# American Depositary Receipts.
* Non-income producing security.
See Notes to Financial Statements.
| THE ALGER FUNDS II |
| NOTES TO FINANCIAL STATEMENTS (Unaudited) |
The Alger Funds II (the “Trust”) is an open-end registered investment company organized as a business trust under the laws of the Commonwealth of Massachusetts. The Trust qualifies as an investment company as defined in Financial Accounting Standards Board (“FASB”) Accounting Standards Codification 946-Financial Services – Investment Companies. The Trust operates as a series company currently offering an unlimited number of shares of beneficial interest in four series—Alger Spectra Fund, Alger Dynamic Opportunities Fund, Alger Emerging Markets Fund and Alger Responsible Investing Fund (collectively, the “Funds” or individually, each a “Fund”). The Funds normally invest primarily in equity securities and each has an investment objective of long-term capital appreciation.
Each Fund offers one or more of the following share classes: Class A shares, Class C shares, Class I shares, Class Y shares and Class Z shares. Class A shares are generally subject to an initial sales charge while Class C shares are generally subject to a deferred sales charge. Class C shares will automatically convert to Class A shares on the fifth business day of the month following the tenth anniversary of the purchase date of a shareholder’s Class C shares, without the imposition of any sales load, fee or other charge. Class C shares held at certain dealers may not convert to Class A shares or may be converted on a different schedule. At conversion, a proportionate amount of shares representing reinvested dividends and distributions will also be converted into Class A shares. Effective August 27, 2019, Class C shares were closed to direct shareholders and are only available for purchase through certain financial intermediaries and group retirement plan recordkeeping platforms, Class I shares, Class Y shares and Class Z shares are sold to institutional investors without an initial or deferred sales charge. Each class has identical rights to assets and earnings, except that each share class bears the pro rata allocation of the Fund’s expenses other than a class expense (not including advisory or custodial fees or other expenses related to the management of the Fund’s assets).
| NOTE 2 — Significant Accounting Policies: |
(a) Investment Valuation: The Funds value their financial instruments at fair value using independent dealers or pricing services under policies approved by the Trust’s Board of Trustees (the “Board”). Investments held by the Funds are valued on each day the New York Stock Exchange (the “NYSE”) is open, as of the close of the NYSE (normally 4:00
p.m. Eastern Time).
Investments in money market funds and short-term securities held by the Funds having a remaining maturity of sixty days or less are valued at amortized cost which approximates market value.
Equity securities, including traded rights, warrants and option contracts for which valuation information is readily available, are valued at the last quoted sales price or official closing price on the primary market or exchange on which they are traded as reported by an independent pricing service. In the absence of quoted sales, such securities are valued at the bid price or, in the absence of a recent bid price, the equivalent as obtained from one or more of the major market makers for the securities to be valued.
| THE ALGER FUNDS II |
| NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued) |
Debt securities generally trade in the over-the-counter market. Debt securities with remaining maturities of more than sixty days at the time of acquisition are valued on the basis of the last available bid prices or current market quotations provided by dealers or pricing services. In determining the value of a particular investment, pricing services may use certain information with respect to transactions in such investments, quotations from dealers, pricing matrixes, market transactions in comparable investments, various relationships observed in the market between investments and calculated yield measures based on valuation technology commonly employed in the market for such investments. Asset-backed and mortgage-backed securities are valued by independent pricing services using models that consider estimated cash flows of each tranche of the security, establish a benchmark yield and develop an estimated tranche-specific spread to the benchmark yield based on the unique attributes of the tranche. Debt securities with a remaining maturity of sixty days or less are valued at amortized cost which approximates market value.
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 and described further herein.
Securities in which the Funds invest may be traded in foreign markets that close before the close of the NYSE. Developments that occur between the close of the foreign markets and the close of the NYSE may result in adjustments to the closing foreign prices to reflect what the Trust’s investment adviser, pursuant to policies established by the Board, believes to be the fair value of these securities as of the close of the NYSE. The Funds may also fair value securities in other situations, for example, when a particular foreign market is closed but the Funds are open.
FASB Accounting Standards Codification 820 – Fair Value Measurements and Disclosures (“ASC 820”) defines fair value as the price that the Funds would receive upon selling an investment in a timely transaction to an independent buyer in the principal or most advantageous market of the investment. ASC 820 established a three-tier hierarchy to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability and may be observable or unobservable. Observable inputs are based on market data obtained from sources independent of the Funds. Unobservable inputs are inputs that reflect the Funds’ own assumptions based on the best information available in the circumstances. The three-tier hierarchy of inputs is summarized in the three broad Levels listed below.
| • | Level 1 – quoted prices in active markets for identical investments |
| • | Level 2 – significant other observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.) |
| • | Level 3 – significant unobservable inputs (including the Funds’ own assumptions in determining the fair value of investments) |
| THE ALGER FUNDS II |
| NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued) |
The Funds’ valuation techniques are generally consistent with either the market or the income approach to fair value. The market approach considers prices and other relevant information generated by market transactions involving identical or comparable assets to measure fair value. The income approach converts future amounts to a current, or discounted, single amount. These fair value measurements are determined on the basis of the value indicated by current market expectations about such future events. Inputs for Level 1 include exchange-listed prices and broker quotes in an active market. Inputs for Level 2 include the last trade price in the case of a halted security, an exchange-listed price which has been adjusted for fair value factors, and prices of closely related securities. Additional Level 2 inputs include an evaluated price which is based upon a compilation of observable market information such as spreads for fixed income and preferred securities. Inputs for Level 3 include, but are not limited to, revenue multiples, earnings before interest, taxes, depreciation and amortization (“EBITDA”) multiples, discount rates, time to exit and the probabilities of success of certain outcomes. Such unobservable market information may be obtained from a company’s financial statements and from industry studies, market data, and market indicators such as benchmarks and indexes. Because of the inherent uncertainty and often limited markets for restricted securities, the valuations assigned to such securities by the Funds may significantly differ from the valuations that would have been assigned by the Funds had there been an active market for such securities.
Valuation processes are determined by a Valuation Committee (“Committee”) authorized by the Board and comprised of representatives of the Trust’s investment adviser and officers of the Trust. The Committee reports its fair valuation determinations and related valuation information to the Board. The Board is responsible for approving the valuation policy and procedures.
While the Committee meets on an as-needed basis, the Committee generally meets quarterly to review and evaluate the effectiveness of the procedures for making fair value determinations. The Committee considers, among other things, the results of quarterly back testing of the fair value model for foreign securities, pricing comparisons between primary and secondary price sources, the outcome of price challenges put to the Funds’ pricing vendor, and variances between transactional prices and the previous day’s price.
(b) Cash and Cash Equivalents: Cash and cash equivalents include U.S. dollars, foreign cash and overnight time deposits.
NOTE 3 — Fair Value Measurements |
The following is a summary of the inputs used as of January 31, 2021 in valuing the Funds’ investments carried at fair value on a recurring basis. Based upon the nature, characteristics, and risks associated with their investments, the Funds have determined that presenting them by security type and sector is appropriate.
| THE ALGER FUNDS II |
| NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued) |
| Alger Spectra Fund | | TOTAL | | | LEVEL 1 | | | LEVEL 2 | | | LEVEL 3 | |
| COMMON STOCKS | |
| Communication Services | | $ | 1,124,483,578 | | | $ | 1,124,483,578 | | | $ | — | | | $ | — | |
| Consumer Discretionary | | | 1,760,092,761 | | | | 1,660,307,093 | | | | 91,343,829 | | | | 8,441,839 | |
| Consumer Staples | | | 44,896,081 | | | | 44,896,081 | | | | — | | | | — | |
| Financials | | | 144,400,057 | | | | 144,400,057 | | | | — | | | | — | |
| Healthcare | | | 821,952,333 | | | | 793,022,109 | | | | 28,930,224 | | | | — | |
| Industrials | | | 536,766,082 | | | | 536,766,082 | | | | — | | | | — | |
| Information Technology | | | 3,749,118,380 | | | | 3,702,062,773 | | | | 47,055,607 | | | | — | |
| Materials | | | 224,055,909 | | | | 224,055,909 | | | | — | | | | — | |
| TOTAL COMMON STOCKS | | $ | 8,405,765,181 | | | $ | 8,229,993,682 | | | $ | 167,329,660 | | | $ | 8,441,839 | |
| PREFERRED STOCKS | |
| Healthcare | | | 436,802 | | | | — | | | | — | | | | 436,802 | |
| REAL ESTATE INVESTMENT TRUST | |
| Real Estate | | | 20,210,788 | | | | 20,210,788 | | | | — | | | | — | |
| SPECIAL PURPOSE VEHICLE | |
| Information Technology | | | 11,925,000 | | | | — | | | | — | | | | 11,925,000 | |
| TOTAL INVESTMENTS IN SECURITIES | | $ | 8,438,337,771 | | | $ | 8,250,204,470 | | | $ | 167,329,660 | | | $ | 20,803,641 | |
| SECURITIES SOLD SHORT COMMON STOCKS | |
| Communication Services | | | 24,156,278 | | | | 24,156,278 | | | | — | | | | — | |
| Consumer Discretionary | | | 120,093,677 | | | | 120,093,677 | | | | — | | | | — | |
| Consumer Staples | | | 121,063,306 | | | | 121,063,306 | | | | — | | | | — | |
| Exchange Traded Funds | | | 59,745,151 | | | | 59,745,151 | | | | — | | | | — | |
| Healthcare | | | 81,981,570 | | | | 81,981,570 | | | | — | | | | — | |
| Industrials | | | 48,026,062 | | | | 48,026,062 | | | | — | | | | — | |
| Information Technology | | | 138,547,537 | | | | 138,547,537 | | | | — | | | | — | |
| Materials | | | 9,159,642 | | | | 9,159,642 | | | | — | | | | — | |
| TOTAL COMMON STOCKS | | $ | 602,773,223 | | | $ | 602,773,223 | | | $ | — | | | $ | — | |
| Alger Dynamic Opportunities Fund | | TOTAL | | | LEVEL 1 | | | LEVEL 2 | | | LEVEL 3 | |
| COMMON STOCKS | |
| Communication Services | | | 21,844,228 | | | | 21,844,228 | | | | — | | | | — | |
| Consumer Discretionary | | | 101,725,777 | | | | 98,159,730 | | | | 3,566,047 | | | | — | |
| Consumer Staples | | | 4,861,308 | | | | 4,861,308 | | | | — | | | | — | |
| Energy | | | 8,348,007 | | | | 8,348,007 | | | | — | | | | — | |
| Financials | | | 42,694,479 | | | | 42,694,479 | | | | — | | | | — | |
| Healthcare | | | 132,301,043 | | | | 132,301,043 | | | | — | | | | — | |
| Industrials | | | 67,819,486 | | | | 67,819,486 | | | | — | | | | — | |
| Information Technology | | | 129,052,716 | | | | 128,244,750 | | | | 807,966 | | | | — | |
| Real Estate | | | 13,135,274 | | | | 13,135,274 | | | | — | | | | — | |
| TOTAL COMMON STOCKS | | $ | 521,782,318 | | | $ | 517,408,305 | | | $ | 4,374,013 | | | $ | — | |
| THE ALGER FUNDS II |
| NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued) |
| Alger Dynamic Opportunities Fund | | TOTAL | | | LEVEL 1 | | | LEVEL 2 | | | LEVEL 3 | |
| PREFERRED STOCKS | |
| Healthcare | | $ | 6,213 | | | $ | — | | | $ | — | | | $ | 6,213 | |
| WARRANTS | |
| Healthcare | | | 1,436,921 | | | | — | | | | 1,436,921 | | | | — | |
| RIGHTS | |
| Healthcare | | | 87,015 | | | | — | | | | — | | | | 87,015 | * |
| REAL ESTATE INVESTMENT TRUST | |
| Real Estate | | | 10,738,059 | | | | 10,738,059 | | | | — | | | | — | |
| SPECIAL PURPOSE VEHICLE | |
| Information Technology | | | 1,475,000 | | | | — | | | | — | | | | 1,475,000 | |
| PURCHASED OPTIONS | |
| Financials | | | 14,525 | | | | 14,525 | | | | — | | | | — | |
| TOTAL INVESTMENTS IN SECURITIES | | $ | 535,540,051 | | | $ | 528,160,889 | | | $ | 5,810,934 | | | $ | 1,568,228 | |
| SECURITIES SOLD SHORT COMMON STOCKS | |
| Communication Services | | | 8,337,081 | | | | 8,337,081 | | | | — | | | | — | |
| Consumer Discretionary | | | 6,363,999 | | | | 6,363,999 | | | | — | | | | — | |
| Consumer Staples | | | 22,715,662 | | | | 22,715,662 | | | | — | | | | — | |
| Energy | | | 1,357,039 | | | | 1,357,039 | | | | — | | | | — | |
| Financials | | | 9,456,699 | | | | 9,456,699 | | | | — | | | | — | |
| Healthcare | | | 14,836,183 | | | | 14,836,183 | | | | — | | | | — | |
| Industrials | | | 17,871,844 | | | | 17,871,844 | | | | — | | | | — | |
| Information Technology | | | 27,611,555 | | | | 27,611,555 | | | | — | | | | — | |
| Market Indices | | | 71,926,374 | | | | 71,926,374 | | | | — | | | | — | |
| Materials | | | 3,062,613 | | | | 3,062,613 | | | | — | | | | — | |
| TOTAL COMMON STOCKS | | $ | 183,539,049 | | | $ | 183,539,049 | | | $ | — | | | $ | — | |
| REAL ESTATE INVESTMENT TRUST | |
| Real Estate | | | 14,794,346 | | | | 14,794,346 | | | | — | | | | — | |
| TOTAL SECURITIES SOLD SHORT | | $ | 198,333,395 | | | $ | 198,333,395 | | | $ | — | | | $ | — | |
| Alger Emerging Markets Fund | | TOTAL | | | LEVEL 1 | | | LEVEL 2 | | | LEVEL 3 | |
| COMMON STOCKS | |
| Communication Services | | | 3,530,086 | | | | — | | | | 3,530,086 | | | | — | |
| Consumer Discretionary | | | 7,780,627 | | | | 2,605,388 | | | | 5,175,239 | | | | — | |
| Consumer Staples | | | 1,173,178 | | | | 38 | | | | 1,173,140 | | | | — | |
| Energy | | | 622,531 | | | | — | | | | 622,531 | | | | — | |
| Financials | | | 3,739,289 | | | | 1,356,220 | | | | 2,383,069 | | | | — | |
| Healthcare | | | 1,460,331 | | | | — | | | | 1,460,331 | | | | — | |
| Industrials | | | 2,243,518 | | | | 1,048,479 | | | | 1,195,039 | | | | — | |
| Information Technology | | | 8,703,316 | | | | 1,657,674 | | | | 7,045,642 | | | | — | |
| Materials | | | 1,220,324 | | | | 499,069 | | | | 721,255 | | | | — | |
| TOTAL COMMON STOCKS | | $ | 30,473,200 | | | $ | 7,166,868 | | | $ | 23,306,332 | | | $ | — | |
| TOTAL INVESTMENTS IN SECURITIES | | $ | 30,473,200 | | | $ | 7,166,868 | | | $ | 23,306,332 | | | $ | — | |
| THE ALGER FUNDS II |
| NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued) |
| Alger Responsible Investing Fund | | TOTAL | | | LEVEL 1 | | | LEVEL 2 | | | LEVEL 3 | |
| COMMON STOCKS | |
| Communication Services | | $ | 7,656,922 | | | $ | 7,656,922 | | | $ | — | | | $ | — | |
| Consumer Discretionary | | | 14,160,024 | | | | 14,160,024 | | | | — | | | | — | |
| Consumer Staples | | | 2,381,540 | | | | 2,381,540 | | | | — | | | | — | |
| Financials | | | 3,025,246 | | | | 3,025,246 | | | | — | | | | — | |
| Healthcare | | | 7,060,568 | | | | 7,060,568 | | | | — | | | | — | |
| Industrials | | | 3,185,595 | | | | 3,185,595 | | | | — | | | | — | |
| Information Technology | | | 37,357,585 | | | | 37,357,585 | | | | — | | | | — | |
| Materials | | | 1,823,813 | | | | 1,823,813 | | | | — | | | | — | |
| Utilities | | | 477,780 | | | | 477,780 | | | | — | | | | — | |
| TOTAL COMMON STOCKS | | $ | 77,129,073 | | | $ | 77,129,073 | | | $ | — | | | $ | — | |
| REAL ESTATE INVESTMENT TRUST | |
| Real Estate | | | 2,273,736 | | | | 2,273,736 | | | | — | | | | — | |
| TOTAL INVESTMENTS IN SECURITIES | | $ | 79,402,809 | | | $ | 79,402,809 | | | $ | — | | | $ | — | |
*Alger Dynamic Opportunities Fund’s holdings of Adolor Corp.’s rights are classified as a Level 3 investment and fair valued at zero as of January 31, 2021.
| | | FAIR VALUE MEASUREMENTS USING SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3) | |
| Alger Spectra Fund | | Common Stocks | |
Opening balance at November 1, 2020 | | $ | 13,384,440 | |
| Transfers into Level 3 | | | — | |
| Transfers out of Level 3 | | | — | |
| Total gains or losses | | | | |
| Included in net realized gain (loss) on investments | | | — | |
| Included in net change in unrealized appreciation (depreciation) on investments | | | (4,942,601 | ) |
| Purchases and sales | | | | |
| Purchases | | | — | |
| Sales | | | — | |
Closing balance at January 31, 2021 | | | 8,441,839 | |
| Net change in unrealized appreciation (depreciation) attributable to investments still held at January 31, 2021 | | | (4,942,601 | ) |
| THE ALGER FUNDS II |
| NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued) |
| | | FAIR VALUE MEASUREMENTS USING SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3) | |
| Alger Spectra Fund | | Preferred Stocks | |
Opening balance at November 1, 2020 | | $ | 436,802 | |
| Transfers into Level 3 | | | — | |
| Transfers out of Level 3 | | | — | |
| Total gains or losses | | | | |
| Included in net realized gain (loss) on investments | | | — | |
| Included in net change in unrealized appreciation (depreciation) on investments | | | — | |
| Purchases and sales | | | | |
| Purchases | | | — | |
| Sales | | | — | |
Closing balance at January 31, 2021 | | | 436,802 | |
| Net change in unrealized appreciation (depreciation) attributable to investments still held at January 31, 2021 | | | — | |
| Alger Spectra Fund | | Special Purpose Vehicle | |
Opening balance at November 1, 2020 | | $ | 7,350,000 | |
| Transfers into Level 3 | | | — | |
| Transfers out of Level 3 | | | — | |
| Total gains or losses | | | | |
| Included in net realized gain (loss) on investments | | | — | |
| Included in net change in unrealized appreciation (depreciation) on investments | | | — | |
| Purchases and sales | | | | |
| Purchases | | | 4,575,000 | |
| Sales | | | — | |
Closing balance at January 31, 2021 | | | 11,925,000 | |
| Net change in unrealized appreciation (depreciation) attributable to investments still held at January 31, 2021 | | | — | |
| THE ALGER FUNDS II |
| NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued) |
| | | FAIR VALUE MEASUREMENTS USING SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3) | |
| Alger Dynamic Opportunities Fund | | Preferred Stocks | |
Opening balance at November 1, 2020 | | $
| 6,213 | |
| Transfers into Level 3 | | | — | |
| Transfers out of Level 3 | |
| — | |
| Total gains or losses | | | | |
| Included in net realized gain (loss) on investments | | | — | |
| Included in net change in unrealized appreciation (depreciation) on investments | | | — | |
| Purchases and sales | | | | |
| Purchases | | | — | |
| Sales | | | — | |
Closing balance at January 31, 2021 | | | 6,213 | |
Net change in unrealized appreciation (depreciation) attributable to investments still held at January 31, 2021 | | | — | |
| Alger Dynamic Opportunities Fund | | Rights | |
Opening balance at November 1, 2020 | | $ | 87,015 | * |
| Transfers into Level 3 | | | — | |
| Transfers out of Level 3 | | | — | |
| Total gains or losses | | | | |
| Included in net realized gain (loss) on investments | | | — | |
| Included in net change in unrealized appreciation (depreciation) on investments | | | — | |
| Purchases and sales | | | | |
| Purchases | | | — | |
| Sales | | | — | |
Closing balance at January 31, 2021 | | | 87,015 | * |
Net change in unrealized appreciation (depreciation) attributable to investments still held at January 31, 2021 | | | — | |
| Alger Dynamic Opportunities Fund | | Special Purpose Vehicle | |
Opening balance at November 1, 2020 | | | | |
| Transfers into Level 3 | | | — | |
| Transfers out of Level 3 | | | — | |
| Total gains or losses | | | | |
| Included in net realized gain (loss) on investments | | | — | |
| Included in net change in unrealized appreciation (depreciation) on investments | | | — | |
| Purchases and sales | | | | |
| Purchases | | | 550,000 | |
| Sales | | | — | |
Closing balance at January 31, 2021 | | | 1,475,000 | |
Net change in unrealized appreciation (depreciation) attributable to investments still held at January 31, 2021 | | | — | |
* Includes securities that are fair valued at zero.
| THE ALGER FUNDS II |
| NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued) |
The following table provides quantitative information about each Fund's Level 3 fair value measurements of the Funds' investments as of January 31, 2021. The table below is not intended to be all-inclusive, but rather provides information on the Level 3 inputs as they relate to the Funds' fair value measurements.
| | | Fair Value January 31, 2021 | | Valuation Methodology | Unobservable Input | | Input/Range | | | Weighted Average Inputs | |
| Alger Spectra Fund | |
| Common Stocks | | | 8,441,839 | | Income | Discount Rate | | | 15.00%-50.00 | % | | | N/A | |
| | | | | | Approach | | | | | | | | | |
| Preferred Stocks | | | 436,802 | | Income | Discount Rate | | | 72.50%-77.50 | % | | | N/A | |
| | | | | | Approach | | | | | | | | | |
| Special Purpose Vehicle | | | 11,925,000 | | Market | Priced at Cost | | | N/A | | | | N/A | |
| | | | | | Approach | | | | | | | | | |
| Alger Dynamic Opportunities Fund | |
| Preferred Stocks | | | 6,213 | | Income | Discount Rate | | | 72.50%-77.50 | % | | | N/A | |
| | | | | | Approach | | | | | | | |
| |
| Rights | | | 87,015 | | Income | Discount Rate | | | 3.89%-4.77 | % | | | N/A | |
| | | | | | Approach | | | | | | | | N/A | |
| Special Purpose Vehicle | | | 1,475,000 | | Market | Priced at Cost | | | N/A | | | | N/A | |
| | | | | | Approach | | | | | | | | | |
The significant unobservable inputs used in the fair value measurement of the Fund's securities are revenue and EBITDA multiples, discount rates, and the probabilities of success of certain outcomes. Significant increases and decreases in these inputs in isolation and interrelationships between these inputs would have resulted in significantly higher or lower fair value measurements than those noted in the table above. Generally, all other things being equal, increases in revenue and EBITDA multiples, decreases in discount rates, and increases in the probabilities of success result in higher fair value measurements, whereas decreases in revenues and EBITDA multiples, increases in discount rates, and decreases in the probabilities of success result in lower fair value measurements.
| THE ALGER FUNDS II |
| NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued) |
Certain of the Funds’ assets and liabilities are held at carrying amount or face value, which approximates fair value for financial statements purposes. As of January 31, 2021, such assets were categorized within the ASC 820 disclosure hierarchy as follows:
| | | TOTAL | | | LEVEL 1 | | | LEVEL 2 | | | LEVEL 3 | |
| Cash, Foreign Cash and Cash Equivalents: | |
| Alger Spectra Fund | | $ | 22,420 | | | $ | – | | | $ | 22,420 | | | $ | – | |
| Collateral held for short sales(a) | | | 168,053,677 | | | | 168,053,677 | | | | – | | | | – | |
| Due to broker(b) | | | (142,983,470 | ) | | | (142,983,470 | ) | | | – | | | | – | |
| Alger Dynamic Opportunities Fund | | | 59,007,427 | | | | – | | | | 59,007,427 | | | | – | |
| Collateral held for short sales(a) | | | 171,296,497 | | | | 171,296,497 | | | | – | | | | – | |
| Alger Emerging Markets Fund | | | 1,781,310 | | | | 491,539 | | | | 1,289,771 | | | | – | |
| Alger Responsible Investing Fund | | | 1,321,632 | | | | – | | | | 1,321,632 | | | | – | |
(a) The due to broker balance represents a margin payable related to short sales due to prime brokers as of January 31, 2021.
(b) The collateral held for short sales balance represents restricted cash held at prime brokers as of January 31, 2021.
FASB Accounting Standards Codification 815 – Derivatives and Hedging (“ASC 815”) requires qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of and gains and losses on derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements.
Options — The Funds seek to capture the majority of the returns associated with equity market investments. To meet this investment goal, the Funds invest in a broadly diversified portfolio of common stocks, the Funds may also buy and sell call and put options on equities and equity indexes. The Funds may also purchase call options to increase their exposure to the stock market and also provide diversification of risk. The Funds may also purchase put options in order to protect from significant market declines that may occur over a short period of time. The Funds may also write covered call and cash secured put options to generate cash flows while reducing the volatility of the Funds’ portfolios. The cash flows may be an important source of the Funds’ returns, although written call options may reduce the Funds’ ability to profit from increases in the value of the underlying security or equity portfolio. The value of a call option generally increases as the price of the underlying stock increases and decreases as the stock decreases in price. Conversely, the value of a put option generally increases as the price of the underlying stock decreases and decreases as the stock increases in price. The combination of the diversified stock portfolio and the purchase and sale of options is intended to provide the Funds with the majority of the returns associated with equity market investments but with reduced volatility and returns that are augmented with the cash flows from the sale of options. During the period ended January 31, 2021, options were used in accordance with these objectives.
The Funds’ option contracts were not subject to any rights of offset with any counterparty. All of the Funds’ options were exchange traded which utilize a clearinghouse that acts as an intermediary between buyer and seller, receiving initial and maintenance margin from both, and guaranteeing performance of the option contract.
| THE ALGER FUNDS II |
| NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued) |
Forward foreign currency contracts—In connection with portfolio purchases and sales of securities denominated in foreign currencies, the Funds may enter into forward foreign currency contracts. Additionally, the Funds may enter into such contracts to economically hedge certain other foreign currency denominated investments. These contracts are valued at the current cost of covering or offsetting such contracts. In the event that counterparties fail to settle these currency contracts or the related foreign security trades, the Funds could be exposed to foreign currency fluctuation.
| NOTE 5 — Affiliated Securities: |
The issuers of the securities listed below are deemed to be affiliates of the Funds because the Funds or their affiliates owned 5% or more of the issuer’s voting securities during all or part of the period ended January 31, 2021. Information regarding the Funds’ holdings of such securities is set forth in the following table:
Security | | Value at October 31, 2020 | | | Purchases/ Conversion | | | Sales/ Conversion | | | Dividend/ Interest Income | | | Realized Gain (Loss) | | | Net Change in Unrealized App(Dep) | | | Value at January 31, 2021 | |
| Alger Spectra Fund | | | | | | | | | | | | | | | | | | | | | |
| Preferred Stocks | | | | | | | | | | | | | | | | | | | | | |
| Prosetta Biosciences, Inc., Series D | | $ | 436,802 | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | 436,802 | |
| Special Purpose Vehicle | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Crosslink Ventures Capital LLC, Cl. A | | | 7,350,000 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 7,350,000 | |
| Crosslink Ventures Capital LLC, Cl. B | | | – | | | | 4,575,000 | | | | – | | | | – | | | | – | | | | – | | | | 4,575,000 | |
| Total | | $ | 7,786,802 | | | $ | 4,575,000 | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | 12,361,802 | |
Security | | Value at October 31, 2020 | | | Purchases/ Conversion | | | Sales/ Conversion | | | Dividend/ Interest Income | | | Realized Gain (Loss) | | | Net Change in Unrealized App(Dep) | | | Value at January 31, 2021 | |
| Alger Dynamic Opportunities Fund | |
| Preferred Stocks | | | | | | | | | | | | | | | | | | | | | |
| Prosetta Biosciences, Inc., Series D | | $ | 6,213 | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | 6,213 | |
| Special Purpose Vehicle | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Crosslink Ventures Capital LLC, Cl. A | | | 925,000 | | | | – | | | | – | | | | – | | | | – | | | | – | | | | 925,000 | |
| Crosslink Ventures Capital LLC, Cl. B | | | – | | | | 550,000 | | | | – | | | | – | | | | – | | | | – | | | | 550,000 | |
| Total | | $ | 931,213 | | | $ | 550,000 | | | $ | – | | | $ | – | | | $ | – | | | $ | – | | | $ | 1,481,213 | |
