, by Alger Management, the Distributor, their affiliates, the funds named as defendants, and the current and former fund trustees and officers, of Sections 11, 12(a)(2), and 15 of the Securities Act of 1933, Sections 10(b) (and Rule 10b-5 thereunder) and 20(a) of the Securities Exchange Act of 1934, and Section 34(b) of the Investment Company Act of 1940, (iii) breach of contract by the funds named as defendants, and (iv) unjust enrichment by all of the named defendants. It seeks relief similar to that sought in the Derivative Complaint. Alger Management does not believe that the foregoing lawsuits will materially affect its ability to perform its management contracts with any of the funds that it manages, and the management of the Trust believes that it will not be materially adversely affected by the pending lawsuits. -61- REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Shareholders and Board of Trustees of The Alger Institutional Funds: We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of The Alger Institutional Funds (comprising the LargeCap Growth Institutional, SmallCap Growth Institutional, MidCap Growth Institutional, Capital Appreciation Institutional, Balanced Institutional, and Socially Responsible Growth Institutional Funds) (collectively, the "Funds"), as of October 31, 2004, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended. These financial statements and financial highlights are the responsibility of the Funds' management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. The financial highlights for the two years ended October 31, 2001 were audited by other auditors, whose report, dated November 30, 2001, expressed an unqualified opinion on those financial highlights. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights. Our procedures included confirmation of investments owned as of October 31, 2004, by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above, and audited by us, present fairly, in all material respects, the financial position of The Alger Institutional Funds at October 31, 2004, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP December 15, 2004 -62- TRUSTEES AND OFFICERS OF THE FUNDS (UNAUDITED) Information about the Trustees and officers of the Funds is set forth below. In the table the term "Alger Fund Complex" refers to the Fund, The Alger Funds, The Alger American Fund, Spectra Fund, The China-U.S. Growth Fund and Castle Convertible Fund, Inc., each of which is a registered investment company managed by Fred Alger Management, Inc. ("Alger Management"). Each Trustee serves until an event of termination, such as death or resignation, or until his successor is duly elected; each officer's term of office is one year. Unless otherwise noted, the address of each person named below is 111 Fifth Avenue, New York, NY 10003.
NUMBER OF PORTFOLIOS IN THE ALGER FUND TRUSTEE COMPLEX AND/OR WHICH ARE NAME, AGE, POSITION WITH OFFICER OVERSEEN THE FUND AND ADDRESS PRINCIPAL OCCUPATIONS SINCE BY TRUSTEE -------------------------------------------------------------------------------------------------------------- INTERESTED TRUSTEES Fred M. Alger III (69) Chairman of the Board of Alger Associates, Inc. 1993 22 Chairman of the Board ("Associates"), Fred Alger & Company, Incorporated ("Alger Inc."), Alger Management, Alger Properties, Inc. ("Properties"), Alger Shareholder Services, Inc. ("Services"), Alger Life Insurance Agency, Inc. ("Agency"), Fred Alger International Advisory S.A. ("International"), and five of the six funds in the Alger Fund Complex; Chairman of the Boards of Alger SICAV ("SICAV") and Analysts Resources, Inc. ("ARI"). Dan C. Chung (42) President, Director and Chief Investment Officer 2001 16 President and of Alger Management; President and Director of Trustee Associates, Alger Inc., Properties, Services, Agency, International, ARI and Trust; Trustee/Director of four of the six funds in the Alger Fund Complex. Hilary M. Alger (43) Trustee/Director of five of the six funds in the 2003 17 Trustee Alger Fund Complex; Director of Development, Pennsylvania Ballet; formerly Associate Director of Development, College of Arts and Sciences, University of Virginia, formerly Director of Development and Communications, Lenox Hill Neighborhood House. NON-INTERESTED TRUSTEES Stephen E. O'Neil (72) Attorney; Private investor since 1981; Director of 1993 23 Trustee Brown-Forman Corporation; Trustee/Director of the six funds in the Alger Fund Complex; formerly of Counsel to the law firm of Kohler & Barnes.
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NUMBER OF PORTFOLIOS IN THE ALGER FUND TRUSTEE COMPLEX AND/OR WHICH ARE NAME, AGE, POSITION WITH OFFICER OVERSEEN THE FUND AND ADDRESS PRINCIPAL OCCUPATIONS SINCE BY TRUSTEE -------------------------------------------------------------------------------------------------------------- Charles F. Baird, Jr. (51) Managing Partner of North Castle Partners, a private 2000 16 Trustee equity securities group; Chairman of Equinox, Leiner Health Products, Elizabeth Arden Day Spas, Grand Expeditions and EAS; Trustee/Director of four of the six funds in the Alger Fund Complex. Formerly Managing Director of AEAInvestors, Inc. Roger P. Cheever (59) Associate Dean of Development, Harvard University; 2000 16 Trustee Trustee/Director of four of the six funds in the Alger Fund Complex. Formerly Deputy Director of the Harvard College Fund. Lester L. Colbert, Jr. (70) Private investor; Trustee/Director of five of the six 2000 17 Trustee funds in the Alger Fund Complex. Formerly Chairman of the Board and Chief Executive Officer of Xidex Corporation. Nathan E. Saint-Amand, Medical doctor in private practice; Co-Partner Fishers 1993 23 M.D. (66) Island Partners; Member of the Board of the Manhattan Trustee Institute; Trustee/Director of the six funds in the Alger Fund Complex. Formerly Co-Chairman Special Projects Committee of Memorial Sloan Kettering. Joseph S. Nye, Jr. (66) Trustee/Director of the six funds in the Alger Fund Complex; Trustee Dean, John F. Kennedy School of Government,Harvard University, since 1995; Assistant Secretary of Defense for International Security Affairs 1994-1995; Chairman, National Intelligence Council, 1993-1994. OFFICERS Frederick A. Blum (51) Executive Vice President and Treasurer of Alger Inc., 1996 N/A Treasurer and Alger Management, Properties, Associates, ARI, Assistant Secretary Services and Agency since September 2003 and Senior Vice President prior thereto; Treasurer or Assistant Treasurer, and Assistant Secretary, of each of the other five investment companies in the Alger Fund Complex since the later of 1996 or its inception. Director of SICAV and International and Chairman of the Board (and prior thereto, Senior Vice President) and Treasurer of Alger National Trust Company since 2003.
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NUMBER OF PORTFOLIOS IN THE ALGER FUND TRUSTEE COMPLEX AND/OR WHICH ARE NAME, AGE, POSITION WITH OFFICER OVERSEEN THE FUND AND ADDRESS PRINCIPAL OCCUPATIONS SINCE BY TRUSTEE -------------------------------------------------------------------------------------------------------------- Dorothy G. Sanders (49) Senior Vice President, General Counsel and Secretary 2000 N/A Secretary of Alger, Inc., General Counsel and Secretary of Associates, Agency, Properties, Services, ARI and Alger Management; Secretary of International, and the six funds in the Alger Fund Complex. Formerly Senior Vice President, Fleet Financial Group.
Messrs. Alger and Chung are "interested persons"(as defined in the Investment Company Act) of the Fund because of their affiliations with Alger Management. Mr. Chung is Mr. Alger's son-in-law. Ms. Alger is a daughter of Fred M. Alger III. Ms. Alger is an "interested person" because she is an immediate family member of Mr. Alger. No Trustee is a director of any public company except as may be indicated under "Principal Occupations." Mr. Nye has given notice of his intention to resign as Trustee of the Trust. Ms. Sanders resigned as Secretary effective November 19, 2004. The Statement of Additional Information contains additional information about the Funds' Trustees and is available without charge upon request by calling (800) 992-3863. -65- TAX INFORMATION (UNAUDITED) In accordance with subchapter Mof the Internal Revenue Code of 1986, as amended, for the year ended October 31, 2004, 12.48% of the Balanced Fund's ordinary dividends qualified for the dividends received deduction for corporations. For the year ended October 31, 2004, certain dividends paid by the Funds may be subject to a maximum rate of 15%, as provided by the Jobs and Growth Tax Relief Reconciliation Act of 2003. Of the distributions paid during the fiscal year, $756 represents the maximum amount that may be considered qualified dividend income of the Balanced Institutional Fund. Shareholders should not use the above information to prepare their tax reeturns. Since the Trust's fiscal year is not the calendar year, another notification will be sent with respect to calendar year 2004. Such notification, which will reflect the amount to be used by taxpayers on their federal income tax returns, will be made in conjunction with Form 1099 DIV and will be mailed in January 2005. Shareholders are advised to consult their own tax advisers with respect to the tax consequences of their investment in the Trust. NOTES: THE ALGER INSTITUTIONAL FUNDS 111 Fifth Avenue New York, NY 10003 (800) 992-3362 www.alger.com INVESTMENT MANAGER Fred Alger Management, Inc. 111 Fifth Avenue New York, NY 10003 TRANSFER AGENT AND DIVIDEND DISBURSING AGENT Boston Financial Data Services, Inc. P.O. Box 8480 Boston, MA 02266 This report is submitted for the general information of the shareholders of The Alger Institutional Funds. It is not authorized for distribution to prospective investors unless accompanied by an effective Prospectus for the Trust, which contains information concerning the Trust's investment policies, fees and expenses as well as other pertinent information. PROXY VOTING POLICIES A description of the policies and procedures the Trust uses to determine how to vote proxies relating to portfolio securities and the proxy voting record is available, without charge, by calling (800) 992-3362 or online on the Funds' website at http://www.alger.com or on the SEC's website at http://www.sec.gov. QUARTERLY FUND HOLDINGS Commencing with the fiscal quarter ending July 31, 2004, the Funds file their complete schedule of portfolio holdings with the SEC for the first and third quarter of each fiscal year on Form N-Q. Forms N-Q are available online on the Funds' website at http://www.alger.com or on the SEC's website at HTTP://WWW.SEC.GOV. The Funds' Forms N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information regarding the operation of the SEC's Public Reference Room may be obtained by calling 1-800-SEC-0330. A copy of the most recent quarterly holdings may also be obtained from the Funds by calling (800) 992-3362. [LOGO] SAIFI61404 L1 The Alger Institutional Funds [LOGO] Boston Financial Data Services, Inc. P.O. Box 8480 Boston, MA 02266 SAIFI61404 L2 ITEM 2. CODE OF ETHICS. (a) The Registrant has adopted a code of ethics (the "Code of Ethics") that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. (b) Not applicable. (c) The Registrant has not amended its Code of Ethics during the period covered by the shareholder report presented in Item 1 hereto. (d) The Registrant has not granted a waiver or an implicit waiver from a provision of its Code of Ethics during the period covered by the shareholder report presented in Item 1 hereto. (e) Not applicable. (f) The Registrant's Code of Ethics is attached as an Exhibit hereto. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. The Board of Trustees of the Registrant determined that Stephen E. O'Neil is an audit committee financial expert (within the meaning of that phrase specified in the instructions to Form N-CSR) on the Registrant's audit committee. Mr. O'Neil is an "independent" trustee - i.e., he is not an interested person of the Registrant as defined in the Investment Company Act of 1940, nor has he accepted directly or indirectly any consulting, advisory or other compensatory fee from the Registrant, other than in his capacity as Trustee. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. a) Audit Fees: October 31, 2004 $35,350 October 31, 2003 $32,000 b) Audit-Related Fees: NONE c) Tax Fees for tax advice, tax compliance and tax planning: October 31, 2004 $25,300 October 31, 2003 $15,900 d) ALL Other Fees: October 31, 2004 $13,500 October 31, 2003 $0 Other fees include a review and consent for Registrants registration statement filing and a review of the semi-annual financial statements. e) 1) Audit Committee Pre-Approval Policies And Procedures: Audit and non-audit services provided by the Registrant's independent registered public accounting firm (the "Auditors") on behalf the Registrant must be pre-approved by the Audit Committee. Non-audit services provided by the Auditors on behalf of the Registrant's Investment Adviser or any entity controlling, controlled by, or under common control with the Investment Adviser must be pre-approved by the Audit Committee if such non-audit services directly relate to the operations or financial reporting of the Registrant. 2) All fees in item 4(b) through 4(d) above were approved by the Registrants' Audit Committee. f) Not Applicable g) Non-Audit Fees: October 31, 2004 $157,449 and 82,300 Euros October 31, 2003 $61,400 and 113,827 Euros h) The audit committee of the board of Trustees has considered whether the provision of the non-audit services that were rendered to the registrant's investment adviser and any entity controlling, controlled by, or under common control, with the adviser that provides ongoing services to the registrant that were not approved pursuant to (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principle accountant's independence. ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable ITEM 6. SCHEDULE OF INVESTMENTS Not applicable ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED END MANAGEMENT INVESTMENT COMPANIES. Not applicable ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None ITEM 10. CONTROLS AND PROCEDURES. (a) The Registrant's principal executive officer and principal financial officer have concluded that the Registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended) are effective based on their evaluation of the disclosure controls and procedures as of a date within 90 days of the filing date of this document. (b) No changes in the Registrant's internal control over financial reporting occurred during the Registrant's last fiscal half-year that materially affected, or are reasonably likely to materially affect, the Registrant's internal control over financial reporting. ITEM 11. EXHIBITS. (a) (1) Code of Ethics as Exhibit 99.CODE ETH (a) (2) Certifications of principal executive officer and principal financial officer as required by rule 30a-2(a) under the Investment Company Act of 1940 are attached as Exhibit 99.CERT (b) Certifications of principal executive officer and principal financial officer as required by rule 30a-2(b) under the Investment Company Act of 1940 are attached as Exhibit 99.906CERT SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. The Alger Institutional Funds By: /s/Dan C. Chung Dan C. Chung President Date: January 5, 2005 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/Dan C. Chung Dan C. Chung President Date: January 5, 2005 By: /s/Frederick A. Blum Frederick A. Blum Treasurer Date: January 5, 2005