Prospectus
May 1,
2023
|
|
Ticker
Symbol |
Listing
Exchange |
|
Alger
Mid Cap 40 ETF |
FRTY |
NYSE Arca,
Inc. |
|
Alger
35 ETF |
ATFV |
NYSE Arca,
Inc. |
|
Alger
Weatherbie Enduring Growth ETF |
AWEG |
NYSE Arca,
Inc. |
These
Exchange-Traded Funds (“ETFs”) are different from traditional ETFs.
Traditional
ETFs tell the public what assets they hold each day. These ETFs will not. This
may create additional risks for your investment. For example:
•
You
may have to pay more money to trade an ETF’s shares. These ETFs will provide
less information to traders, who tend to charge more for trades when they have
less information.
•
The
price you pay to buy ETF shares on an exchange may not match the value of an
ETF’s portfolio. The same is true when you sell shares. These price differences
may be greater for these ETFs compared to other ETFs because these ETFs provide
less information to traders.
•
These
additional risks may be even greater in bad or uncertain market
conditions.
The
differences between these ETFs and other ETFs may also have advantages. By
keeping certain information about the ETFs secret, these ETFs may face less risk
that other traders can predict or copy their investment strategies. This may
improve an ETF’s performance. If other traders are able to copy or predict an
ETF’s investment strategies, however, this may hurt an ETF’s
performance.
For
additional information regarding the unique attributes and risks of these ETFs,
see the Share Price and Distributions section of this Prospectus and the
Non-Transparent ETF Risks in the Principal Risks section of this
Prospectus.
The Securities and
Exchange Commission has not determined if the information in this Prospectus is
accurate or complete, nor has it approved or disapproved these securities. It is
a criminal offense to represent otherwise.
Prospectus 2/39
Summary
Sections
(fees paid directly from your investment)
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|
Alger
Mid Cap 40 ETF |
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|
|
(expenses that you pay each year as a percentage of the value of your investment)
|
|
Alger Mid
Cap 40 ETF |
|
Management
Fees |
|
|
Distribution
and/or Service (12b-1) Fees* |
|
|
Other
Expenses |
|
|
Total
Annual Fund Operating Expenses |
|
|
Fee
Waiver and/or Expense Reimbursement** |
( |
|
Total
Annual Fund Operating Expenses After Fee Waiver and/or Expense
Reimbursement |
|
*
**
|
|
1
Year |
3
Years |
5
Years |
10
Years |
|
Alger
Mid Cap 40 ETF |
$ |
$ |
$ |
$ |
Prospectus 3/39
Prospectus 4/39
Prospectus 5/39
Prospectus 6/39
|
|
|
|
|
|
|
|
|
1
Year |
Since
Inception |
Inception
Date |
|
Alger
Mid Cap 40 ETF |
|
|
|
|
Return
Before Taxes |
- |
- |
|
|
Return
After Taxes on Distributions |
- |
- |
|
|
Return
After Taxes on Distributions and Sale of Fund Shares |
- |
- |
|
|
Russell
Midcap Growth Index (reflects
no deductions for fees, expenses or taxes) |
- |
- |
|
Prospectus 7/39
Management
|
Investment
Manager |
Portfolio
Manager Primarily Responsible for Day-to-Day Management of the
Fund |
|
Fred
Alger Management, LLC |
Amy
Y. Zhang, CFA
Executive
Vice President and Portfolio Manager
Since
Inception (February 2021) |
Shareholder
Information
Purchasing
and Redeeming Fund Shares
Individual Fund
shares may only be bought and sold in the secondary market through a broker or
dealer at a market price. Because ETF shares trade at market prices rather than
NAV, shares may trade at a price greater than NAV (premium) or less than NAV
(discount). An investor may incur costs attributable to the difference between
the highest price a buyer is willing to pay to purchase shares of the Fund (bid)
and the lowest price a seller is willing to accept for shares of the Fund (ask)
when buying or selling shares in the secondary market (the “bid-ask spread”).
Once the Fund commences operations, recent information, including information on
the Fund’s NAV, market price, premiums and discounts, and bid-ask spreads, will
be available on the Fund’s website at www.alger.com.
Tax
Information
The Fund’s
distributions may be taxable as ordinary income or capital gains. The Fund is
actively managed, and as a result, investors may receive capital gains
distributions annually.
Payments
to Broker-Dealers and Other Financial Intermediaries
If you purchase the
Fund through a broker-dealer or other financial intermediary (such as if your
account is held at a bank), the Manager or the Fund’s distributor may pay the
intermediary for the sale of Fund shares and related services. These payments
may create a conflict of interest by influencing the broker-dealer or other
intermediary and your financial professional to recommend the Fund over another
investment. Ask your financial professional or visit your financial
intermediary’s website for more information.
Prospectus 8/39
(fees paid directly from your investment)
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|
Alger
35 ETF |
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|
|
(expenses that you pay each year as a percentage of the value of your investment)
|
|
Alger 35
ETF |
|
Management
Fees |
|
|
Distribution
and/or Service (12b-1) Fees* |
|
|
Other
Expenses |
|
|
Total
Annual Fund Operating Expenses |
|
|
Fee
Waiver and/or Expense Reimbursement** |
( |
|
Total
Annual Fund Operating Expenses After Fee Waiver and/or Expense
Reimbursement |
|
*
**
|
|
1
Year |
3
Years |
5
Years |
10
Years |
|
Alger
35 ETF |
$ |
$ |
$ |
$ |
Prospectus 9/39
Prospectus 10/39
Prospectus 11/39
Prospectus 12/39
|
|
|
|
|
|
|
|
|
1
Year |
Since
Inception |
Inception
Date |
|
Alger
35 ETF |
|
|
|
|
Return
Before Taxes |
- |
- |
|
|
Return
After Taxes on Distributions |
- |
- |
|
|
Return
After Taxes on Distributions and Sale of Fund Shares |
- |
- |
|
|
S&P
500 Index (reflects
no deductions for fees, expenses or taxes) |
- |
- |
|
Management
|
Investment
Manager |
Portfolio
Manager Primarily Responsible for Day-to-Day Management of the
Fund |
|
Fred
Alger Management, LLC |
Dan
C. Chung, CFA
Chief
Executive Officer, Chief Investment Officer and Portfolio
Manager
Since
Inception (May
2021) |
Prospectus 13/39
Shareholder
Information
Purchasing
and Redeeming Fund Shares
Individual Fund
shares may only be bought and sold in the secondary market through a broker or
dealer at a market price. Because ETF shares trade at market prices rather than
NAV, shares may trade at a price greater than NAV (premium) or less than NAV
(discount). An investor may incur costs attributable to the difference between
the highest price a buyer is willing to pay to purchase shares of the Fund (bid)
and the lowest price a seller is willing to accept for shares of the Fund (ask)
when buying or selling shares in the secondary market (the “bid-ask spread”).
Once the Fund commences operations, recent information, including information on
the Fund’s NAV, market price, premiums and discounts, and bid-ask spreads, will
be available on the Fund’s website at www.alger.com.
Tax
Information
The Fund’s
distributions may be taxable as ordinary income or capital gains. The Fund is
actively managed, and as a result, investors may receive capital gains
distributions annually.
Payments
to Broker-Dealers and Other Financial Intermediaries
If you purchase the
Fund through a broker-dealer or other financial intermediary (such as if your
account is held at a bank), the Manager or the Fund’s distributor may pay the
intermediary for the sale of Fund shares and related services. These payments
may create a conflict of interest by influencing the broker-dealer or other
intermediary and your financial professional to recommend the Fund over another
investment. Ask your financial professional or visit your financial
intermediary’s website for more information.
Prospectus 14/39
(fees paid directly from your investment)
|
|
Alger
Weatherbie Enduring Growth ETF |
|
|
|
(expenses that you pay each year as a percentage of the value of your investment)
|
|
Alger
Weatherbie Enduring Growth ETF |
|
Management
Fees |
|
|
Distribution
and/or Service (12b-1) Fees* |
|
|
Other
Expenses** |
|
|
Total
Annual Fund Operating Expenses |
|
|
Fee
Waiver and/or Expense Reimbursement*** |
( |
|
Total
Annual Fund Operating Expenses After Fee Waiver and/or Expense
Reimbursement |
|
*
**
***
|
|
1
Year |
3
Years |
|
Alger
Weatherbie Enduring Growth ETF |
$ |
$ |
Prospectus 15/39
Prospectus 16/39
Prospectus 17/39
Prospectus 18/39
Prospectus 19/39
Management
|
Investment
Manager |
Portfolio
Managers Jointly and Primarily Responsible for Day-to-Day Management of
the
Fund |
|
Fred
Alger Management, LLC |
|
|
Sub-Adviser |
|
|
Weatherbie
Capital, LLC* |
H.
George Dai, Ph.D.
Chief
Investment Officer and Senior Portfolio Manager
Since
Inception (March 2023) |
|
Joshua
D. Bennett, CFA
Chief
Operating Officer and Senior Portfolio Manager
Since
Inception (March 2023) |
*
Weatherbie, an
affiliate of the Manager, sub-advises the Fund subject to the Manager’s
supervision and approval.
When a Fund is
co-managed, the responsibilities of such portfolio managers may be shared,
divided or otherwise assigned based on various factors including, but not
limited to, level of Fund assets to be managed, their overall experience, their
sector expertise, and such other factors as the Manager believes are most
efficient and effective. In all cases, each portfolio manager collaborates with
the other portfolio manager(s) and analysts to develop overall strategy,
outlook, and themes, which impact industry, sector and security allocations in
the Fund. Responsibilities amongst portfolio managers may be fully or partially
allocated to one of the portfolio managers for the purposes of day-to-day
portfolio management and stock selection, implementation of trades, strategic
and performance oversight, risk management, or oversight of guidelines, whether
externally driven or internally developed by the Manager.
Shareholder
Information
Purchasing
and Redeeming Fund Shares
Individual Fund
shares may only be bought and sold in the secondary market through a broker or
dealer at a market price. Because ETF shares trade at market prices rather than
NAV, shares may trade at a price greater than NAV (premium) or less than NAV
(discount). An investor may incur costs attributable to the difference between
the highest price a buyer is willing to pay to purchase shares of the Fund (bid)
and the lowest price a seller is willing to accept for shares of the Fund (ask)
when buying or selling shares in the secondary market (the “bid-ask spread”).
Once the Fund commences operations, recent information, including information on
the Fund’s NAV, market price, premiums and discounts, and bid-ask spreads, will
be available on the Fund’s website at www.alger.com.
Tax
Information
The Fund’s
distributions may be taxable as ordinary income or capital gains. The Fund is
actively managed, and as a result, investors may receive capital gains
distributions annually.
Payments
to Broker-Dealers and Other Financial Intermediaries
If you purchase the
Fund through a broker-dealer or other financial intermediary (such as if your
account is held at a bank), the Manager or the Fund’s distributor may pay the
intermediary for the sale of Fund shares and related services. These payments
may create a conflict of interest by influencing the broker-dealer or other
intermediary and your financial professional to recommend the Fund over another
investment. Ask your financial professional or visit your financial
intermediary’s website for more information.
Prospectus 20/39
Investment
Objectives, Principal Investment Strategies and Related Risks
The investment
objective, principal strategy and primary risks of each Fund are discussed
individually in each Fund’s Summary Section in this Prospectus. Alger Mid Cap 40
ETF has adopted a policy to invest at least 80% of its assets in specified
securities appropriate to its name (as described in the Fund’s Summary Section
in this Prospectus) and to provide its shareholders with at least 60 days’ prior
notice of any change with respect to this policy. Each Fund’s investment
objective is a non-fundamental investment policy and may be changed by the Board
of Trustees (the “Board”) of The Alger ETF Trust (the “Trust”) without
shareholder approval. Each Fund will provide its shareholders with at least 60
days’ prior notice of any change to its investment objective. A Fund may, from
time to time, take temporary defensive positions (subject to the limitations on
the types of investments a Fund may hold, as listed in the Funds’ application
for the Order) that are inconsistent with the Fund’s principal investment
strategies in attempting to respond to adverse market, economic, political, or
other conditions. A Fund may not achieve its investment objective while in a
temporary defensive position.
Each Fund is a
non-diversified and non-transparent, actively managed ETF that does not seek to
replicate the performance of a specified index. A Fund’s past performance
(before and after taxes) is not necessarily an indication of how it will perform
in the future.
Each index used in
the Summary Sections is a broad-based index designed to track a particular
market or market segment. No expenses, fees or taxes are reflected in the
returns for the indexes, which are unmanaged. All returns for the indexes assume
reinvestment of dividends and interest of the underlying securities that make up
the respective index. Investors cannot invest directly in any
index.
•
Russell Midcap Growth
Index: measures the performance of the mid-cap growth segment of the U.S. equity
universe. It includes those Russell Midcap Index companies with higher growth
earning potential as defined by Russell’s leading style methodology. The Russell
Midcap Growth Index is constructed to provide a comprehensive and unbiased
barometer of the mid-cap growth market.
•
S&P 500 Index: An
index of large company stocks considered to be representative of the U.S. stock
market.
Additional
Information About the Funds’ Investment Strategies and Investments
Investment
Objectives
Each of the Funds
seeks long-term capital appreciation.
Principal
Investment Strategies
The following are
each Fund’s investment process and principal investment strategies. Each Fund
may invest in other securities that are not its principal strategy, and such
strategies and related risks are described in more detail in the Fund’s
Statement of Additional Information (“SAI”).
Each Fund invests
primarily in equity securities. Each Fund’s investments in equity securities are
primarily in common or preferred stocks, including convertible preferred
securities, and American Depositary Receipts. Each Fund invests in companies
whose securities are traded on a national securities exchange registered with
the SEC, and trade contemporaneously with the Fund’s shares. As noted in each
Fund’s Summary Section in this Prospectus, the Funds operate in reliance on the
Order from the SEC, which limits the types of investments the Funds may hold to
those listed in the Funds' application for the Order.
Each Fund invests
primarily in “growth” stocks. The Funds’ investment manager, Fred Alger
Management, LLC (the “Manager”), believes that these companies tend to fall into
one of two categories:
•
High
Unit Volume Growth
Vital, creative companies that offer goods or services to a rapidly expanding marketplace. They include both established and emerging firms, exercising market dominance, offering new or improved products, or simply fulfilling an increased demand for an existing product line.
Vital, creative companies that offer goods or services to a rapidly expanding marketplace. They include both established and emerging firms, exercising market dominance, offering new or improved products, or simply fulfilling an increased demand for an existing product line.
•
Positive
Life Cycle Change
Companies experiencing a major change which is expected to produce advantageous results. These changes may be as varied as new management, products or technologies; restructuring or reorganization; regulatory change; or merger and acquisition.
Companies experiencing a major change which is expected to produce advantageous results. These changes may be as varied as new management, products or technologies; restructuring or reorganization; regulatory change; or merger and acquisition.
Alger Weatherbie
Enduring Growth ETF is sub-advised by Weatherbie Capital, LLC (“Weatherbie”
or the “Sub-Adviser”), an affiliate of the Manager (Weatherbie and the Manager,
collectively referred to as the “Manager,” where applicable). Subject to
the general supervision by the Board, the Manager oversees Weatherbie and
evaluates its performance results. The Manager reviews portfolio performance,
compliance with investment guidelines and federal securities laws, and changes
in key personnel of Weatherbie. Weatherbie is primarily responsible for the
day-to-day management of the Alger Weatherbie Enduring Growth ETF’s portfolio,
including purchases and sales of individual securities.
Prospectus 21/39
Alger Mid Cap 40 ETF
and Alger Weatherbie Enduring Growth ETF must take into account a company’s
market capitalization when considering it for investment. The market
capitalization of a company is its price per share multiplied by its number of
outstanding shares.
ESG
Integration
The following is
applicable to each Fund, except Alger Weatherbie Enduring Growth
ETF.
Although a Fund does
not seek to implement a specific environmental, social and governance (“ESG”),
impact or sustainability strategy unless otherwise disclosed, the Manager has
sought to integrate ESG considerations into its investment process through the
use of both third-party ESG specific information and its own proprietary
research. Specifically, with respect to 75% of its assets under management, the
Manager evaluates a company’s ESG factors and, based on such factors, may engage
with the company to (i) identify drivers of poor ESG metrics; (ii) interview
management with key questions about ESG issues; and (iii) evaluate the prospect
of positive ESG change within a company. Upon conclusion of this engagement, a
report is published to the Manager’s research database to ensure that all
portfolio managers have access to the report summarizing the company’s ESG
issues, the results of any meeting/interview with the company, an ESG rating of
the company and any other relevant factors. The author of each report will meet
with portfolio managers as necessary to discuss the ESG report and the impact
the report may have on the overall investment view of the company.
The Manager may
change the sources for such ESG information, including by adding or modifying
the information it receives from third-party firms, selecting different
third-party firms, using company-provided information, or performing different
or additional internal assessments. To assist with efforts to incorporate ESG
considerations into the investment process, all of the Manager’s investment
professionals have access to company-specific ESG reports. The Manager has
established an ESG steering committee comprised of executive management and
senior investment professionals to oversee this process.
ESG characteristics
are not the sole considerations when making investment decisions for a Fund.
Further, investors can differ in their views of what constitutes positive or
negative ESG characteristics. As a result, a Fund may invest in issuers that do
not reflect the beliefs and values with respect to ESG of any particular
investor. ESG considerations may affect a Fund’s exposure to certain companies
or industries and a Fund may forego certain investment opportunities. While the
Manager views ESG considerations as having the potential to contribute to a
Fund’s long-term performance, there is no guarantee that such results will be
achieved.
Alger
Mid Cap 40 ETF
Under normal
circumstances, the Fund invests at least 80% of its net assets in equity
securities of mid-cap companies. For these purposes, “mid-cap companies” are
those companies that, at the time of purchase of the securities, have total
market capitalization within the range of (i) companies included in the Russell
MidCap Growth Index or the S&P MidCap 400 Index, as reported by the index at
the most recent quarter end, or (ii) $1 billion to $30 billion. Both indexes are
designed to track the performance of medium-capitalization stocks. At December
31, 2022, the companies in the Russell MidCap Growth Index ranged from $736
million to $52.8 billion and the companies in the S&P MidCap 400 Index
ranged from $1.76 billion to $30.35 billion. Because of the Fund’s long-term
approach to investing, it could have a significant portion of its assets
invested in securities of issuers that have appreciated beyond the market
capitalization thresholds noted.
The Fund may invest a
significant portion of its assets in securities of companies conducting business
within a single sector, as defined by third party sources, including the
information technology, health care and industrials sectors; however, the Fund
will not invest more than 25% of its total assets in any one industry comprising
such sector.
As a focus fund, the
Fund intends to invest a substantial portion of its assets in a smaller number
of issuers. Generally the Fund will own approximately 40 holdings. Fund holdings
may occasionally differ from this number for a variety of reasons, including,
among others, because of extreme market volatility, such as when the Fund has
entered a temporary defensive position. Additionally, the Fund may temporarily
exceed the stated number of holdings when it acquires a new holding and
determines that it is in the best interests of shareholders to sell an existing
holding over a period of time, instead of immediately selling the entire
holding.
The Fund may sell a
stock when it reaches a target price, it fails to perform as expected, or other
opportunities appear more attractive. As a result, the Fund may engage in active
trading of portfolio securities.
The Fund is a
non-diversified and non-transparent, actively managed ETF that does not seek to
replicate the performance of a specified index.
The Fund operates in
reliance on the Order, which limits the types of investments the Fund may hold
to those listed in the Fund’s application for the Order. Under the terms of the
Order, the Fund is permitted to invest only in ETFs, exchange-traded notes,
exchange listed common stocks, exchange-traded preferred stocks, exchange-traded
ADRs, exchange-traded real estate investment trusts, exchange-traded commodity
pools, exchange-traded metal trusts, exchange-traded currency trusts and
exchange-traded futures that trade on a U.S. exchange contemporaneously with the
Fund’s shares, as well as cash and cash
Prospectus 22/39
equivalents (which are short-term
U.S. Treasury securities, government money market funds, and repurchase
agreements). The Fund’s investment strategies and practices, including those
listed above, are subject to these limitations.
The Fund invests in
cash (and cash equivalents) when the Fund is unable to find enough attractive
long-term investments to meet its investment objective, in the event of a large
redemption order from an Authorized Participant and/or when the Manager believes
it is advisable to do so during times of short-term market volatility. During
these times, cash (and cash equivalents) will not exceed 15% of the Fund’s net
assets.
Alger
35 ETF
Under normal
circumstances, the Fund invests in a stock portfolio of approximately 35 equity
securities of companies of any market capitalization that the Manager believes
are undergoing Positive Dynamic Change. The Fund focuses its investments in
technology companies, including companies benefiting from technological
improvements, advancements or developments. In the opinion of the Manager, these
companies across industries use technology extensively to improve their business
processes, applications and opportunities or seek to grow through technological
developments and innovations.
As a focus fund, the
Fund intends to invest a substantial portion of its assets in a smaller number
of issuers. Generally the Fund will own approximately 35 holdings. Fund holdings
may occasionally differ from this number for a variety of reasons, including
because of extreme market volatility, such as when the Fund has entered a
temporary defensive position. Additionally, the Fund may temporarily exceed the
stated number of holdings when it acquires a new holding and determines that it
is in the best interests of shareholders to sell an existing holding over a
period of time, instead of immediately selling the entire holding.
The Fund may sell a
stock when it reaches a target price, it fails to perform as expected, or other
opportunities appear more attractive. As a result, the Fund may engage in active
trading of portfolio securities.
The Fund may invest a
significant portion of its assets in securities of companies conducting business
within a single sector, as defined by third party sources, including the
information technology, health care and consumer discretionary
sectors.
The Fund is a
non-diversified and non-transparent, actively managed ETF that does not seek to
replicate the performance of a specified index.
The Fund operates in
reliance on the Order, which limits the types of investments the Fund may hold
to those listed in the Fund’s application for the Order. Under the terms of the
Order, the Fund is permitted to invest only in ETFs, exchange-traded notes,
exchange listed common stocks, exchange-traded preferred stocks, exchange-traded
ADRs, exchange-traded real estate investment trusts, exchange-traded commodity
pools, exchange-traded metal trusts, exchange-traded currency trusts and
exchange-traded futures that trade on a U.S. exchange contemporaneously with the
Fund’s shares, as well as cash and cash equivalents (which are short-term U.S.
Treasury securities, government money market funds, and repurchase agreements).
The Fund’s investment strategies and practices, including those listed above,
are subject to these limitations.
The Fund invests in
cash (and cash equivalents) when the Fund is unable to find enough attractive
long-term investments to meet its investment objective, in the event of a large
redemption order from an Authorized Participant and/or when the Manager believes
it is advisable to do so during times of short-term market volatility. During
these times, cash (and cash equivalents) will not exceed 15% of the Fund’s net
assets.
Alger
Weatherbie Enduring Growth ETF
The Fund invests
primarily in equity securities of mid-cap growth companies with an
environmental, social and governance (“ESG”) rating of medium or better, as
rated by Sustainalytics, a third-party ESG rating agency (“Sustainalytics” or
the “ESG Rating Agency”), at the time of purchase. Sustainalytics provides ESG
ratings that measure a company’s exposure to ESG risks and how well the company
is managing those risks. Using its proprietary methodology, as described below,
Sustainalytics rates companies on a scale of 0 to 100, with 0 to 10 representing
negligible ESG risk, 10 to 20 representing low ESG risk, 20 to 30 representing
medium ESG risk, 30 to 40 representing high ESG risk, and 40 and higher
representing severe ESG risk.
Under normal
circumstances, 80% of companies in the Fund’s portfolio, based on net assets,
will have a Sustainalytics ESG rating. The Sustainalytics ESG ratings for this
portion of the portfolio will have a weighted average of 25 or better. For
determining the weighted average (as summarized below), the Sustainalytics ESG
rating of a security comprising a higher percentage of the portfolio will have a
greater impact than the Sustainalytics ESG rating of a security with a lower
percentage of the portfolio on the weighted average ESG rating of this portion
of the portfolio. As a result, the Fund may invest in companies with
Sustainalytics ESG ratings above and below 25, although the Fund will not invest
in a company if, as a result, the weighted average of the applicable portion of
its portfolio would exceed a Sustainalytics ESG rating of 25. In addition, the
Fund will not invest in a company with a Sustainalytics ESG rating of 40 or
above (i.e., severe ESG risk) at the time of purchase. If an existing portfolio
holding’s ESG rating is adjusted by Sustainalytics to 40 or higher, Weatherbie
will sell that portfolio holding within six months, subject to its fiduciary
obligations to the Fund, although the Fund may continue to hold that investment
if Sustainalytics readjusts the company’s ESG rating back to below 40 as a
result of positive actions taken by the company to reduce its ESG risk
rating.
Prospectus 23/39
The weighted average
is calculated by multiplying each portfolio holding’s weight by its
Sustainalytics ESG rating, then adding each total together to determine the
Fund’s weighted ESG rating. For example, to determine the weighted average of
(i) a security with an ESG rating of 10 comprising 50% of the Fund’s portfolio,
(ii) a security with an ESG rating of 20 comprising 35% of the Fund’s portfolio,
and (iii) a security with an ESG rating of 30 comprising 15% of the Fund’s
portfolio: first, 10 is multiplied by 50% (for a total of 5), 20 is multiplied
by 35% (for a total of 7), and 30 is multiplied by 15% (for a total of 4.5).
Then, 5, 7 and 4.5 are added together for a total weighted average ESG rating of
16.5. If a simple average was used, rather than weighted average, the average
ESG rating of these three companies would be 20. The previous calculation is
only an example made to illustrate how the Fund’s weighted average ESG rating is
calculated. The Fund’s actual portfolio will contain more securities and will
consist of securities with ESG ratings that are likely to differ from those
shown in the example.
Although the Fund
expects to invest primarily in companies with ESG ratings provided by
Sustainalytics, certain investments may not be rated by Sustainalytics. Reasons
for this may be because (i) Sustainalytics does not include the company in its
rating universe; and (ii) of timing differences between when the Fund may invest
in a company and when, and if, that company receives an ESG rating from
Sustainalytics. With respect to (ii) for example, Sustainalytics may take time
to rate a particular company when it is newly publicly traded or as a result of
a corporate action, such as a merger, spin-off or restructuring. The Fund may
hold up to three securities totaling no more than 20% of the Fund’s net assets
in securities, without a Sustainalytics ESG rating. If a company does receive an
ESG rating from Sustainalytics, Weatherbie will include that company as part of
the portion of the Fund’s portfolio that is required to maintain a weighted
average ESG rating of 25 or better.
In effecting the
Fund’s investment strategy, Weatherbie initially employs fundamental analysis to
identify innovative and dynamic companies that demonstrate promising growth
potential such as strong earnings growth and sound stock market values.
Weatherbie then uses Sustainalytics’ ESG ratings to determine whether an
identified company is an appropriate investment for the Fund, including
determining the impact that the investment would have on the Sustainalytics ESG
rating of the Fund’s portfolio on a weighted average basis. In selecting and
monitoring investments for the Fund, Weatherbie conducts due diligence on
Sustainalytics, reviews the Sustainalytics ESG ratings of existing and potential
portfolio investments, and separately engages with identified companies to
determine whether a company’s Sustainalytics ESG rating seems consistent with
the company’s practices. As part of Weatherbie’s fundamental analysis when
considering investing in a company without a Sustainalytics ESG rating,
Weatherbie will consider the company’s ESG record in addition to the company’s
overall growth potential.
With respect to its
ESG ratings, Sustainalytics arrives at an ESG risk score for each company it
rates by assessing the company’s exposure to material ESG risks and assessing
how well management manages the company’s exposure to those risks. Regarding
assessing exposure to material ESG risks, Sustainalytics uses a variety of
criteria, which may change from time to time as part of its ratings process. The
environmental criteria include, but are not limited to, climate change (carbon,
energy efficiency, fines), natural resources (water stress, biodiversity),
pollution and waste (air/water pollution, waste management), and environmental
opportunities (clean technology, green building, renewable energy). The social
criteria include, but are not limited to, human capital (labor management,
development, supply chain, health and safety, employee sentiment, diversity),
product liability (safety and quality, consumer satisfaction), stakeholder
opposition (controversial sourcing), social opportunities (access to finance,
healthcare, communications, nutrition and health, philanthropy), and board
composition (diversity). The governance criteria include, but are not limited
to, corporate governance (board, executive pay, ownership structure, accounting
and disclosures, audit committee structure) and corporate behavior (business
ethics, anti-competition strategies, corruption, lobbying, political
contributions, shareholder rights). The overall Sustainalytics risk score for
each company is a measure of whether or not, and how well, a company has
responded to the various material ESG risks to which it is exposed.
In evaluating a
particular company’s ESG rating, as well as the Fund’s weighted average ESG
rating, the Fund relies exclusively on ratings provided by Sustainalytics.
Sustainalytics periodically assesses companies for their exposure to and
management of ESG risks and opportunities based on data collected from company
filings, public disclosures and other sources.
For purposes of the
Fund’s principal investment strategies, “mid-cap companies” are those companies
that, at the time of purchase of the securities, primarily have total market
capitalization within the range of (i) companies included in the Russell Midcap
Growth Index, as reported by the index at the most recent quarter end, or (ii)
$1 billion to $25 billion. At December 31, 2022, the companies in this index
ranged from $735.7 million to $ 52.8 billion. Because of the Fund’s long-term
approach to investing, it could have a significant portion of its assets
invested in securities of issuers that have appreciated beyond the market
capitalization thresholds noted.
The Fund intends to
invest a substantial portion of its assets in a smaller number of issuers.
Generally, the Fund will own no more than 30 holdings. As a result, the Fund is
a non-diversified investment company, which means the performance results of any
one position may have a greater impact on the Fund’s performance. Fund holdings
may differ from this number for any reason. Such reasons may be, among others,
because of extreme market volatility, such as when the Fund has entered a
temporary defensive position. Additionally, the Fund may temporarily exceed the
stated number of holdings when it acquires a new holding and determines that it
is in the best interests of shareholders to sell an existing holding over a
period of time, instead of immediately selling the entire holding.
The Fund may invest a
significant portion of its assets in securities of companies conducting business
within a single sector.
Prospectus 24/39
The Fund may sell a
stock when it reaches a target price, it fails to perform as expected, or other
opportunities appear more attractive. As a result, the Fund may engage in active
trading of portfolio securities.
The Fund is a
non-transparent, actively managed ETF that does not seek to replicate the
performance of a specified index.
The Fund operates in
reliance on the Order, which limits the types of investments the Fund may hold
to those listed in the Fund’s application for the Order. Under the terms of the
Order, the Fund is permitted to invest only in ETFs, exchange-traded notes,
exchange listed common stocks, exchange-traded preferred stocks, exchange-traded
ADRs, exchange-traded real estate investment trusts, exchange-traded commodity
pools, exchange-traded metal trusts, exchange-traded currency trusts and
exchange-traded futures that trade on a U.S. exchange contemporaneously with the
Fund’s shares, as well as cash and cash equivalents (which are short-term U.S.
Treasury securities, government money market funds, and repurchase agreements).
The Fund’s investment strategies and practices, including those listed above,
are subject to these limitations.
The Fund invests in
cash (and cash equivalents) when the Fund is unable to find enough attractive
long-term investments to meet its investment objective, in the event of a large
redemption order from an Authorized Participant and/or when the Sub-Adviser
believes it is advisable to do so during times of short-term market volatility.
During these times, cash (and cash equivalents) will not exceed 15% of the
Fund’s net assets.
Principal
Risks
This section contains
a discussion of the general risks of investing in the Funds. The “Investment
Strategies and Policies” section in the SAI also includes more information about
the Funds and their investments and the related risks. An investment in the
Funds is not insured or guaranteed by the Federal Deposit Insurance Corporation
or by any bank or governmental agency. As with any fund, an investment in the
Funds involves risks. Each risk noted below is applicable to each Fund unless
the specific Fund or Funds are noted in a parenthetical.
Non-Transparent
ETF Risks
•
Non-Transparent ETF
Structure Risk – Unlike most ETFs, each Fund does not provide daily disclosure
of its portfolio holdings. Instead, each Fund provides a VIIV, calculated and
disseminated every second throughout the trading day. The VIIV is intended to
provide investors and other market participants with enough information to allow
for an effective arbitrage mechanism that will attempt to keep the market price
of a Fund at or close to the underlying NAV per share of the Fund. There is,
however, a risk that shares of a Fund may trade at a wider bid/ask spread than
ETFs that publish their portfolio holdings daily, especially during periods of
market disruption or volatility, and therefore, may cost investors more to
trade. There is also a risk that the market price may vary significantly from
the VIIV and, thus, the underlying value of a Fund. There is also a risk that,
despite not disclosing the portfolio holdings each day, some market participants
may seek to use publicly available information, including the VIIV, to identify
a Fund’s investment strategies and engage in certain predatory trading practices
that may have the potential to harm a Fund.
•
Trading Issues Risk –
Trading in Fund shares on the Listing Exchange may be halted in certain
circumstances. If at any time the securities representing 10% or more of a
Fund’s portfolio become subject to a trading halt or otherwise do not have
readily available market quotations, the Manager will request the Listing
Exchange to halt trading of the Fund. There may be other instances that require
a trading halt specific to the VIIV. If there is a discrepancy of sufficient
magnitude in a Fund’s VIIV calculation, the Manager will request the Listing
Exchange to halt trading. This “circuit breaker” is designed to prevent the VIIV
from reflecting outlier prices.
•
Early Close/Trading
Halt Risk – An exchange or market may close early or issue trading halts on
portfolio securities. In times of market volatility, if trading is halted in
some of the securities that a Fund holds, there may be a disconnect between the
market price of those securities and the market price of a Fund. If at any time
the securities representing 10% or more of a Fund’s portfolio become subject to
a trading halt or otherwise do not have readily available market quotations, the
Manager will request the Listing Exchange to halt trading on a Fund, meaning
that investors would not be able to trade their shares. During any such trading
halt, the VIIV would continue to be calculated and disseminated. Trading halts
may have a greater impact on a Fund than traditional ETFs because of its lack of
transparency. Additionally, the Manager monitors the bid and ask quotations for
the securities a Fund holds, and, if it determines that such a security does not
have readily available market quotations (such as during an extended trading
halt), it will post that fact and the name and weighting of that security in a
Fund’s VIIV calculation on the Fund’s web site. This information should permit
market participants to calculate the effect of that security on the VIIV
calculation, determine their own fair value of the disclosed portfolio security,
and better judge the accuracy of that day’s VIIV for a Fund. An extended trading
halt in a portfolio security could exacerbate discrepancies between the VIIV and
a Fund’s NAV.
•
Authorized
Participant / AP Representative Concentration Risk – The creation and redemption
process for a Fund occurs through a Confidential Account with an AP
Representative on behalf of an Authorized Participant who has entered into a
participation agreement with a Fund’s distributor and a Confidential Account
agreement with an AP Representative. Each day, the AP Representative will be
given the Basket, allowing the AP Representative to buy and sell positions in
the portfolio
Prospectus 25/39
securities to permit creations or
redemptions on the Authorized Participant’s behalf, without disclosing the
information to the Authorized Participant. A Fund may have a limited number of
institutions that act as Authorized Participants and AP Representatives, none of
which are obligated to engage in creation or redemption transactions. To the
extent that these institutions exit the business or are unable to proceed with
creation and/or redemption orders with respect to a Fund and no other Authorized
Participant is able to step forward to process creation and/or redemption
orders, Fund shares may trade at a discount to NAV and possibly face trading
halts and/or delisting. This risk may be more pronounced in volatile markets,
potentially where there are significant redemptions in ETFs generally. The fact
that a Fund is offering a novel and unique structure may result in fewer
entities willing to act as Authorized Participants and AP Representatives.
During times of market stress, Authorized Participants may be more likely to
step away from this type of ETF than a traditional ETF.
•
Market Trading Risk –
Although shares of each Fund are listed for trading on one or more stock
exchanges, there can be no assurance that an active trading market for such
shares will develop or be maintained. There are no obligations of market makers
to make a market in a Fund’s shares or of an AP to submit purchase or redemption
orders for shares at NAV in aggregations of a specified number of shares (a
“Creation Unit”). Decisions by market makers or APs to reduce their role or step
away from these activities in times of market stress could inhibit the
effectiveness of the arbitrage process in maintaining the relationship between
the underlying value of a Fund’s portfolio securities and a Fund’s market price.
This reduced effectiveness could result in Fund shares trading at a premium or
discount to its NAV. For the life of each Fund, the Manager monitors on an
on-going basis how shares of each Fund trade, including the level of any market
price premium or discount to NAV and the bid/ask spreads on market transactions.
For at least the first three years after launch of each Fund, the Board will
promptly meet if, for 30 or more days in any quarter or 15 days in a row, the
absolute difference between either the market closing price or the bid/ask
price, on one hand, and NAV, on the other, exceeds 1.00% or the bid/ask spread
exceeds 1.00%. In such a circumstance, the Board will consider the continuing
viability of each Fund, whether shareholders are being harmed, and what, if any,
action would be appropriate to among other things, narrow the premium/discount
or spread, as applicable. The Board will then decide whether to take any such
action. Potential actions may include, but are not limited to, changing lead
market makers, listing a Fund on a different exchange, changing the size of
Creation Units, changing a Fund’s investment objective or strategy, and
liquidating a Fund.
Secondary market
trading in Fund shares may be halted by a stock exchange because of market
conditions or other reasons and may be subject to trading halts caused by
extraordinary market volatility pursuant to “circuit breaker” rules on the stock
exchange or market. There can be no assurance that the requirements necessary to
maintain the listing or trading of Fund shares will continue to be met or will
remain unchanged. In addition, during a “flash crash,” the market prices of a
Fund’s shares may decline suddenly and significantly. Such a decline may not
reflect the performance of the portfolio securities held by a Fund. Flash
crashes may cause APs and other market makers to limit or cease trading in a
Fund’s shares for temporary or longer periods. Shareholders could suffer
significant losses to the extent that they sell Fund shares at these temporarily
low market prices.
When buying or
selling shares of a Fund through a broker, you may incur a brokerage commission
or other charges determined by your broker. In addition, you may incur the cost
of the “spread,” that is, any difference between the bid price and the ask
price. The spread varies over time for shares of a Fund based on the Fund’s
trading volume and market liquidity and is generally lower if a Fund has a lot
of trading volume and market liquidity, and higher if a Fund has little trading
volume and market liquidity. During times of market stress, spreads may widen
causing investors to pay more.
•
Premium/Discount Risk
– Shares of each Fund are listed for trading on the Listing Exchange and are
bought and sold in the secondary market at market prices that may differ from
its most recent NAV. The market value of a Fund’s shares will fluctuate, in some
cases materially, in response to changes in the Fund’s NAV, the intraday value
of the Fund’s holdings, and the relative supply and demand for the Fund’s shares
on the Listing Exchange. Although a Fund is intended to provide investors with
enough information to allow for an effective arbitrage mechanism that will keep
the market price of a Fund at or close to the Fund’s NAV, there is a risk (which
may increase during periods of market disruption or volatility) that market
prices for Fund shares will vary significantly from a Fund’s NAV. This risk may
be greater for each Fund than for traditional ETFs that disclose their full
portfolio holdings on a daily basis because the publication of the VIIV does not
provide the same level of transparency as the publication of the full portfolio
by a fully transparent active ETF. This could cause a Fund’s shares to have
wider bid/ask spread and larger premiums/discount than fully transparent ETFs
using the same investment strategies. During such periods, you may be unable to
sell your shares or may incur significant losses if you sell your shares. There
are various methods by which investors can purchase and sell shares and various
types of orders that may be placed. Investors should consult their financial
intermediary before purchasing or selling shares of a Fund. If a shareholder
purchases shares at a time when the market price is at a premium to the NAV or
sells shares at a time when the market price is at a discount to the NAV, the
shareholder may pay significantly more or receive significantly less than the
underlying value of the Fund shares and may sustain losses. A Fund cannot
predict whether shares will trade above (premium), below (discount) or at
NAV.
Investment
Risk
An investment in a
Fund is subject to investment risk, including the possible loss of the entire
principal amount that you invest.
Prospectus 26/39
Market
Risk
Your investment in
Fund shares represents an indirect investment in the securities owned by a Fund.
The value of these securities, like other investments, may move up or down,
sometimes rapidly and unpredictably. Local, regional or global events such as
environmental or natural disasters, war, terrorism, pandemics, outbreaks of
infectious diseases, and similar public health threats, recessions, or other
events could have a significant impact on a Fund and its investments and
could result in increased premiums or discounts to a Fund’s NAV.
Mid
Cap Securities Risk
There may be greater
risk in investing in medium-capitalization companies rather than larger, more
established companies due to such factors as inexperienced management and
limited product lines or financial resources. It may also be difficult or
impossible to liquidate a security position at a time and price acceptable to
the Fund because of the potentially less frequent trading of stocks of smaller
market capitalization.
Small
Cap Securities Risk (Alger 35 ETF)
There may be greater
risk investing in small capitalization companies rather than larger, more
established companies owing to such factors as more limited product lines or
financial resources or lack of management depth. They may be less financially
secure than larger, more established companies. They may depend on a small
number of key personnel. If a product fails, there are other adverse
developments, or if management changes, a Fund’s investment in a small cap
company may lose substantial value. In addition, it is more difficult to get
information on smaller companies, which tend to be less well known, have shorter
operating histories, do not have significant ownership by large investors and
are followed by relatively few securities analysts. The securities of small cap
companies generally trade in lower volumes and are subject to greater and more
unpredictable price changes than larger cap securities or the market as a whole.
In addition, it may be difficult or impossible to liquidate a security position
at a time and price acceptable to a Fund because of the potentially less
frequent trading of stocks of smaller market capitalization. Small cap
securities may be particularly sensitive to changes in interest rates, borrowing
costs and earnings. Investing in small cap securities requires a longer term
view.
Equity
Securities Risk
As with any fund that
invests in stocks, your investment will fluctuate in value, and the loss of your
investment is a risk of investing. Each Fund’s price per share will fluctuate
due to changes in the market prices of its investments. Because stock markets
tend to move in cycles, stock prices overall may decline. A particular stock’s
market value may decline as a result of general market conditions that are not
related to the issuing company (e.g., adverse economic
conditions or investor sentiment) or due to factors that affect the particular
company (e.g., management
performance or factors affecting the industry). Also, a Fund’s investments may
not grow as fast as the rate of inflation and stocks tend to be more volatile
than some other investments you could make, such as bonds.
Small
Number of Holdings Risk
A Fund’s performance
may be more vulnerable to changes in the market value of a single issuer and
more susceptible to risks associated with a single economic, political, or
regulatory occurrence than a fund that has a higher number of holdings. At
times, the performance of shares of particular companies will lag the
performance of other sectors or the market as a whole. This risk is magnified
when a fund has a small number of holdings. Generally, the more broadly a fund
invests, the more it spreads its risks and potentially reduces the risk of loss
and volatility.
Growth
Securities Risk
Prices of growth
stocks tend to be higher in relation to their companies’ earnings and may be
more sensitive to market, political and economic developments than other stocks,
making their prices more volatile. An investment in a Fund may be better suited
to investors who seek long-term capital growth and can tolerate fluctuations in
their investment’s value. Expected growth may not be realized.
Non-Diversification
Risk
Each Fund is a
non-diversified investment company. As such, each Fund can invest in fewer
individual companies than a diversified investment company. As a result, each
Fund’s performance may be more vulnerable to changes in the market value of a
single issuer and more susceptible to risks associated with a single economic,
political, or regulatory occurrence than a fund that has a diversified
portfolio. This risk is magnified compared to a fund that invests more
broadly.
Prospectus 27/39
Sector
Risk
Each Fund may have a
significant portion of its assets invested in securities of companies conducting
business within a single sector, as defined by third party sources. Companies in
the same sector may be similarly affected by economic, regulatory, political or
market events or conditions, which may make a Fund more vulnerable to
unfavorable developments in that sector than a fund that has a more diversified
portfolio. Generally, the more broadly a Fund invests, the more it spreads risk
and potentially reduces the risks of loss and volatility.
•
Consumer
Discretionary Sector Risk – The success of consumer product manufacturers and
retailers is tied closely to the performance of domestic and international
economies, interest rates, exchange rates, competition, consumer confidence,
changes in demographics and consumer preferences. Companies in the consumer
discretionary sector depend heavily on disposable household income and consumer
spending, and may be strongly affected by social trends and marketing campaigns.
These companies may be subject to severe competition, which may have an adverse
impact on their profitability.
•
Health Care Sector
Risk – A Fund may be more susceptible to particular risks that may affect
companies in the health care sector than if it were invested in a wider variety
of companies in unrelated sectors. At times, the performance of such companies
will lag the performance of other industries or the broader market as a whole,
and the performance of such companies may be more volatile. The healthcare field
is subject to substantial governmental regulation and may, therefore, be
adversely affected by changes in governmental policies. These factors may lead
to limited earnings and/or failing profit margins. As a result, the value of
healthcare companies’ securities may fall or fail to rise. In addition,
companies in the health care sector can be significantly affected by intense
competition, aggressive pricing, technological innovations, product
obsolescence, patent considerations, product compatibility and consumer
preferences.
•
Industrials Sector
Risk – A Fund may have a significant portion of its assets invested in
securities of companies in the industrials sector. Industrial companies are
affected by supply and demand both for their specific product or service and for
industrials sector products in general. Government regulation, world events,
exchange rates and economic conditions, technological developments and
liabilities for environmental damage and general civil liabilities will likewise
affect the performance of these companies. Aerospace and defense companies, a
component of the industrials sector, can be significantly affected by government
spending policies because companies involved in this industry rely, to a
significant extent, on U.S. and foreign government demand for their products and
services.
•
Information
Technology Sector Risk – A Fund may be more susceptible to particular risks that
may affect companies in the information technology sector and technology-related
sectors than if it were invested in a wider variety of companies in unrelated
sectors. At times, the performance of such companies will lag the performance of
other industries or the broader market as a whole. Certain technology related
companies may face special risks that their products or services may not prove
to be commercially successful. Technology related companies are also strongly
affected by worldwide scientific or technological developments. As a result,
their products may rapidly become obsolete. Such companies are also often
subject to governmental regulation and may, therefore, be adversely affected by
governmental policies. These factors may lead to limited earnings and/or failing
profit margins. As a result, the value of technology related companies’
securities may fall or fail to rise. Many technology related companies’
securities have historically been more volatile than other securities,
especially over the short term.
Environmental,
Social and/or Governance Sustainability-Related Securities Risk (Alger
Weatherbie Enduring Growth ETF)
The Sub-Adviser’s use
of an ESG Rating Agency to implement the Fund’s investment strategy may result
in the selection or exclusion of securities of certain issuers in and from the
Fund’s portfolio for reasons other than financial performance, and carries the
risk that the Fund’s investment returns may underperform funds that do not
utilize an ESG Rating Agency or employ another type of ESG investment strategy.
The application of this strategy may affect the Fund’s investment exposure to
certain companies, sectors, regions, countries or types of investments, which
could negatively impact the Fund’s performance depending on whether such
investments are in or out of favor. In evaluating a particular issuer’s ESG
rating, as well as the Fund’s weighted average ESG rating, the Sub-Adviser
relies exclusively on the ESG Rating Agency and, therefore, is dependent upon
information and data from the ESG Rating Agency that may be incomplete or
inaccurate, or that may present conflicting information and data with respect to
an issuer than other third party ESG data providers utilized throughout the
industry. Determining a company’s ESG rating is inherently subjective and the
ESG Rating Agency’s assessment of a company, based on the ESG Rating Agency’s
proprietary methodology may differ from that of other third party ESG rating
agencies, other funds, or an investor. As a result, the Fund may invest in
companies that do not reflect the beliefs or values of any particular investor
and may not be deemed to exhibit positive or favorable ESG characteristics if
different metrics or ESG rating agencies were used to evaluate them. ESG
standards differ by region and industry, and a company’s ESG practices or the
ESG Rating Agency’s assessment of a company’s ESG practices may change over
time.
Prospectus 28/39
Portfolio
Turnover (Active Trading) Risk
If a Fund engages in
active trading of portfolio securities, it may incur increased transaction costs
and brokerage commissions, both of which can lower the actual return on an
investment. Active trading may also increase short-term gains and
losses.
To the
extent net short-term capital gains are realized, any distributions resulting
from such gains will generally be taxed as ordinary income tax rates for federal
income tax purposes, which may result in higher taxes than an ETF investor might
expect to incur.
Cash
Position Risk
A Fund may hold up to
15% of its net assets in cash (or cash equivalents) at any time or for an
extended time and may hold a significant portion of its assets in cash (or cash
equivalents) when taking a temporary defensive position, as described under
“Temporary Defensive Investments.” The Manager will determine the amount of a
Fund’s assets to be held in cash (or cash equivalents) at its sole discretion,
based on such factors as it may consider appropriate under the circumstances. To
the extent a Fund holds assets in cash and is otherwise uninvested, the ability
of a Fund to meet its objective may be limited. If a Fund holds a large cash
position, a Fund may under-perform relative to equity securities. U.S. Treasury
obligations are backed by the “full faith and credit” of the U.S. government and
generally have negligible credit risk. Investments in government money
market funds are subject to interest rate risk, credit risk, and market risk.
Interest rate risk is the risk that rising interest rates could cause the value
of such an investment to decline. Credit risk is the risk that the issuer,
guarantor or insurer of an obligation, or the counterparty to a transaction, may
fail or become less able or unwilling to make timely payment of interest or
principal or otherwise honor its obligations, or that it may default
completely. If the other party to a repurchase agreement defaults on its
obligation under the agreement, a Fund may suffer delays and incur costs or lose
money in exercising its rights under the agreement. If the seller fails to
repurchase the security and the market value of the security declines, a Fund
may lose money.
Temporary
Defensive Investments Risk
In times of adverse
or unstable market, economic or political conditions, a Fund may invest up to
100% of its assets in cash and cash equivalents (i.e., short-term U.S. Treasury
securities, government money market funds and repurchase agreements) for
temporary defensive reasons. This is to attempt to protect a Fund’s assets from
a temporary, unacceptable risk of loss, rather than directly to promote the
Fund’s investment objective; however, it could reduce the benefit from any
upswing in the market. A Fund may not achieve its investment objective, and a
Fund’s investments may not be consistent with its principal investment
strategies, while in a temporary defensive position.
Prospectus 29/39
Management
and Organization
Manager
Fred Alger
Management, LLC
100 Pearl Street, 27th Floor
New York, NY 10004
100 Pearl Street, 27th Floor
New York, NY 10004
The Manager has been
an investment adviser since 1964, and manages investments totaling (at December
31, 2022) approximately $21.7 billion. The Manager is responsible for providing
a continuous investment program for each Fund, making decisions with respect to
all purchases and sales of assets, and placing orders for the investment and
reinvestment of Fund assets. The Manager also arranges for transfer agency,
custody and all other services necessary for each Fund to operate. Additionally,
the Manager provides certain administrative services to the Funds. These
management responsibilities are subject to the supervision of the Board. A
discussion of the Trustees’ basis for approving the management contract with
respect to Alger Mid Cap 40 ETF and Alger 35 ETF is available in the Funds’
annual report to shareholders for its most recent December 31 fiscal year end. A
discussion of the Trustees’ basis for approving the management contract with
respect to Alger Weatherbie Enduring Growth ETF will be available in the Fund’s
first available semi-annual report to shareholders for its most recent June 30
semi-annual fiscal year end. The Funds pay the Manager management fees at the
below annual rates based on a percentage of average daily net assets. The
actual rate paid by Alger Mid Cap 40 ETF and Alger 35 ETF as a percentage of
average daily net assets, for the fiscal year ended December 31, 2022, is set
forth below under the heading “Actual Rate.”
|
Fund |
Annual
Fee as a Percentage of Average Daily Net Assets |
Actual
Rate |
|
Alger
Mid Cap 40 ETF |
.50% |
.50% |
|
Alger
35 ETF |
.45% |
.45% |
|
Alger
Weatherbie Enduring Growth ETF |
.55% |
— |
The Manager has made
contractual commitments to each Fund to waive and/or reimburse the Fund for
expenses to the extent necessary to maintain the Fund’s other expenses at or
below 0.10%
of
average daily net assets. The limitations do not apply to custody fees, acquired
fund fees and expenses, taxes, brokerage and extraordinary expenses, to the
extent applicable. Each agreement runs through April 30, 2025 and may only be
amended or terminated prior to its expiration date by agreement between the
Manager and the Board, and will terminate automatically in the event of
termination of the Investment Management Agreement. The Manager may
recoup
any fees waived or expenses reimbursed pursuant to the contract; however, a Fund
will only make repayments to the Manager if such repayment does not cause a
Fund’s expense ratio after the repayment is taken into account, to exceed both
(i) the expense cap in place at the time such amounts were waived or reimbursed,
and (ii) a Fund’s current expense cap. Such recoupment is limited to two years
from the date the amount is initially waived or reimbursed.
Sub-Adviser
Weatherbie Capital,
LLC
265 Franklin Street, Suite 1603
Boston, Massachusetts 02110
265 Franklin Street, Suite 1603
Boston, Massachusetts 02110
The Manager has
engaged Weatherbie, an affiliate of the Manager, to serve as Alger Weatherbie
Enduring Growth ETF’s sub-adviser under a sub-investment advisory agreement
between the Manager and the Sub-Adviser. Weatherbie is a registered investment
adviser formed in 1995. As of December 31, 2022, Weatherbie had approximately
$2.9 billion in assets under management. The Manager pays a sub-advisory fee to
the Sub-Adviser out of its own resources at no additional charge to the Fund.
Alger Management and Weatherbie are both wholly-owned subsidiaries of Alger
Group Holdings, LLC.
Portfolio
Managers Responsible for Day-to-Day Management of the Funds
|
Fund |
Portfolio
Managers |
Since |
|
Alger
Mid Cap 40 ETF |
Amy
Y. Zhang, CFA |
Inception
(February 2021) |
|
Alger
35 ETF |
Dan
C. Chung, CFA |
Inception
(May 2021) |
|
Alger
Weatherbie Enduring Growth ETF |
H.
George Dai, Ph.D.
Joshua
D. Bennett, CFA |
Inception
(March 2023)
Inception
(March 2023) |
•
Mr. Bennett is the
Chief Operating Officer of Weatherbie and a Senior Portfolio Manager. He joined
Weatherbie in 2007.
•
Mr. Chung has been
employed by the Manager since 1994. He became a portfolio manager in 2000, Chief
Investment Officer in 2001, President in 2003, and Chief Executive Officer in
2006.
•
Dr. Dai is the Chief
Investment Officer of Weatherbie and a Senior Portfolio Manager. He joined
Weatherbie in 2001.
Prospectus 30/39
•
Ms. Zhang has been
employed by the Manager since 2015 as portfolio manager. She became an Executive
Vice President in 2020 and was previously Senior Vice President. Prior to
joining the Manager, she was a Managing Director and Senior Portfolio Manager at
Brown Capital Management, Inc. from 2002 to 2015.
The SAI provides
additional information about the portfolio managers’ compensation, other
accounts that they manage, and their ownership of securities of the Fund(s) that
they manage.
Investing
in the Funds
Buying
and Selling Shares
Shares of each Fund
may be acquired or redeemed directly from each Fund only in Creation Units or
multiples thereof. Only an Authorized Participant may engage in creation and
redemption transactions directly with a Fund. Once created, shares of a
Fund
generally trade in
the secondary market in amounts less than a Creation Unit. Individual Fund
shares may only be bought and sold in the secondary market through a broker or
dealer at market price.
Shares of a Fund are
listed on the Listing Exchange, a national securities exchange, for trading
during the trading day. Shares can be bought and sold throughout the trading day
like shares of other publicly traded companies. The Trust does not impose any
minimum investment for shares of a Fund purchased on an exchange.
Each Fund’s primary
listing exchange is NYSE Arca, Inc., which is open for trading Monday through
Friday and is closed on weekends and the following holidays: New Year’s Day,
Martin Luther King, Jr. Day, Washington’s Birthday, Good Friday, Memorial Day,
Juneteenth National Independence Day, Independence Day, Labor Day, Thanksgiving
Day and Christmas Day.
Additional
information regarding the purchase and redemption of Fund shares can be found in
the “Creation and Redemption of Creation Units” section of the SAI.
Book
Entry
Shares of each Fund
are held in book-entry form, which means that no share certificates are issued.
The Depository Trust Company (“DTC”) or its nominee is the record owner of all
outstanding shares of each Fund.
Investors owning
shares of a Fund are beneficial owners as shown on the records of DTC or its
participants. DTC serves as the securities depository for shares of each Fund.
DTC participants include securities brokers and dealers, banks, trust companies,
clearing corporations and other institutions that directly or indirectly
maintain a custodial relationship with DTC. As a beneficial owner of shares, you
are not entitled to receive physical delivery of stock certificates or to have
shares registered in your name, and you are not considered a registered owner of
shares. Therefore, to exercise any right as an owner of shares, you must rely
upon the procedures of DTC and its participants. These procedures are the same
as those that apply to any other securities that you hold in book-entry or
“street name” form.
Frequent
Trading
The Board has not
adopted a policy of monitoring for frequent purchases and redemptions of Fund
shares. The Board believes that a frequent trading policy is unnecessary because
Fund shares are listed for trading on a national securities exchange. Therefore,
it is unlikely that a shareholder could take advantage of a potential arbitrage
opportunity presented by a lag between a change in the value of a Fund’s
portfolio securities after the close of the primary markets for the Fund’s
portfolio securities and the reflection of that change in the Fund’s NAV,
because the Fund generally sells and redeems its shares directly through
transactions that are in-kind and/or for cash, subject to the conditions
described in the “Creation and Redemption of Creation Units” section of the
SAI.
Investments
by Other Investment Companies
Section 12(d)(1) of
the Investment Company Act of 1940, as amended (the “1940 Act”) restricts
investments by investment companies in the securities of other investment
companies. Registered investment companies are permitted to invest in a
Fund
beyond
the limits set forth in Section 12(d)(1), subject to certain terms and
conditions set forth in SEC rules. In order for an unaffiliated registered
investment company to invest in shares of a Fund beyond the limitations of
Section 12(d)(1) pursuant to Rule 12d1-4 under the 1940 Act, the registered
investment company must, among other items, enter into an agreement with the
Trust.
Prospectus 31/39
Share
Price and Distributions
Share
Price
The secondary market
price of shares trading on the Listing Exchange is based on a current bid/ask
market. The secondary market price of a Fund’s shares generally differs from a
Fund’s daily NAV and, like the price of all traded securities, is affected by
market forces such as supply and demand, economic conditions and other factors
such as the current VIIV (described below).
Because the shares
are traded in the secondary market, a broker may charge a commission to execute
a transaction in shares, and an investor also may incur the cost of the spread
between the price at which a dealer will buy shares and the somewhat higher
price at which a dealer will sell shares.
The
Verified Intraday Indicative Value
Information regarding
the intraday value of shares of a Fund, also known as the VIIV, is calculated
and disseminated every second throughout each trading day by the Listing
Exchange or by market data vendors or other information providers. It is
available on www.alger.com and on websites that publish updated market
quotations during the trading day, like Yahoo Finance
(https://finance.yahoo.com), by searching for a Fund’s ticker plus the extension
IV, though some websites require their own unique extensions. The VIIV is based
on the current market value of the securities in a Fund’s portfolio that day.
The VIIV is intended to provide investors and other market participants with a
highly correlated per share value of the underlying portfolio that can be
compared to the current market price. To calculate the VIIV, each Fund employs
two separate calculation engines to provide two independently calculated sources
of intraday indicative values (calculation engines). A Fund then uses a pricing
verification agent to continuously compare the data from both the calculations
engines on a real time basis. If during the process of real time price
verification, the indicative values from the calculation engines differ by more
than 25 basis points for 60 consecutive seconds, the pricing verification agent
will alert the Manager, which will request that the Listing Exchange halt
trading of a Fund’s shares until the two indicative values come back into
line.
Each Fund has adopted
policies and procedures concerning the calculation and dissemination of its VIIV
and the Manager bears responsibility for the oversight of that process. As part
of that oversight process, periodically, but no less frequently than annually,
the Manager reviews these procedures. In accordance with these procedures, the
portfolio used for calculating the VIIV will be the same portfolio used to
calculate a Fund’s NAV for that business day. The VIIV will be calculated to the
nearest penny by dividing the “Intraday Fund Value” as of the time of the
calculation by the number of total Fund shares outstanding. Intraday Fund Value
is the sum of a Fund’s assets (e.g., the amount of cash and cash equivalents
held in a Fund’s portfolio, the current value of the securities positions in a
Fund’s portfolio, plus any accrued interest, and declared but unpaid dividends)
minus all accrued liabilities. All portfolio securities will be valued by the
calculation engines throughout the trading day at the mid-point between the
current national best bid and national best offer as disseminated by the
Consolidated Quotation System or UTP Plan Securities Information Processor. The
methodology used to calculate a Fund’s VIIV is available on
www.alger.com.
Although the VIIV is
intended to provide investors with enough information to allow for an effective
arbitrage mechanism that will keep the market price of a Fund at or close to the
underlying NAV per share of the Fund, there is a risk (which may increase during
periods of market disruption or volatility) that market prices will vary
significantly from the underlying NAV of a Fund. ETFs trading on the basis of a
published VIIV may trade at a wider bid/ask spread than ETFs that publish their
portfolios on a daily basis, especially during periods of market disruption or
volatility, and therefore, may cost investors more to trade. Although each Fund
seeks to benefit from not disclosing its portfolio information daily, market
participants may attempt to use the VIIV to identify a Fund’s trading strategy,
which if successful, could result in such market participants engaging in
certain predatory trading practices that may have the potential to harm the Fund
and its shareholders.
To the extent a
portfolio holding does not have a readily available market quotation, a Fund
will make public the identity of the holding and its weight in the VIIV, thus
making the holding fully transparent. If at any time 10% or more of the
securities in a Fund’s portfolio become subject to a trading halt or otherwise
do not have readily available market quotations, the Manager will ask the
Listing Exchange to halt trading of a Fund. Trading halts may have a greater
impact on a Fund compared to other ETFs because it is less
transparent.
Net
Asset Value
The value of one
share is its net asset value, or “NAV.” Each Fund values its financial
instruments at fair value using independent dealers or pricing services under
policies approved by the Board. Investments held by each Fund 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).
Prospectus 32/39
NAV
of a Fund is computed by adding together the value allocable to a Fund’s
investments plus cash and other assets, subtracting applicable liabilities and
then dividing the result by the number of outstanding shares of the
Fund.
The Board has
designated, pursuant to Rule 2a-5 under the 1940 Act, the Manager as its
valuation designee (the “Valuation Designee”) to make fair value determinations
subject to the Board’s review and oversight. The Valuation Designee has
established a Valuation Committee (“Valuation Committee”) comprised of
representatives of the Manager and officers of the Trust to assist in performing
the duties and responsibilities of the Valuation Designee. The Valuation
Designee has established valuation processes, including but not limited to:
making fair value determinations when market quotations for a financial
instrument are not readily available in accordance with valuation policies and
procedures adopted by the Board; assessing and managing material risks
associated with fair valuation determinations; selecting, applying and testing
fair valuation methodologies; and overseeing and evaluating pricing services
used by a Fund. The Valuation Designee reports its fair valuation determinations
and related valuation information to the Board. The Valuation Committee meets on
an as-needed basis and generally meets quarterly to review and evaluate the
effectiveness of the valuation policies and procedures in accordance with the
requirements of Rule 2a-5.
Investments in money
market funds and short-term securities held by a Fund with maturities of 60 days
or less are valued at their amortized cost, which does not take into account
unrealized capital gains or losses and approximates market value.
Equity securities 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.
Securities for which
market quotations are not readily available are valued at fair value pursuant to
policies and procedures approved by the Board.
The Valuation
Designee’s 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. Because of the inherent
uncertainty and often limited markets for restricted securities, the valuations
assigned to such securities by the Valuation Designee may significantly differ
from the valuations that would have been assigned by the Valuation Designee had
there been an active market for such securities.
Each Fund’s website,
which is publicly accessible at no charge, contains, on a per share basis, the
prior business day’s NAV and market closing price or bid/ask price of the
shares, a calculation of the premium or discount of the market closing price or
bid/ask price against such NAV, and any other required information about
premiums and discounts. The website also discloses each Fund’s median bid/ask
spread information for the most recent 30-day period on a rolling
basis.
Taxes
The following
discussion is a very general summary of the federal income tax consequences of
holding shares in a Fund. This summary applies only to shareholders that are
U.S. residents for tax purposes and hold their shares as capital assets. This
summary does not address shareholders subject to special rules, such as those
who hold shares of a Fund through an IRA, 401(k) plan, or other tax-advantaged
account, or non-U.S. shareholders. The discussion is limited to federal income
tax matters, and does not address state, local, foreign or non-income taxes.
Further information regarding tax considerations applicable to a Fund, to
its
qualification and
taxation as a regulated investment company for U.S. federal income tax purposes,
and to the acquisition, ownership, and disposition of shares in a Fund is
included in the SAI. Because each shareholder’s circumstances are different and
special tax rules may apply, shareholders should consult their tax advisors
about federal, state, local, foreign and non-income tax considerations that may
be relevant to their particular situation.
Distributions
Each Fund declares
and pays dividends and distributions annually. Distributions of net capital gain
reported by a Fund as capital gain dividends are taxable to shareholders as
long-term capital gain regardless of how long a shareholder has owned its
shares. Noncorporate shareholders ordinarily pay tax at reduced rates on
long-term capital gain. Distributions of investment income that a Fund reports
as “qualified dividend income” may be eligible to be taxed to noncorporate
shareholders at the reduced rates applicable to long-term capital gain if
certain requirements are satisfied.
If a Fund’s
distributions exceed current and accumulated earnings and profits, the excess
will generally be considered a return of capital. A return of capital
distribution generally will not be taxable but will reduce the shareholder's
cost basis and will result in a higher capital gain or lower capital loss when
those shares on which the distribution was received are sold. Once a
shareholder's cost basis is reduced to zero, further distributions will be
treated as capital gain.
Prospectus 33/39
A shareholder may
want to avoid buying shares shortly before a Fund is about to declare a dividend
or capital gain distribution because the dividend or distribution will be
taxable to the shareholder even though it may economically represent a return of
a portion of the shareholder’s investment.
Sale
of Shares of a Fund
Capital gain or loss
realized upon a sale of shares of a Fund generally is treated as long-term gain
or loss if the shares have been held for more than one year. Any capital gain or
loss realized upon a sale of shares of a Fund held for one year or less
generally is treated as short-term gain or loss, except that any capital loss on
the sale of shares held for six months or less is treated as long-term capital
loss to the extent that capital gain dividends were paid with respect to those
shares.
If a loss is realized
on the sale of shares of a Fund, the reinvestment in additional shares of that
Fund within 30 days before or after the sale generally will be subject to the
“wash sale” rules, in which case the shareholder’s ability to report a loss
would be deferred.
Net
Investment Income Tax
A Medicare
contribution tax is imposed at the rate of 3.8% on all or a portion of the net
investment income of U.S. individuals with income exceeding specified
thresholds, and on all or a portion of undistributed net investment income of
certain estates and trusts. Net investment income for this purpose generally
includes dividends and capital gain distributions paid by a Fund and gain on the
redemption or sale of shares of a Fund.
Withholding
A shareholder may be
subject to backup withholding at the applicable federal withholding tax rate on
taxable dividends, capital gains distributions and proceeds from the sale of
shares of a Fund if the shareholder fails to certify that their social security
number or tax identification number is correct and that they are not subject to
withholding.
Creation
Units
An Authorized
Participant that exchanges securities for Creation Units generally will
recognize a gain or a loss, except as described in the subsequent paragraph. The
gain or loss will be equal to the difference between the market value of the
Creation Units at the time and the sum of the Authorized Participant’s aggregate
basis in the securities surrendered plus the amount of cash paid for the
Creation Units. An Authorized Participant that redeems Creation Units generally
will recognize a gain or (subject to the subsequent sentence) loss equal to the
difference between the Authorized Participant’s basis in the Creation Units and
the sum of the aggregate market value of any securities received plus the amount
of any cash received for the Creation Units. It is unclear whether any loss
realized upon an exchange of securities for Creation Units would be immediately
deductible or would be required to be deferred under the “wash sale” rules or on
the basis that there has been no significant change in economic
position.
Any gain or loss
realized on the creation of Creation Units will be treated as capital gain or
loss if the Authorized Participant holds the securities exchanged therefor as
capital assets, and generally will be treated as long-term capital gain or loss
if the securities exchanged for such Creation Units have been held for more than
one year. Similarly, any gain or loss realized upon a redemption of Creation
Units will be treated as capital gain or loss if the Authorized Participant
holds the shares of the Fund comprising the Creation Units as capital assets,
and otherwise will be ordinary income or loss, and generally will be treated as
long-term capital gain or loss if the Fund shares comprising the Creation Units
have been held for more than one year, and otherwise generally will be
short-term capital gain or loss. Any capital loss realized upon a redemption of
Creation Units held for six months or less will be treated as a long-term
capital loss to the extent of any amounts treated as distributions to the
applicable Authorized Participant of long-term capital gain with respect to the
Creation Units (including any amounts credited to the Authorized Participant as
undistributed capital gains).
A Fund has the right
to reject an order for Creation Units if the Authorized Participant (or group of
Authorized Participants) would, upon obtaining the Fund shares so ordered, own
80% or more of the outstanding shares of the Fund and if, pursuant to section
351 of the Internal Revenue Code, the Fund would have a basis in any securities
different from the market value of such securities on the date of deposit. A
Fund also has the right to require information necessary to determine beneficial
Fund shares ownership for purposes of the 80% determination. If a Fund does
issue Creation Units to an Authorized Participant (or group of Authorized
Participants) that would, upon obtaining the shares so ordered, own 80% or more
of the outstanding shares of the Fund, the Authorized Participant (or group of
Authorized Participants) generally would not recognize gain or loss upon the
exchange of securities for Creation Units.
Authorized
Participants purchasing or redeeming Creation Units should consult their own tax
advisors with respect to the tax treatment of any creation or redemption
transaction.
Prospectus 34/39
Additional
Information
Premium/Discount
Information
Each Fund’s website
includes additional quantitative information that is updated on a daily basis,
including, on a per share basis for each Fund, the prior business day’s NAV and
market closing price or bid/ask price and a calculation of the premium or
discount of the market closing price or bid/ask price against such NAV. In
addition, each Fund posts a table showing the number of days the Fund’s shares
traded at a premium or a discount and a line graph showing the Fund share
premiums or discounts during the most recently completed calendar year and most
recently completed calendar quarters since that year (or the life of the fund,
if shorter). If a Fund’s premium or discount is greater than 2% for more than
seven consecutive trading days, the website will contain disclosure to that
effect along with a discussion of the factors that are reasonably believed to
have materially contributed to the premium or discount.
Service,
Distribution, and Administrative Fees
Rule 12b-1 under the
1940 Act permits investment companies that adopt a written plan to pay certain
expenses associated with the distribution of their shares out of fund assets.
The Board has adopted a 12b-1 plan that allows each Fund to pay annual fees not
to exceed 0.25% to Fred Alger & Company, LLC (the “Distributor”), each
Fund’s distributor, for distribution and individual shareholder services.
However, the Board has determined not to authorize payment of a 12b-1 plan fee
at this time.
Because these fees
are paid out of a Fund’s assets on an ongoing basis, to the extent that a fee is
authorized, over time these fees will increase the cost of your investment and
may cost you more than paying other types of sales charges.
The Manager or its
affiliates (collectively, “Alger”) may make payments to intermediaries for
various additional services, other expenses and/or the intermediaries’
distribution of a Fund out of their profits or other available sources. Such
payments may be made for one or more of the following: (1) distribution, which
may include expenses incurred by intermediaries for their sales activities with
respect to a Fund, such as preparing, printing and distributing sales literature
and advertising materials and compensating registered representatives or other
employees of such financial intermediaries for their sales activities, as well
as the opportunity for a Fund to be made available by such intermediaries; (2)
shareholder services, such as providing individual and custom investment
management services to clients of the financial intermediaries; and (3)
marketing and promotional services, including business planning assistance,
educating personnel about a Fund, and sponsorship of sales meetings, which may
include covering costs of providing speakers, meals and other entertainment.
Alger may pay partnership and/or sponsorship fees to support seminars,
conferences, and other programs designed to educate intermediaries about a Fund
and may cover the expenses associated with attendance at such meetings,
including travel costs. Alger also may pay fees related to obtaining data
regarding intermediary or financial professional activities to assist Alger with
sales reporting, business intelligence, and training and education
opportunities. These payments and activities are intended to provide an
incentive to intermediaries to sell a Fund by educating them about a Fund and
helping defray the costs associated with offering a Fund. These payments may
create a conflict of interest by influencing the intermediary to recommend a
Fund over another investment. Ask your salesperson or visit your financial
intermediary’s website for more information. The amount of any payments
described by this paragraph is determined by Alger, and all such amounts are
paid out of their available assets, and not paid by you or a Fund. As a result,
the total expense ratio of a Fund will not be affected by any such
payments.
Other
Information
Other
Payments by the Funds. Certain Financial
Intermediaries perform networking, sub-accounting, recordkeeping and/or
administrative services for their clients that would otherwise be performed by
the transfer agent, Brown Brothers Harriman & Co. (the “Transfer
Agent”). In addition to fees that the Funds may pay to a Financial Intermediary
for distribution and/or shareholder servicing (12b-1), and fees the Funds pay to
the Transfer Agent, the Distributor, on behalf of a Fund, may enter into
agreements with Financial Intermediaries pursuant to which a Fund will pay a
Financial Intermediary for such services. These payments are generally based on
either (1) a percentage of the average daily net assets of Fund shareholders
serviced by a Financial Intermediary or (2) a fixed dollar amount for each
account serviced by a Financial Intermediary. The aggregate amount of these
payments may be substantial.
The Distributor may
pay partnership and/or sponsorship fees to support seminars, conferences, and
other programs designed to educate intermediaries about a Fund and may cover the
expenses associated with attendance at such meetings, including travel costs.
The Distributor also may pay fees related to obtaining data regarding Financial
Intermediary or financial advisor activities to assist the Distributor with
sales reporting, business intelligence, and training and education
opportunities. These payments and activities are intended to provide an
incentive to Financial Intermediaries to sell a Fund by educating them about a
Fund and helping defray the costs associated with offering a Fund. These
payments may create a conflict of interest by influencing the Financial
Intermediary to recommend a Fund over another investment. Ask your salesperson
or visit your Financial Intermediary’s website for more information. The amount
of any payments described by this paragraph is determined by the Manager or the
Prospectus 35/39
Distributor, and all such amounts are
paid out of their legitimate profits, and not paid by you or a Fund. As a
result, the total expense ratio of a Fund will not be affected by any such
payments.
Additional
Compensation. From time to time
the Distributor, at its expense from its legitimate profits, may compensate
Financial Intermediaries who are instrumental in effecting investments by their
clients or customers in a Fund, in an amount up to 1% of the value of those
investments. The Distributor may also from time to time, at its expense from its
own resources, make payments to Financial Intermediaries that provide
shareholder servicing, or transaction processing, with such payments structured
as a percentage of gross sales, a percentage of net assets, and/or as a fixed
dollar amount (the latter as a per account fee or as reimbursement for
transactions processing and transmission charges). The Distributor determines
whether to make any additional cash payments and the amount of any such payments
in response to requests from Financial Intermediaries, based on factors the
Distributor deems relevant. Factors considered by the Distributor generally
include the Financial Intermediary’s reputation, ability to attract and retain
assets for the Fund, expertise in distributing a particular class of shares of
the Fund, entry into target markets, and/or quality of service. In addition, the
Distributor may make payments to dealer firms in the form of payments for
marketing support, seminar support, training meetings, or comparable expenses in
the discretion of the Distributor. Please contact your Financial Intermediary
for details about revenue sharing payments it may receive. Any payments
described above will not change the price paid by investors for the purchase of
shares of a Fund or the amount of proceeds received by a Fund on the sale of
shares.
Householding. To reduce expenses,
only one copy of most financial reports and prospectuses may be mailed to
households, even if more than one person in a household holds shares of a Fund.
Call an Alger Funds Representative at (800) 223-3810 if you need additional
copies of financial reports or prospectuses, or download them at www.alger.com.
If you do not want the mailing of these documents to be combined with those for
other members of your household, contact Alger Funds in writing at Alger Family
of Funds, c/o Brown Brothers Harriman & Co., 50 Post Office Square, Boston,
Massachusetts, 02110.
Disclosure
of Portfolio Holdings
For a discussion of
each Fund’s policies and procedures regarding the selective disclosure of its
portfolio holdings, please see the SAI. Alger Mid Cap 40 ETF makes publicly
available its month-end top 10 holdings with a 10-day lag and its month-end full
portfolio with a 60-day lag on its website www.alger.com. Each of Alger 35
ETF and Alger Weatherbie Enduring Growth ETF makes publicly available its
month-end top 5 holdings with a 10-day lag and its month-end full portfolio with
a 60-day lag on its website www.alger.com.
Prospectus 36/39
Hypothetical
Investment and Expense Information
Hypothetical
investment and expense information, which is not required to be included in this
Prospectus by the SEC, is presented in the chart below. This information is
intended to reflect the annual and cumulative effect of a Fund’s expenses,
including management fees and other Fund costs, on each Fund’s total return
based on NAV over a 10-year period. The example assumes the
following:
•
You invest $10,000 in
the Fund and hold it for the entire 10-year period; and
•
Your investment has a
5% return before expenses each year.
There is no assurance
that the annual expense ratio will be the expense ratio for the Fund for any of
the years shown. To the extent that the Manager and any of its affiliates alter
any fee waivers and/or expense reimbursements pursuant to a voluntary or
contractual arrangement, your actual expenses may be higher or lower. This is
only a hypothetical presentation made to illustrate what expenses and returns
would be under the above scenarios. Your actual expenses and returns are likely
to differ (higher or lower) from those shown below.
Alger
Mid Cap 40 ETF
|
|
Year
1 |
Year
2 |
Year
3 |
Year
4 |
Year
5 |
Year
6 |
Year
7 |
Year
8 |
Year
9 |
Year
10 |
|
Expense
Ratio |
0.60% |
0.60% |
1.19% |
1.19% |
1.19% |
1.19% |
1.19% |
1.19% |
1.19% |
1.19% |
|
Cumulative
Gross Return |
5.00% |
10.25% |
15.76% |
21.55% |
27.63% |
34.01% |
40.71% |
47.75% |
55.13% |
62.89% |
|
Cumulative
Net Return |
4.40% |
8.99% |
13.15% |
17.46% |
21.93% |
26.58% |
31.40% |
36.41% |
41.60% |
47.00% |
|
End
Investment Balance |
$10,440 |
$10,899 |
$11,315 |
$11,746 |
$12,193 |
$12,658 |
$13,140 |
$13,641 |
$14,160 |
$14,700 |
|
Annual
Expense |
$61 |
$64 |
$132 |
$137 |
$142 |
$148 |
$153 |
$159 |
$165 |
$172 |
Alger
35 ETF
|
|
Year
1 |
Year
2 |
Year
3 |
Year
4 |
Year
5 |
Year
6 |
Year
7 |
Year
8 |
Year
9 |
Year
10 |
|
Expense
Ratio |
0.55% |
0.55% |
1.83% |
1.83% |
1.83% |
1.83% |
1.83% |
1.83% |
1.83% |
1.83% |
|
Cumulative
Gross Return |
5.00% |
10.25% |
15.76% |
21.55% |
27.63% |
34.01% |
40.71% |
47.75% |
55.13% |
62.89% |
|
Cumulative
Net Return |
4.45% |
9.10% |
12.56% |
16.12% |
19.81% |
23.60% |
27.52% |
31.56% |
35.73% |
40.04% |
|
End
Investment Balance |
$10,445 |
$10,910 |
$11,256 |
$11,612 |
$11,981 |
$12,360 |
$12,752 |
$13,156 |
$13,573 |
$14,004 |
|
Annual
Expense |
$56 |
$59 |
$203 |
$209 |
$216 |
$223 |
$230 |
$237 |
$245 |
$252 |
Alger
Weatherbie Enduring Growth ETF
|
|
Year
1 |
Year
2 |
Year
3 |
Year
4 |
Year
5 |
Year
6 |
Year
7 |
Year
8 |
Year
9 |
Year
10 |
|
Expense
Ratio |
0.65% |
0.65% |
1.25% |
1.25% |
1.25% |
1.25% |
1.25% |
1.25% |
1.25% |
1.25% |
|
Cumulative
Gross Return |
5.00% |
10.25% |
15.76% |
21.55% |
27.63% |
34.01% |
40.71% |
47.75% |
55.13% |
62.89% |
|
Cumulative
Net Return |
4.35% |
8.89% |
12.97% |
17.21% |
21.60% |
26.16% |
30.90% |
35.80% |
40.90% |
46.18% |
|
End
Investment Balance |
$10,435 |
$10,889 |
$11,297 |
$11,721 |
$12,160 |
$12,616 |
$13,090 |
$13,580 |
$14,090 |
$14,618 |
|
Annual
Expense |
$66 |
$69 |
$139 |
$144 |
$149 |
$155 |
$161 |
$167 |
$173 |
$179 |
Prospectus 37/39
Financial
Highlights
The financial
highlights tables are intended to help you understand each Fund’s financial
performance for the periods shown. Certain information reflects financial
results for a single Fund share. The total returns in the tables represent the
rate that an investor would have earned or lost on an investment in the Fund
(assuming reinvestment of all dividends and distributions). The information in
the tables for the fiscal years ended December 31 has been audited by Deloitte
& Touche LLP, whose report, along with each Fund’s financial statements, is
included in the Annual Report, which is available upon request.
The financial
highlights are not available at this time for Alger Weatherbie Enduring Growth
ETF because Alger Weatherbie Enduring Growth ETF has limited performance history
as of the date of this Prospectus. Financial information, when available, will
be included in Alger Weatherbie Enduring Growth ETF’s next annual or semi-annual
report.
The
Alger ETF Trust
|
Alger
Mid Cap 40 ETF |
Year
Ended
12/31/22 |
From
2/26/21
(commencement
of
operations)
to
12/31/21(i) |
|
Net
asset value, beginning of period |
$20.00 |
$20.00 |
|
Income
from Investment Operations: |
|
|
|
Net
investment loss (ii) |
(0.01) |
(0.08) |
|
Net
realized and unrealized gain (loss) on investments |
(8.30) |
1.15 |
|
Total
from investment operations |
(8.31) |
1.07 |
|
Distributions
from net realized gains |
— |
(1.07) |
|
Net
asset value, end of period |
$11.69 |
$20.00 |
|
Net
asset value, Total return |
(41.55)% |
5.62% |
|
Ratios/Supplemental
Data: |
|
|
|
Net
assets, end of period (000's omitted) |
$28,638 |
$38,750 |
|
Ratio
of gross expenses to average net assets |
1.19% |
1.23% |
|
Ratio
of expense reimbursements to average net assets |
(0.59)% |
(0.63)% |
|
Ratio
of net expenses to average net assets |
0.60% |
0.60% |
|
Ratio
of net investment loss to average net assets |
(0.09)% |
(0.43)% |
|
Portfolio
turnover rate (iii) |
256.37% |
417.06% |
(i)
Ratios have been
annualized; total return and portfolio turnover rate have not been
annualized.
(ii)
Amount was computed
based on average shares outstanding during the period.
(iii)
Portfolio turnover
excludes the value of portfolio securities received or delivered as a result of
in-kind fund share transactions.
Prospectus 38/39
The
Alger ETF Trust
|
Alger
35 ETF |
Year
Ended
12/31/22 |
From
5/03/21
(commencement
of
operations)
to
12/31/21(i) |
|
Net
asset value, beginning of period |
$20.40 |
$20.00 |
|
Income
from Investment Operations: |
|
|
|
Net
investment income (loss) (ii) |
0.01 |
(0.04) |
|
Net
realized and unrealized gain (loss) on investments |
(7.33) |
0.44 |
|
Total
from investment operations |
(7.32) |
0.40 |
|
Dividends
from net investment income |
(0.01) |
— |
|
Net
asset value, end of period |
$13.07 |
$20.40 |
|
Net
asset value, Total return |
(35.90)% |
2.00% |
|
Ratios/Supplemental
Data: |
|
|
|
Net
assets, end of period (000's omitted) |
$8,983 |
$13,517 |
|
Ratio
of gross expenses to average net assets |
1.83% |
1.85% |
|
Ratio
of expense reimbursements to average net assets |
(1.28)% |
(1.30)% |
|
Ratio
of net expenses to average net assets |
0.55% |
0.55% |
|
Ratio
of net investment income (loss) to average net
assets |
0.08% |
(0.28)% |
|
Portfolio
turnover rate (iii) |
187.01% |
99.20% |
(i)
Ratios have been
annualized; total return and portfolio turnover rate have not been
annualized.
(ii)
Amount was computed
based on average shares outstanding during the period.
(iii)
Portfolio turnover
excludes the value of portfolio securities received or delivered as a result of
in-kind fund share transactions.
Prospectus 39/39
For
Fund Information:
|
By
Telephone: |
(800)
223-3810 |
|
By
Mail: |
Alger
Family of Funds
c/o
Brown Brothers Harriman & Co.
50
Post Office Square
Boston,
Massachusetts 02110 |
|
Online |
Text
versions of Fund documents can be downloaded from the following
sources: |
|
|
•The
Funds: www.alger.com |
|
|
•SEC
(EDGAR data base):
www.sec.gov |
Statement
of Additional Information
For more detailed
information about each Fund and its policies, please read each Fund’s SAI, which
is incorporated by reference into (is legally made a part of) this Prospectus.
You can get a free copy of the SAI by calling the Funds’ toll-free number, at
the Funds’ website at www.alger.com or by writing to the address above. The SAI
is on file with the SEC.
Annual
and Semi-Annual Reports
Additional
information about a Fund’s investments is available in the Fund’s annual and
semi-annual reports to shareholders. In each Fund’s annual report you will find
a discussion of the market conditions and investment strategies that
significantly affected the Fund’s performance during the period covered by the
report. You can receive free copies of these reports by calling the Funds’
toll-free number, at the Funds’ website at www.alger.com or by writing to the
address above. Copies can also be obtained for a duplicating fee by E-mail
request to publicinfo@sec.gov. Fund documents are also available on the EDGAR
database on the SEC’s Internet site at www.sec.gov.
Quarterly
Fund Holdings
Each Fund’s most
recent month end portfolio holdings are available approximately sixty days after
month-end on the Fund’s website at www.alger.com. Each Fund also files its
complete schedule of portfolio holdings with the SEC for the first and third
quarter of each fiscal year as an exhibit to Form N-PORT and semi-annually on
Form N-CSR. Forms N-PORT and N-CSR are available online on the SEC’s website at
www.sec.gov. A copy of the most recent quarterly holdings may also be obtained
from the Funds by calling (800) 223-3810.
Alger
Electronic Delivery Service
The Funds provide you
with an enhancement of your ability to access Fund documents online. When Fund
documents such as prospectuses and annual and semi-annual reports are available,
you will be sent an e-mail notification with a link that will take you directly
to the Fund information on the Funds’ website. To sign up for this free service,
enroll at www.icsdelivery.com/alger.
ActiveShares®
Methodology
Each Fund utilizes
the ActiveShares® methodology licensed from Precidian Investments, LLC
(“Precidian”). Precidian’s products and services are protected by domestic and
international intellectual property protections, including, without limitation,
the following issued patents and pending patent applications: 7813987, 8285624,
7925562, 13011746, 14528658, 14208966, 16196560.
Distributor:
Fred Alger & Company, LLC
The Alger ETF
Trust SEC File #811-23603
ETF